<PAGE> 1
'33 ACT FILE NO. 33-61370
'40 ACT FILE NO. 811-3365
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 76 [X]
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
SECURITY FIRST LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 312-6100
RICHARD C. PEARSON
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SECURITY FIRST LIFE INSURANCE COMPANY
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(NAME AND ADDRESS OF AGENT FOR SERVICE)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE SPACE)
IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485
- ---
X ON MAY 1, 1996 PURSUANT TO PARAGRAPH (b) OF RULE 485
- ---
60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a) OF RULE 485
- ---
ON [DATE] PURSUANT TO PARAGRAPH (a) OF RULE 485
- ---
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
- --- PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
THE COMPANY HAS ELECTED PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940 TO REGISTER AN INDEFINITE NUMBER OF SECURITIES. THE MOST RECENT RULE
24f-2 NOTICE WAS FILED ON FEBRUARY 26, 1996.
<PAGE> 2
SECURITY FIRST LIFE SEPARATE ACCOUNT A
CROSS REFERENCE SHEET
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption in Prospectus
- ----------------------- ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis or Highlights Synopsis of the Contracts
4. Condensed Financial Information Condensed Financial Information; Financial
Information
5. General Description of Registrant, Description of Security First Life Insurance
Depositor, and Portfolio Companies Company, The Separate Account and The Funds;
Voting Rights; Servicing Agent
6. Deductions and Expenses Contract Charges
7. General Description of Variable Annuity Description of the Contracts
Contracts
8. Annuity Period Annuity Period
9. Death Benefit Death Benefits
10. Purchases and Contract Value Description of the Contracts; Accumulation
Period; Principal Underwriter
11. Redemptions Accumulation Period
12. Taxes Federal Income Tax Status
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement of Table of Contents of the Statement of Additional
Additional Information Information
</TABLE>
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History The Insurance Company; The Separate Account; The
Funds
18. Services Servicing Agent; Safekeeping of Securities;
Independent Auditors
19. Purchase of Securities Being Offered Purchase of Securities Being Offered
20. Underwriters Distribution of the Contracts
21. Calculation of Yield Quotations of Not Applicable
Money Market Subaccounts
22. Annuity Payments Annuity Payments
23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this registration statement.
<PAGE> 4
SECURITY FIRST LIFE SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
GROUP FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
Security First Life Insurance Company
11365 West Olympic Boulevard
Los Angeles, California 90064
- --------------------------------------------------------------------------------
The group flexible payment variable annuity contracts ("Contracts") described in
this prospectus are issued by Security First Life Insurance Company ("Security
First Life"). These Contracts are offered in connection with retirement plans
that receive favorable tax treatment under Section 401 of the Internal Revenue
Code (the "Code"), to employees of public school systems, churches and certain
tax-exempt organizations as tax sheltered annuity Contracts described in Section
403(b) of the Code, to public employers maintaining deferred compensation plans
described in Section 457 of the Code, and to individuals as individual
retirement annuities ("IRAs") described in Section 408(b) of the Code. The
Contracts are funded by the T. Rowe Price Bond Series (formerly the Bond Series)
and the T. Rowe Price Growth and Income Series (formerly the Growth and Income
Series) of Security First Trust, the T. Rowe Price Growth Stock Fund, Inc., T.
Rowe Price Prime Reserve Fund, Inc. and the Money Market Portfolio of Variable
Insurance Products Fund.
This prospectus sets forth information a prospective investor should know before
investing. Additional information about the Contracts has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated May 1, 1996, which information is incorporated herein by reference and is
available without charge upon written request to Security First Life Insurance
Company, P.O. Box 92193, Los Angeles, California 90009 or by telephoning
1-310-477-1059 (in California) or 1-800-992-9785 (outside California).
The table of contents of the Statement of Additional Information appears on page
22 of the prospectus.
- --------------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF SHARES OF ANY UNDERLYING FUND
FOR WHICH A CURRENT PROSPECTUS HAS NOT BEEN RECEIVED AND IN NO EVENT WILL
DESIGNATION OF AN UNDERLYING FUND FOR WHICH A CURRENT PROSPECTUS HAS NOT BEEN
RECEIVED BE PERMITTED. IN CONNECTION WITH A SECTION 403(b) PLAN OR AN IRA,
PURCHASE PAYMENTS MAY NOT BE INVESTED IN T. ROWE PRICE GROWTH STOCK FUND, INC.
OR T. ROWE PRICE PRIME RESERVE FUND, INC.
- --------------------------------------------------------------------------------
THIS PROSPECTUS AND THE PROSPECTUSES FOR THE UNDERLYING FUND(S) SHOULD BE READ
CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Prospectus dated May 1, 1996 SF 1700 (5/96)
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions.................................................................................... 3
Synopsis of the Contracts...................................................................... 4
Fee Tables..................................................................................... 6
Condensed Financial Information................................................................ 8
Financial Information.......................................................................... 9
Description of Security First Life Insurance Company, The Separate Account and The Funds....... 9
Reinsurance of Previously Issued Contracts................................................. 9
The Insurance Company...................................................................... 9
General Account Series..................................................................... 9
The Separate Account....................................................................... 9
Merger of Former Security First Life Separate Account B With and into Security First Life
Separate Account A........................................................................ 10
The Funds.................................................................................. 10
Principal Underwriter.......................................................................... 11
Servicing Agent................................................................................ 12
Safekeeping of Securities...................................................................... 12
Contract Charges............................................................................... 12
Premium Taxes.............................................................................. 12
Sales Charges (Refundable upon Annuitization).............................................. 12
Administrative Charges..................................................................... 13
Mortality and Expense Risk Charge.......................................................... 13
Description of the Contracts................................................................... 13
Annuity Certificates....................................................................... 13
Assignment................................................................................. 14
Purchase Payments.......................................................................... 14
Transfers from the General Account to the Separate Account................................. 14
Conversion Among Series.................................................................... 14
Modification of the Contract............................................................... 14
Accumulation Period............................................................................ 15
Crediting Accumulation Units............................................................... 15
Valuation of an Account.................................................................... 15
Separate Account Accumulation Unit Current Values.......................................... 15
Net Investment Factor...................................................................... 15
Termination (Redemption)................................................................... 15
Limitation on Redemptions.................................................................. 16
Annuity Period................................................................................. 16
Annuity Payments........................................................................... 16
Election of Annuity Date and Form of Annuity............................................... 17
Frequency of Payment....................................................................... 18
Level Payments Varying Annually............................................................ 18
Alternate Assumed Investment Rates......................................................... 18
Annuity Unit Values........................................................................ 18
Death Benefits................................................................................. 18
Death Before the Annuity Date.............................................................. 18
Death After the Annuity Date............................................................... 19
Withdrawal................................................................................. 19
Federal Income Tax Status...................................................................... 19
Withholding Tax -- Eligible Rollover Distributions......................................... 20
Voting Rights.................................................................................. 20
Legal Proceedings.............................................................................. 21
Earlier Contracts.............................................................................. 21
Additional Information......................................................................... 21
Table of Contents of Statement of Additional Information....................................... 22
</TABLE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer described herein and, if given or made, such information or
representations must not be relied upon as having been authorized. This
Prospectus does not constitute an offer in any jurisdiction to any person to
whom such offer would be unlawful therein.
2
<PAGE> 6
DEFINITIONS
As used in this Prospectus, these terms have the following meanings:
ACCUMULATION UNIT -- A measuring unit used to determine the value of a
Participant's interest in a General Account or the Separate Account series under
a Contract at any time before Annuity payments commence.
ANNUITANT -- The individual on whose life Annuity payments under a Contract are
based.
ANNUITY -- A series of periodic payments made to an Annuitant for life, for life
with a minimum number of payments certain, for the joint lifetime of two
Annuitants and thereafter during the lifetime of the survivor, or for a
designated period.
ANNUITY DATE -- The date on which Annuity payments begin.
ANNUITY UNIT -- A measuring unit used to determine the amount of variable
Annuity payments based on a Separate Account series under a Contract after such
payments have commenced.
BUSINESS DAY -- Each Monday through Friday except for days the New York Stock
Exchange is not open for trading.
CERTIFICATE -- The form given to each Participant describing that Participant's
rights under a Contract.
CERTIFICATE DATE -- The date a Participant's Certificate is issued.
CERTIFICATE YEAR -- A period of 12 consecutive months beginning on the
Certificate Date and on each subsequent anniversary thereof.
CONTRACT -- The agreement between Security First Life and the group
contractholder covering the rights of the whole group.
FIXED ANNUITY -- An Annuity providing guaranteed level payments. Such payments
are not based upon the investment experience of the Separate Account.
FUND -- A registered management investment company or an investment series of a
registered management investment company (mutual fund), which serves as the
underlying investment medium for the Separate Account.
GENERAL ACCOUNT -- All assets of Security First Life other than those in the
Separate Account or any other segregated asset account established by Security
First Life.
OWNER -- The person who has title to the Contract.
PARTICIPANT -- The individual by or for whom Purchase Payments are made under a
Contract.
PARTICIPANT'S ACCOUNT -- The sum of all accumulation units credited for a
Participant under a Contract.
PURCHASE PAYMENT -- The amounts paid to Security First Life in order to provide
annuity benefits under the Contracts.
SEPARATE ACCOUNT -- The segregated asset account entitled "Security First Life
Separate Account A". The Separate Account is registered as an investment company
under the Investment Company Act of 1940. (On December 1, 1993, Security First
Life Separate Account B, another segregated asset account of Security First
Life, was merged with and into the Separate Account. See "Description of
Security First Life Insurance Company, the Separate Account and the
Funds -- Merger of Former Security First Life Separate Account B with and into
Security First Life Separate Account A", Page 10.)
SERIES -- A division of the Separate Account, the assets of which consist of
shares of a specified Fund, or an accounting series, maintained for Security
First Life's General Account to determine values used to provide Fixed Annuity
benefits under the Contracts.
TRANSFER PAYMENT -- Any amount received by Security First Life for a Participant
and which amount (i) is transferred from another tax-deferred annuity Contract
or (ii) is not in accordance with the schedule of payments elected by the
Participant.
VALUATION DATE -- Any Business Day used by the Separate Account to determine the
value of part or all of its assets for purposes of determining Accumulation and
Annuity Unit values for the Contracts. Security First Life will establish
Valuation Dates at its discretion but until notice to the contrary is given,
there will be one Valuation Date in each
3
<PAGE> 7
calendar week for Annuity Unit values, such date being the last Business Day in
a week. Accumulation Unit values will be determined each Business Day.
VALUATION PERIOD -- The period of time from one Valuation Date through the next
Valuation Date.
VARIABLE ANNUITY -- An Annuity providing payments which will vary in accordance
with the investment experience of the applicable Separate Account series.
SYNOPSIS OF THE CONTRACTS
Under the Contracts, Purchase Payments will be made to Security First Life
until a specific date, after which annuity benefits become payable. The minimum
monthly Purchase Payment is $20, with an annual minimum of $240. State and
municipal premium taxes, if applicable, may be deducted from each Purchase
Payment as received, from the Participant's General Account values at the time
that a transfer of amounts to the Separate Account is elected, or from the
Participant's Account at the time Annuity payments commence. However, no such
premium taxes are presently being deducted and, until further notice, such
premium taxes, which range from 0% to 3.0%, will be absorbed by Security First
Life. (See "Premium Taxes," page 12.)
Purchase Payments made under the Contracts are allocated initially to
Security First Life's General Account to provide Fixed Annuity benefits.
Simultaneously or thereafter, the Participant may elect to transfer a portion of
the resulting General Account values to the Separate Account to provide the
Variable Annuity benefits described herein subject to certain limitations. (See
"The Separate Account," page 9.) All or a portion of payments received by
Security First Life together with or following a valid written election by the
Participant, subject to certain limitations, may be immediately transferred from
the General Account to the Separate Account. The minimum amount of any such
immediate transfer is $20. Except in the case of Contracts issued to certain
state and local governmental units pursuant to Section 457 of the Code, up to
48% of the value of Accumulation Units provided by payments received prior to a
Participant's written election, subject to certain limitations, may be
transferred to the Separate Account in equal monthly installments of not less
than $50 each over a period of at least 48 months from the date of election.
(See "Transfers from the General Account to the Separate Account," page 14 for
an example of how this limitation applies.) However, no such installment
transfers are permitted with respect to General Account values acquired by a
particular payment where any part of such values has already been transferred to
the Separate Account as the result of a prior election. In all cases, amounts
which have been transferred from the General Account to the Separate Account may
not be transferred back to the General Account except to provide immediate Fixed
Annuity benefits.
Each transfer from the General Account to the Separate Account is treated as
a surrender from the General Account and is subject to a sales charge
(refundable upon annuitization and payable in the form of a fixed annuity) which
varies in amount from 0% to 7%, depending on the length of time the amounts to
be transferred have remained in the General Account. This charge will be
restored, in whole or in part, as an Annuity Bonus when Annuity payments begin
under the Contract.
Pursuant to the Participant's designation, amounts transferred to the
Separate Account are invested at a net asset value in Accumulation Units of one
or more of five Series (Series B, Series G, Series T, Series P and Series FM),
each of which consists of the shares of a different Fund. The five Funds which
constitute the underlying investment media for the Contracts offered by this
prospectus are the T. Rowe Price Bond Series of Security First Trust, the T.
Rowe Price Growth and Income Series of Security First Trust, T. Rowe Price
Growth Stock Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc. and the Money
Market Portfolio of the Variable Insurance Products Fund, corresponding
respectively to the aforementioned Series. (See "The Funds," page 11). If a
Certificate has been issued after September 25, 1981 in connection with a plan
qualifying under Code Section 403(b) or in connection with the purchase of an
IRA under Section 408(b), amounts transferred to the Separate Account may be
invested in only three Series: Series B, Series G and Series FM. If a
Certificate has been issued pursuant to a plan qualifying under Code Section
457, any amounts transferred to the Separate Account may be invested only in
four Series: Series B, Series G, Series T and Series P.
T. Rowe Price Associates, Inc. ("Price Associates") provides investment
advisory and administrative services to T. Rowe Price Growth Stock Fund, Inc.
and T. Rowe Price Prime Reserve Fund, Inc. ("T. Rowe Price Funds"). Security
First Investment Management Corporation ("Security Management") has been
contracted to provide investment advisory and administrative services to the
Security First Trust. Under separate agreements, Price Associates provides
subadvisory services on behalf of the Security First Trust. The investment
adviser of the Variable Insurance Products Fund is Fidelity Management &
Research Company ("FMR").
During the accumulation period, a Participant may elect to have all or part
of the amounts allocated to any one Separate Account Series converted to another
Separate Account Series, subject to certain limitations. (See "Conver-
4
<PAGE> 8
sion Among Series," page 14.) Each such conversion is subject to a $10
conversion charge and to a $1,000 minimum amount. Such conversions are also
permitted after the Annuity Date, subject to the same $10 charge. Except in the
case of Contracts issued to certain state and local governmental units pursuant
to Section 457 of the Code, an administrative charge ranging from $30 to $40
will be assessed against a Participant's Account on each anniversary of the date
such account was established and on the date such account is cancelled as the
result of a complete surrender. In addition, a daily deduction for mortality and
expense risks under the Contracts, at the rate of .0000244 (equivalent to .89%
annually) is assessed against and deducted from the assets of each Series in the
Separate Account. (See "Contract Charges," page 12.)
The Code limits withdrawals from 403(b) Annuity Contracts to circumstances
only: when the Participant attains age 59 1/2, separates from service, dies,
becomes disabled (within the meaning of Section 72(m)(7) of the Code), or in the
case of hardship. Withdrawals for hardship are restricted to the portion of the
Participant's Account Value which represents contributions made by the
Participant and does not include any investment results. The limitations on
withdrawals apply only to: (1) salary reduction contributions made after
December 31, 1988; (2) income attributable to such contributions; and (3) income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or exchanges between retirement plans which
may receive favorable tax treatment under the Code. Tax penalties may also
apply.
Participants should consult their own tax counsel or tax adviser regarding
any distributions.
Subject to the foregoing, a Participant may at any time before the Annuity
Date surrender all or part of his interest under a Contract, provided that no
partial surrender is permitted if it would reduce the Participant's interest in
any Series to less than $200 unless his entire interest in that Series is being
surrendered. Surrenders from any Separate Account Series are subject to a $10
charge and are effected on the basis of the current value of Accumulation Units
in such Series. (See "Termination (Redemption)," page 16.) In the event of the
Annuitant's death prior to attaining age 65 and before the Annuity Date,
Security First Life will pay as a death benefit the accumulated value of the
Participant's Account or, if greater, the total of the Participant's Purchase
Payments reduced by any amounts previously applied to provide Annuity income or
withdrawn as partial surrenders. (See "Death Benefits," page 19.)
Since the Contracts are designed to fulfill long-term financial needs,
purchasers should not consider them as short-term or temporary investments. The
Code provides various taxes which may be assessed upon amounts that are
withdrawn prematurely under the Contracts. (See "Federal Income Tax Status,"
page 19.)
5
<PAGE> 9
FEE TABLES
PARTICIPANT TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C>
(a) Withdrawal Charge $10 from each Series from
which withdrawal is made.
Minimum Maximum
------------------- -----------------
(b) Administrative Charges $30 $42.50 per year
(c) Sales Charge Applicable
Charge as a
Percentage
of Purchase
Year Payment
---- --------
1 7%
2 6%
3 5%
4 4%
5 3%
6 and later 0%
(d) Conversion Charge (Applies to $10 per conversion
election to convert Accumulation or
Annuity units from any one Series to
another)
</TABLE>
SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE.
DEDUCTED ANNUALLY FROM THE SEPARATE ACCOUNT)
Mortality and Expense Risk Fees 0.89% annually
SECURITY FIRST TRUST (SERIES B AND G)
T. ROWE PRICE GROWTH STOCK FUND, INC. (SERIES T)
T. ROWE PRICE PRIME RESERVE FUND, INC. (SERIES P)
VARIABLE INSURANCE PRODUCTS FUND (SERIES FM)
ANNUAL EXPENSES (NET OF REIMBURSEMENTS)
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series FM
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
(a) Management Fee (as a percentage of average net
assets)............................................. .50% .50% .59% .39% .24%
(b) Other Expenses (as a percentage of average net
assets)............................................. .79% .24% .21% .28% .09%
(c) Total Annual Expenses Of Underlying Funds........... 1.29% .74% .80% .67% .33%
</TABLE>
6
<PAGE> 10
EXAMPLES
<TABLE>
<CAPTION>
CONDITIONS
A PARTICIPANT* WOULD PAY THE FOLLOWING EXPENSES ON
SEPARATE A TIME PERIODS
ACCOUNT $1,000 INVESTMENT ASSUMING 5% ANNUAL RETURN ON --------------------------------------
SERIES ASSETS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------- --------------------------------------------------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
B (a) upon surrender at the end of the stated time (a) $ 100 $ 143 $ 187 $311
period
(b) if the Certificate WAS NOT surrendered (b) 90 133 177 301
- --------- --------------------------------------------------- ------- ------- ------- --------
G Same (a) 95 127 161 257
(b) 85 117 151 247
- --------- --------------------------------------------------- ------- ------- ------- --------
T Same (a) 96 129 164 263
(b) 86 119 154 253
- --------- --------------------------------------------------- ------- ------- ------- --------
P Same (a) 95 125 158 250
(b) 85 115 148 240
- --------- --------------------------------------------------- ------- ------- ------- --------
FM Same (a) 91 115 141 215
(b) 81 105 131 205
- --------- --------------------------------------------------- ------- ------- ------- --------
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
* The Examples are based upon the Contract as originally funded in Capitol Life
Separate Account A which was transferred intact and became Security First
Life Separate Account B which, in 1993, was merged with and into the Separate
Account.
1. The purpose of the foregoing tables and examples is to assist the Participant
in understanding the various costs and expenses that he or she will bear
directly or indirectly. The table reflects expenses of the Separate Account
as well as the underlying funds. For additional information see "Contract
Charges," beginning on page 12 of this Prospectus.
2. The examples assume that the initial transfer from the General Account to the
Separate Account occurred during the first certificate year and that,
therefore, the maximum sales charge of 7% is applied against the initial
$1,000 investment. The 7% charge, however, should not be considered an
expense if the Certificate is not surrendered, since that amount is placed in
the Participant's fixed account to be refunded upon annuitization and payable
in the form of a fixed annuity. Thus, for example, if the Participant began
an annuity payout at any of the time periods indicated in the examples, he or
she would receive an additional value (based upon the $1,000 hypothetical
investment) of: 1 year $74, 3 years $81, 5 years $89 and 10 years $114 as a
fixed annuity. In the case of an annuitization, the examples of expense
incurred would be as follows:
<TABLE>
<CAPTION>
SERIES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
B 20 63 107 231
G 15 47 81 177
T 16 49 84 183
P 15 45 78 170
FM 11 35 61 135
</TABLE>
The examples assume that there were no subsequent transactions that would
result in the imposition of charges. Premium taxes are not reflected. Premium
taxes may be deducted from each Purchase Payment, upon transfers from the
General Account, or upon annuitization. However, Security First Life is
presently absorbing all premium taxes.
3. For purposes of the amounts reported in the examples, annual Administrative
Charges are reflected by dividing the total amount of contract fees collected
during the year by the total average net assets of the Separate Account.
4. NEITHER THE TABLE NOR THE EXAMPLES ARE REPRESENTATIONS OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
7
<PAGE> 11
CONDENSED FINANCIAL INFORMATION
The following table, which sets forth condensed financial information of the
Separate Account, was prepared by The Capitol Life Insurance Company which
issued the Contracts funded in the Separate Account prior to the assumptive
reinsurance of the Contracts and the transfer of the Separate Account to
Security First Life effective February 18, 1992. The financial statements for
the six years ended December 31, 1995, have been audited by Ernst & Young LLP,
independent auditors. The financial statements for each of the four years in the
period ended December 31, 1989 have been audited by Deloitte & Touche,
independent auditors. The information should be read in conjunction with
the financial statements, related notes and other financial information in the
Statement of Additional Information.
<TABLE>
<CAPTION>
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
Separate Acct A* Series 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91
- ---------------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
B (formerly L)
Beg. AUV $............................ 9.28 10.42 10.60 11.14 12.24 12.55
End. AUV $............................ 10.42 10.60 11.14 12.24 12.65 14.39
End No. Qual. AUs (000)............... 552.7 605.4 631.8 583.2 153.0 131.15
G (formerly V)
Beg. AUV $............................ 11.54 12.16 13.09 15.69 19.55 17.24
End. AUV $............................ 12.16 13.09 15.69 19.55 17.24 21.67
End No. Qual. AUs (000)............... 1299.5 1450.2 1597.8 1501.5 796.2 689.2
T Beg. AUV $............................ 9.62 11.61 11.92 12.48 15.60 14.70
End. AUV $............................ 11.61 11.92 12.48 15.60 14.70 19.60
End No. Qual. AUs (000)............... 1265.4 1656.9 1857.2 1543.9 136.1 116.9
P Beg. AUV $............................ 8.14 8.58 9.04 9.61 10.36 11.08
End. AUV $............................ 8.58 9.04 9.61 10.36 11.08 11.60
End No. Qual. AUs (000)............... 1509.1 1681.8 1947.9 1825.5 251.7 209.5
</TABLE>
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
Separate Acct A* Series 7/31/92 7/31/93 12/31/93 12/31/94 12/31/95
- ---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
B Beg. AUV $............................ 14.39 14.92 16.21 16.48 15.77
End. AUV $............................ 14.92 16.21 16.48 15.77 18.25
End No. Qual. AUs (000)............... 126.7 122.0 116.0 105.3 101.8
G Beg. AUV $............................ 21.67 23.34 25.16 26.64 27.17
End. AUV $............................ 23.34 25.16 26.64 27.17 35.31
End. No. NonQualified AUs (000)....... 11.0 -- --
End No. Qual. AUs (000)............... 684.2 661.70 635.0 607.2 580.5
T Beg. AUV $............................ 19.60 19.41 21.12 23.45 23.44
End. AUV $............................ 19.41 21.12 23.45 23.44 30.44
End No. Qual. AUs (000)............... 112.8 108.0 106.8 108.4 115.2
P Beg. AUV $............................ 11.60 11.79 12.00 12.07 12.40
End. AUV $............................ 11.79 12.00 12.07 12.40 12.97
End No. Qual. AUs (000)............... 188.7 168.8 157.7 122.0 113.1
FM Beg. AUV $ (1/6/94).................. 5.00 5.16
End. AUV $............................ 5.16 5.42
End. No. Qual. AUs (000).............. 92.3 104.7
Yield................................. 4.81% 4.40%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
AUV -- Accumulation Unit Value
AU -- Accumulation Units
* Represents amounts accumulated in Capitol Life Separate Account A prior to
February 18, 1992 and, from that date, in Security First Life Separate Account
B.
8
<PAGE> 12
FINANCIAL INFORMATION
Financial Statements of the Separate Account are contained in the Statement
of Additional Information. Security First Life's financial statements are also
included in the Statement of Additional Information.
DESCRIPTION OF SECURITY FIRST LIFE INSURANCE COMPANY,
THE SEPARATE ACCOUNT AND THE FUNDS
REINSURANCE OF PREVIOUSLY ISSUED CONTRACTS
On February 18, 1992, Security First Life and The Capitol Life Insurance
Company ("Capitol Life") entered into an Assumption Reinsurance Agreement
("Reinsurance Agreement") pursuant to which Security First Life acquired, on an
assumption reinsurance basis, the variable annuity contracts of Capitol Life,
including contracts which, except for the issuing separate account, are
identical in all material respects ("reinsured contracts") to the Contracts
offered by this prospectus. Pursuant to the Reinsurance Agreement, Capitol
Life's Separate Account A with all of its assets was transferred intact to
Security First Life and the separate account was reformed pursuant to Delaware
law as Security First Life Separate Account B ("Account B"). Security First Life
thereupon assumed all the liabilities and obligations under the reinsured
contracts. All future payments made under the reinsured contracts are made
directly to or by Security First Life.
The reinsured contract Owners have the same contract rights and the same
contract values as they did before the reinsurance transaction. However, they
look to Security First Life instead of Capitol Life to fulfill the terms of
their Contracts. Thus, as of the effective date of the reinsurance closing, the
assets of Account B were only available to satisfy Security First Life's
obligations under the reinsured contracts assumed by the Security First Life.
Neither Account B nor the Separate Account were or are chargeable with
liabilities arising out of any other business that Security First Life conducts
nor can such assets be reached by Capitol Life's creditors. Account B was merged
with and into the Separate Account as of December 1, 1993. (See "Merger of
Former Security First Life Separate Account B with and into Security First Life
Separate Account A," page 10.) The assets of the Separate Account are not
chargeable with liabilities of Security First Life. (See "The Separate Account,"
page 9).
THE INSURANCE COMPANY
Security First Life is a stock life insurance company founded in 1960 and
organized under the laws of the State of Delaware. Its principal executive
offices are located at 11365 West Olympic Boulevard, Los Angeles, California
90064. Security First Life is a wholly-owned subsidiary of Security First Group,
Inc. ("SFG") (formerly The Holden Group, Inc.). The outstanding voting stock of
SFG is owned by London Insurance Group, Inc., a Canadian insurance service
corporation and publicly traded subsidiary of Trilon Financial Corporation of
Toronto, Canada. Trilon Financial controls several major Canadian corporations
including London Life Insurance Company. Security First Life is authorized to
transact the business of life insurance, including annuities. Security First
Life presently is licensed to do business in 49 states and the District of
Columbia.
GENERAL ACCOUNT SERIES
Each payment made under a Contract is initially applied solely to purchase
Accumulation Units in the General Account Series at their value on the date the
payment is received by Security First Life. Such units thereafter increase in
value in increments determined in advance on the basis of the interest rates
guaranteed for that payment by Security First Life under the Contract. A
Participant may apply the General Account values which have been accumulated for
him under the Contract to purchase Fixed Annuity benefits at rates guaranteed in
such Contract. The fixed benefit portion of the Contract is not intended to be
offered by this prospectus. Participants are referred to the terms of the
Contract itself for more information concerning General Account values and Fixed
Annuity provisions.
THE SEPARATE ACCOUNT
The Separate Account was established by Security First Life on May 29, 1980,
in accordance with the provisions of the Delaware Insurance Code. The Separate
Account is registered as a unit investment trust under the Investment Company
Act of 1940. Registration with the Securities and Exchange Commission does not
involve supervision of the management or investment practices or policies of the
Separate Account or Security First Life by the Commission.
The Separate Account and each Series therein are administered and accounted
for as part of the general business of Security First Life, but the income,
gains and losses, whether or not realized, from assets allocated to each
Separate Account Series are credited to or charged against the assets held for
that Series in accordance with the terms of the Contracts, without regard to
other income, gains or losses of any other Separate Account Series or arising
out of any
9
<PAGE> 13
other business Security First Life may conduct. The assets within each Separate
Account Series are not chargeable with liabilities arising out of the business
conducted by any other Separate Account Series, nor will the Separate Account as
a whole be chargeable with liabilities arising out of any other business
Security First Life may conduct.
All obligations arising under a Contract, including the guarantee to make
Annuity payments, are general corporate obligations of Security First Life, and
all of Security First Life's assets are available to meet its expenses and
obligations under the Contracts. However, while Security First Life is obligated
to make the Variable Annuity payments under a Contract, the amount of such
payments is not guaranteed.
The Separate Account is divided into various investment Series. The
Contracts permit allocation to five of the Series each of which invests in the
shares of one of the five available Funds. (for this purpose, the term "Fund"
includes each investment series of a multiple series management investment
company.) Series B, G, T, P and FM respectively invest solely in the shares of
the T. Rowe Price Bond Series of Security First Trust, the T. Rowe Price Growth
and Income Series of Security First Trust, T. Rowe Price Growth Stock Fund,
Inc., T. Rowe Price Prime Reserve Fund, Inc. and the Money Market Portfolio of
Variable Insurance Products Fund. The shares of each Fund are purchased for the
corresponding Separate Account Series at the net asset value per share next
determined by each Fund following its receipt of the applicable payment, without
sales charge. Any dividend or capital gain distributions received from a Fund
are reinvested in Fund shares which are retained as assets of the applicable
Separate Account Series. Fund shares will be redeemed without fee to the
Separate Account to the extent necessary for Security First Life to make Annuity
or other payments under the Contracts.
If a Certificate was issued after September 25, 1981 in connection with a
tax sheltered Annuity under Section 403(b) of the Code or an IRA, amounts
transferred to the Separate Account may be invested only in three Series: Series
B, Series G and Series FM. If a Certificate has been issued in connection with a
deferred compensation plan described in Section 457 of the Code, any amounts
transferred to the Separate Account may be invested in four Series: Series B,
Series G, Series T and Series P. These restrictions also apply to conversion
between Series.
If shares of any Fund should no longer be available for investment by the
Separate Account or if in the judgment of Security First Life's management
further investment in the shares of any Fund should become inappropriate in view
of the purposes of the Contracts issued, Security First Life may substitute for
the Fund shares already purchased, and apply future purchase payments under the
Contracts to the purchase of, shares of another Fund or other securities. No
substitution of securities of any Separate Account Series may take place,
however, without the prior approval of the Securities and Exchange Commission.
MERGER OF FORMER SECURITY FIRST LIFE SEPARATE ACCOUNT B WITH AND INTO SECURITY
FIRST LIFE SEPARATE ACCOUNT A
Prior to December 1, 1993, Account B was a separate account for which
Security First Life acted as depositor. Account B was used to fund the reinsured
contracts that are in all material respects identical to the Contracts discussed
herein. The Capitol Life Contracts were reinsured to Security First Life as of
February 18, 1992. See "Description of Security First Life Insurance Company,
the Separate Account and the Funds -- Reinsurance of Previously Issued
Contracts." Security First Life, as part of the reinsurance transaction, assumed
Capitol Life Separate Account A, intact, and renamed it Security First Life
Separate Account B. The reinsured Capitol Life contract owners thus have looked
to Security First Life subsequent to February 18, 1992, rather than to Capitol
Life to fulfill the obligations the prior depositor had under the reinsured
contracts. Since that date, all payments under the reinsured contracts have been
made directly to or by Security First Life.
On December 4, 1992, an application was filed on behalf of the Separate
Account, Account B and Security First Life, requesting an order of the
Securities and Exchange Commission exempting from relevant provisions of the
Investment Company Act of 1940, to the extent such exemption might be necessary,
the proposed merger of Account B with and into the Separate Account. On February
18, 1993, the requested order was granted. The merger was also approved by the
Delaware Department of Insurance. On December 1, 1993, the proposed merger was
consummated. As a result of the merger, the reinsured Contracts are now funded
through the Separate Account rather than through Account B. As is the case with
the Contracts, the reinsured contracts were (and continue to be) ultimately
invested in the shares of the same Funds after the merger. The merger did not
affect any of the rights and obligations of the reinsured contract owners or
Security First Life under the reinsured contracts, nor did the merger affect
those Owners' Contract Values.
THE FUNDS
Each Fund in which a Separate Account Series is invested is a diversified,
open-end, management investment company, or a separate investment series
thereof, registered under the Investment Company Act of 1940. Such
10
<PAGE> 14
registration does not involve supervision by the Securities and Exchange
Commission of the investments or investment policies of the Funds. The
investment objectives of the Funds are set forth below. There can be no
assurance that the investment objectives of any of the Funds will be achieved.
The principal investment objective of the T. Rowe Price Bond Series
(formerly Bond Series) of Security First Trust is to achieve the highest
investment income over the long-term consistent with the preservation of
principal through investment primarily in marketable debt instruments. A
secondary objective is growth of principal and income with respect to those Fund
assets that are invested in common and preferred stocks.
The principal investment objectives of the T. Rowe Price Growth and Income
Series (formerly Growth and Income Series) of Security First Trust are capital
growth and production of income. Conservation of principal is a secondary
objective. While this Fund will generally invest in common stocks and other
equities, it may, depending on economic conditions, reduce such investments and
substitute fixed income instruments.
The principal investment objective of T. Rowe Price Growth Stock Fund, Inc.
is long-term growth of capital through investments, primarily in common stocks
of growth companies.
The investment objectives of T. Rowe Price Prime Reserve Fund, Inc. are to
seek the highest possible levels of current income while preserving capital and
maintaining liquidity by investing primarily in money market (short-term debt)
instruments.
The principal investment objective of the Money Market Portfolio is to seek
to obtain as high a level of current income as is consistent with preserving
capital and providing liquidity. The portfolio will invest only in high quality
U.S. dollar denominated money market securities of domestic foreign issuers.
Price Associates provides investment advisory and administrative services to
T. Rowe Price Growth Stock Fund, Inc. and T. Rowe Price Prime Reserve Fund, Inc.
("T. Rowe Price Funds"). Security Management provides investment advisory and
administrative services to Security First Trust. Under separate agreements,
Price Associates provides sub-advisory services to Security First Trust.
Security First Trust, a Massachusetts business trust, may offer its shares to
separate accounts funding variable annuity contracts issued by both affiliated
and unaffiliated insurance companies. Variable Insurance Products Fund is a
Massachusetts business trust divided into separate portfolios. The investment
adviser of the Variable Insurance Products Fund is Fidelity Management &
Research Company ("FMR").
Funds are available to registered separate accounts offering variable
annuity and variable life products of participating insurance companies and
entities permitted under Section 817(h) of the Code (except for the T. Rowe
Price Growth Stock Fund and T. Rowe Price Prime Reserve Fund. Although it is not
anticipated that any disadvantage will result, there is a possibility that a
material conflict may arise between the interest of the Separate Account and one
or more of the other separate accounts participating in the Funds. A conflict
may occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
our Owners and those of other companies, or some other reason. In the event of a
conflict, the Separate Account will take any steps necessary to protect Owners
and variable annuity payees, which may include withdrawal of amounts invested in
the Fund by the Separate Account.
The rights of Contract Owners, Annuitants, Participants or beneficiaries to
instruct the Separate Account on the voting of portfolio company securities
underlying their interest in the Separate Account can be found under the heading
"Voting Rights."
Prospectuses for the underlying Funds containing more detailed information
may be obtained without charge by written request to Security First Life
Insurance Company, P.O. Box 92193, Los Angeles, California 90009. An investor
should carefully read a Fund's prospectus before transferring amounts to be
invested in a particular Fund.
PRINCIPAL UNDERWRITER
Security First Financial, Inc., 11365 West Olympic Boulevard, Los Angeles,
California 90064, a broker-dealer registered under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers, Inc., is
the principal underwriter for the Contracts. Security First Financial, Inc., a
Delaware corporation, is a subsidiary of SFG.
11
<PAGE> 15
SERVICING AGENT
An administrative services agreement has been entered into between Security
First Life and SFG, under which the latter has agreed to perform certain of the
administrative services relating to the Contracts and for the Separate Account.
SFG performs substantially all of the recordkeeping and administrative services
in connection with the Separate Account.
SAFEKEEPING OF SECURITIES
All assets of the Separate Account are held for safekeeping by Security
First Life. The assets of the Separate Account Series are kept physically
segregated by the bank and held separate from the assets of any other firm,
person, or corporation. Additional protection for the assets of the Separate
Account is afforded by fidelity bonds covering all of Security First Life's
officers and employees.
CONTRACT CHARGES
Contract charges are assessed in the following ways: (1) as charges on
transfers from the General Account to the Separate Account, part of which may be
deemed to be in the nature of sales charges, (2) as charges against each
Participant's Account for the administration of such account and (3) as charges
against the value of the assets of the Separate Account Series for the
assumption of mortality and expense risks. These charges may not be changed
under the Contract.
An investor should note that there are deductions from and expenses paid out
of the assets of the underlying Funds that are described in their respective
prospectuses.
PREMIUM TAXES
The Contracts permit Security First Life to deduct any applicable state
premium taxes, from each payment as received, from the Participant's General
Account values at the time that a transfer of amounts to the Separate Account is
elected, or from the Participant's Account at the time Annuity payments
commence. However, until further notice, such premium taxes, which range from 0%
to 2.35% (3.50% in Nevada), will be absorbed by Security First Life and will not
be charged against any Participant's Account.
SALES CHARGES (REFUNDABLE UPON ANNUITIZATION)
Whenever a Participant elects to make a transfer from the General Account to
the Separate Account, such transfer is treated as a surrender from the General
Account and is subject to a sales charge (refundable in whole or in part upon
annuitization and payable in the form of a fixed annuity) that varies according
to the length of time that payment amounts have remained in the General Account
before being transferred. This charge amounts to:
7% for amounts received in the calendar year of the transfer;
6% for amounts received in the calendar year before the transfer;
5% for amounts received in the 2nd calendar year before the transfer;
4% for amounts received in the 3rd calendar year before the transfer;
3% for amounts received in the 4th calendar year before the transfer;
0% for all amounts received prior to the 4th calendar year before the
transfer.
These charges are applied by reducing the Participant's interest in the
General Account Series by an amount determined by dividing the amount elected to
be transferred to the Separate Account by a factor derived from the above
percentage charges. This factor is equivalent to (a) - (b) where (a) is 1 and
(b) is the percentage charge expressed as a decimal. The General Account units
are cancelled on a first-in, first-out basis. The effect of this varying
schedule of percentage charges is that amounts left in the General Account for
longer periods of time are subject to a lower charge than amounts immediately
transferred. Thus, for example, if a Participant makes a written election to
transfer $500 of a purchase payment to Series B of the Separate Account
simultaneous with or prior to making the periodic payment, the General Account
Series would be reduced by $537.63 ($500 divided by a factor of 0.93). On the
other hand, if such transfer was a part of an election pertaining to a payment
that had been deposited in the second calendar year prior to the election to
transfer, the General Account Series would be reduced by only $526.32 ($500
divided by a factor of 0.95). (See "Transfers from the General Account to the
Separate Account," page 14.)
12
<PAGE> 16
While there is no direct correlation between the above charges and the sales
commissions that Security First Life pays to agents who sell the Contracts
described in this prospectus, such charges may nevertheless be deemed to be in
the nature of sales charges for purposes of the Investment Company Act of 1940.
If, however, a Participant's Account is applied to provide Annuity income, all
percentage charges (other than premium taxes, if any) previously imposed on that
Participant's transfers from the General Account to the Separate Account will be
restored in full or in part, as an Annuity Bonus. (See "Annuity Payments," page
17.)
ADMINISTRATIVE CHARGES
At the end of each Certificate Year, and on the date a Participant's Account
is cancelled as a result of a complete redemption, Security First Life will
deduct an administrative charge equal to $27.50 plus $2.50 for each General
Account and Separate Account Series for which there are Accumulation Units
included in the value of such account. These charges will thus range from a
minimum of $30 to a maximum of $40 on an annual basis. With respect to certain
Contracts issued to fund deferred compensation plans for state and local
government employees described in Section 457 of the Code, Security First Life
has agreed to waive a portion of this annual administrative charge. As a result,
the charge will be equal to $12 for a single Series, plus $2.50 for each
additional Series and the administrative charges will therefore range from $12
to $22. The administrative charge is designed to cover the costs of
administering the Contracts, and Security First Life does not anticipate
profiting from them.
Administrative expenses include the cost of policy issuance, salaries, rent,
postage, telephone, travel expenses, legal, administrative, actuarial and
accounting fees, periodic reports, office equipment, stationery, office space
and custodial expenses. As of December 31, 1992, there have been no amounts
charged against Participants' accounts for such administrative expenses.
A $10 conversion charge is deducted from a Participant's Account for each
allowable election to convert Accumulation Units or Annuity Units from any one
Series to another. (See "Conversion Among Series," page 14.) A surrender charge
of the lesser of $10 or 2% of the amount surrendered is deducted from a
Participant's Account for each partial surrender. (See "Termination
(Redemption)," page 19.) All of the various types of charges described above are
effected by cancelling Accumulation Units equal in value to the charges, and are
allocated (1) to the Series from which a surrender or transfer is being made or
(2) in the case of periodic administrative charges, among the General Account
and Separate Account Series on the basis of their relative values at the time
the deduction is made.
MORTALITY AND EXPENSE RISK CHARGE
The minimum death benefit provided for by the Contracts requires Security
First Life to assume a mortality risk that the accumulated Contract value
credited to a Participant will be less than the Participant's adjusted Purchase
Payments. (See "Death Before the Annuity Date," page 19.) In addition, because
the Contracts provide life Annuity options, Security First Life assumes a
mortality risk that the death rate of Annuitants as a group will be lower than
the death rate upon which the mortality tables specified in the Contracts are
based. Security First Life also assumes the risk that the amounts collected as
"Administrative Charges" may be insufficient to cover its actual costs. A fee
will be charged by Security First Life to compensate it for assuming mortality
and expense risks in connection with amounts allocated to the Separate Account.
In valuing the Separate Account, Security First Life will make a daily deduction
from the Separate Account determined by multiplying the value of the assets of
the Separate Account by .0000244 (.89% on an annual basis -- approximately .40%
for mortality risks and .49% for expense risks).
In the event Security First Life has gains from the receipt of this fee over
its costs of assuming actuarial risks under the Contracts, some portion of the
gains may be allocated to Participants' Accounts under such Contracts as
experience credits if permitted by the plan under which the Contract is issued.
Security First Life is under no obligation to allocate any such credits.
To the extent there is a profit from the mortality and expense risk charges,
Security First Life may use such profit in its discretion, including the use of
such profit to offset expenses incurred in the distribution of the Contracts.
DESCRIPTION OF THE CONTRACTS
ANNUITY CERTIFICATES
A group Contract is issued to a Contract Owner who is typically an employer,
a trustee, or a government organization establishing a retirement plan.
Employees who become Participants in the retirement plan are covered by a group
Contract and are issued Certificates which evidence their participation and
summarize their rights under the
13
<PAGE> 17
Contract. Since the Contracts are designed to fulfill long-term financial needs,
purchasers should not consider them as short-term or temporary investments.
ASSIGNMENT
The rights of Participants under the Contract may be restricted or augmented
by the terms of the particular retirement plan or by the Code. For example, the
Code provides rules as to the amount of contributions, the time when
distributions must be commenced, and the Annuity options which are available. In
particular, the Code provides that Certificates issued in connection with
Section 401 and 403 plans and IRAs must be nontransferable and nonassignable.
PURCHASE PAYMENTS
Purchase Payments may be made on an annual, semi-annual, quarterly, or
monthly basis, or at such intervals as may be agreed to by Security First Life.
The frequency of Purchase Payments may be changed if permitted by the applicable
plan. The minimum annual Purchase Payment is $240; with each monthly Purchase
Payment subject to a $20 minimum. Purchase Payments will be invested in the
General Account Series to purchase Accumulation Units at their value on the date
the payment is received by Security First Life. Security First Life may also
accept Transfer Payments from other annuity contracts. Confirmation of each
purchase or Transfer Payment received will be sent to the Owner or Participant,
as appropriate.
TRANSFERS FROM THE GENERAL ACCOUNT TO THE SEPARATE ACCOUNT
The entire Purchase Payment, minus a 7% sales charge (refundable upon
annuitization), may be transferred immediately to the Separate Account if
written instructions are received prior to or simultaneous with the receipt of
the payments affected. The minimum amount that may be transferred with respect
to any payment is $20.
With the exception of certain deferred compensation plans described in
Section 457 of the Code, if Purchase Payments are not transferred immediately,
subsequent elections to transfer are restricted to 48% of such payments and are
transferred in equal monthly installments over a period of at least 48 months.
Each monthly installment is subject to a $50 minimum. Thus, if a Purchase
Payment is made that is not the subject of a prior or contemporaneous transfer
instruction, the maximum rate at which funds attributed to that Payment could
subsequently be transferred to the Separate Account is one percent of such
Payment per month, up to a maximum aggregate amount transferred of 48 percent of
the Payment. For example, in the case of a $10,000 Purchase Payment, the maximum
amounts that could be transferred pursuant to such a subsequent transfer
instruction would be $100 per month, up to a maximum of $4,800 in the aggregate.
Transfers from the General Account to the Separate Account are not permitted
after Annuity payments have commenced. No monthly transfers may be made from
General Account Accumulation Units which have been subject to any prior
conversion election.
All amounts transferred represent the current surrender value of the General
Account Accumulation Units which are cancelled. Pursuant to the Participant's
designation, and certain limitations described in "The Separate Account,"
amounts transferred to the Separate Account are invested at the net asset value
next computed after the effective time and date of the transfer in Accumulation
Units of one or more of five Series, each of which consists of the shares of a
different Fund. The investment performance of the Fund and deductions of certain
charges affect the Accumulation Unit value. Amounts may also be transferred back
from the Separate Account to the General Account, but only in connection with an
election to apply the resulting General Account values to provide immediate
Annuity benefits. In addition, all or part of the sales charge may be restored
as an Annuity Bonus upon annuitization. (See "Annuity Payments.")
CONVERSION AMONG SERIES
A Participant may by written direction to Security First Life convert either
Accumulation Units or Annuity Units from any Separate Account Series to any one
or more other Separate Account Series. If a Certificate has been issued to fund
a tax sheltered annuity described in Section 403(b) of the Code, an IRA or a
deferred compensation plan for state or local employees described in Section 457
of the Code, conversions are subject to certain limitations. (See "The Separate
Account.") The minimum amount to be converted is $1,000 and is based upon the
value of the affected Series at the close of business on the Business Day such
conversion occurs, subject to a conversion charge of $10.
MODIFICATION OF THE CONTRACT
The Contracts include Security First Life's assurance that Annuity payments
involving life contingencies will be based on the minimum guaranteed annuity
purchase rates incorporated in the Contracts, regardless of actual mortality
14
<PAGE> 18
experience. The Contracts include provisions legally binding on Security First
Life with respect to these Annuity purchase rates and such other matters as
death benefits, deductions from Purchase Payments, deductions from individual
accounts for actuarial risk and other fees, and guaranteed rates with respect to
fixed benefits. Security First Life may unilaterally change such provisions, but
only: (i) with respect to Participants who become covered under a Contract after
the effective date of the change; (ii) with respect to benefits and values
provided by Purchase Payments made after the effective date of the change to the
extent that such Purchase Payments in any Certificate Year exceed the first
year's Purchase Payments; (iii) with respect to benefits and values provided by
any Transfer Payment from another tax deferred annuity contract which is
accepted by Security First Life after the effective date of the change; or (iv)
to the extent necessary to make the Contract conform to any federal or state
law, regulation or ruling.
A Contract may also be modified by agreement between Security First Life and
the Contract Owner, provided that no such modification will adversely effect a
Participant's Account without that Participant's written consent.
Inquiries as to Contract provisions should be made in writing to Security
First Life Insurance Company, P.O. Box 92193, Los Angeles, California 90009 or
by calling 1-310-477-1059 (in California) or 1-800-992-9785 (outside
California).
ACCUMULATION PERIOD
CREDITING ACCUMULATION UNITS
Accumulation Units are credited to a Participant's Account upon receipt of
each payment, transfer or conversion, as the case may be. The number of
Accumulation Units to be credited is determined by dividing the net amount
allocated to the Series in question by the value of an Accumulation Unit in that
Series next computed following receipt of the payment, transfer or conversion.
VALUATION OF AN ACCOUNT
The value of a Participant's Account on any date prior to the Annuity Date
is determined by multiplying the total number of Accumulation Units credited to
the account for each Series by the current value of an Accumulation Unit in that
Series, and taking the sum of such results for all Series. Prior to the Annuity
Date, each Participant will be provided with a written statement of account for
each calendar quarter in which a transaction occurred, but in no event less than
once annually. The statement of account will show all transactions for the
period being reported as well as the number of Accumulation Units of each Series
then credited to the Participant's Account, the current Accumulation Unit value
for each such Series, and the total value of the Participant's Account as of the
end of the reporting period.
SEPARATE ACCOUNT ACCUMULATION UNIT CURRENT VALUES
The current value of Separate Account Accumulation Units for a Series varies
with the investment experience of the Fund in which assets of that Series are
invested. Such value is determined by multiplying the value of an Accumulation
Unit in the Series on the immediately preceding Business Day by the net
investment factor for the period since that day (see below). The Participant
bears the investment risk that the aggregate value of that portion of the
Participant's Account which is allocated to the Separate Account may at any time
be less than, equal to, or more than the amounts transferred to the Separate
Account.
NET INVESTMENT FACTOR
The Separate Account net investment factor is an index of the percentage
change (adjusted for distributions by the Fund and the deduction of the
actuarial risk fee) in the net asset value of the Fund in which the Series is
invested, since the preceding Business Day. The net investment factor may be
either positive or negative, depending upon the Fund's investment performance.
TERMINATION (REDEMPTION)
To the extent permitted by the Code and the plan under the terms of which
the Contract is purchased, a Participant's Account may be terminated fully or
partially at any time prior to the Annuity Date. As terminations may be
restricted or result in adverse federal income tax consequences, Participants
should consult their tax advisers before terminating their accounts. (See
"Accumulation Period -- Limitations on Redemptions," page 16).
15
<PAGE> 19
The termination value (redemption value) of a Participant's interest in the
Separate Account prior to the Annuity Date may be determined at any time by
multiplying the number of Accumulation Units for each Series credited to the
Participant's Account by the value of an Accumulation Unit in such Separate
Account Series at that time and taking the sum of such results for all Series.
Upon receipt of an application for a full or partial termination of a
Participant's Account, Security First Life will determine the value of the
number of Accumulation Units terminated at the Accumulation Unit value next
computed following receipt of such written request by Security First Life.
A request for a partial termination (partial surrender) of a Participant's
Account containing more than one Series of Accumulation Units must specify the
allocation of the partial termination among the Series of Accumulation Units. In
the case of partial surrenders, a charge of the lesser of $10 or 2% of the
amount surrendered is assessed against the value of each Series from which a
surrender is being made. No partial termination may be made that would cause a
Participant's interest in any Series in the Separate Account or the General
Account to have a value after the termination of less than $200, unless the
entire amount allocated to such Series is being withdrawn. Any termination in
the Separate Account will result in full or partial forfeiture of the right to
have charges previously imposed on transfers from the General Account to the
Separate Account restored in the form of an Annuity Bonus. (See "Annuity
Payments," page 17.)
Payment of any amount surrendered from the Separate Account will be made
within seven days of the date the request is received by Security First Life.
Payments of termination values may be suspended when: (i) trading on the New
York Stock Exchange is restricted by the Securities and Exchange Commission
("SEC") or such Exchange is closed for other than weekends or holidays; (ii) the
SEC has by order permitted such suspension; or (iii) an emergency as determined
by the SEC exists making disposal of portfolio securities or valuation of assets
of the Funds not reasonably practicable.
Repayment of the amount received from the Separate Account upon such a
termination may be made if such repayment is received by Security First Life
within 30 days of the date such amount was mailed to the Participant by Security
First Life, provided that this reinstatement right may be exercised one time
only. An amount repaid under this provision will be applied to purchase Separate
Account Accumulation Units at the unit values prevailing at the time the
repayment is received by Security First Life. Failure to exercise such repayment
privilege after a full termination will result in cancellation of a
Participant's Account under the Contract.
LIMITATION ON REDEMPTIONS
Participant Account values attributable to contributions made pursuant to a
salary reduction agreement, as defined in Section 403(b)(11) of the Code, may be
redeemed only: when the Participant attains age 59 1/2, separates from service,
dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code) or
in the case of hardship.
Redemptions in the case of hardship may not include any income attributable
to salary reduction contributions.
Redeemed amounts may be taxable and may be subject to a penalty tax. If a
withdrawal is taxable, Security First Life will process required tax withholding
against a Participant's Account. A Participant should first consult with a tax
adviser before terminating any portion of his or her account. If these
limitations are violated, the Participant's Certificate may be disqualified
under Section 403(b) of the Code, resulting in immediate taxation.
The above limitations affect contributions made pursuant to a salary
reduction agreement after December 31, 1988 and to income attributable to such
contributions and to income attributable to amounts held as of December 31,
1988. The limitations generally do not apply to rollovers or exchanges between
retirement plans which receive favorable tax treatment under the Code.
Participants should consult their own tax counsel or other tax adviser.
ANNUITY PERIOD
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of a Participant's Account is
determined by multiplying the number of Accumulation Units of each Series in his
account by the value of an Accumulation Unit in the account in that Series on
the last Business Day of the second calendar week immediately preceding the date
on which the first Annuity payment is to be made. Immediately prior to this
valuation, Separate Account values may be transferred among the Separate Account
and General Account Series in order to allocate benefits during the Annuity
period between Fixed and Variable Annuity payments as desired by the
Participant, subject to a $10 conversion charge. (This is the only circumstance
under which amounts may be transferred from the Separate Account back to the
General Account.)
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In the absence of such allocation, General Account Accumulation Units will
be applied to provide a Fixed Annuity, and Separate Account Accumulation Units
will be applied to provide a Variable Annuity. The dollar amount of Variable
Annuity payments will reflect investment gains and losses and investment income
in the Separate Account both before and after the Annuity Date (assuming
variable accumulation) but will not be affected by adverse mortality experience
or by an increase in Security First Life's expenses which may exceed the various
administrative charges provided for under the Contracts.
When a Participant's interest in the Separate Account is applied to provide
Annuity income then, if such Participant has made no terminations (redemptions)
from the Separate Account, Security First Life will add an Annuity Bonus to the
amount (if any) available to provide Fixed Annuity benefits under the Contract.
The Annuity Bonus will be equal to the percentage sales charges previously
imposed upon the Participant's Account with respect to transfers from the
General Account to one or more Separate Account Series, together with interest
on such amount. If the Participant has made partial terminations (redemptions)
from the Separate Account, an Annuity Bonus will still be credited but will be
reduced proportionately to reflect those terminations. The Annuity Bonus will be
reduced by the same proportion which the amount of the termination then bears to
the Participant's entire interest in the Separate Account.
ELECTION OF ANNUITY DATE AND FORM OF ANNUITY
The date on which Annuity payments are to begin and the form of option are
elected by the Participant or Owner, as the case may be. The normal Annuity Date
is the Certificate anniversary nearest to the Annuitant's 75th birthday, or the
10th anniversary of the Certificate Date, whichever is later, except as the Code
may otherwise require. However, to the extent not prohibited by any applicable
plan restrictions, an optional Annuity Date may be elected; such date may be the
first day of any month prior to the normal Annuity Date. The election must be
made at least 31 days before the optional Annuity Date.
The normal form of Annuity under the Contracts is Option 2, a life Annuity
with 120 monthly payments certain. Unless indicated otherwise, Option 2 will be
automatically applied. Changes in the optional form of Annuity payment may be
made at any time up to 31 days prior to the date on which Annuity payments are
to begin. Options 1 through 4 may be elected as either Variable Annuities or
Fixed Annuities, while Option 5 may be elected only as a Fixed Annuity. The
first Annuity payments described in Options 1 though 4 are determined on the
basis of (1) the mortality table specified in the Contracts, (2) the age and
where permitted the sex of the Annuitant, (3) the type of Annuity payment
option(s) selected, and (4) the assumed interest rate selected. Fixed Annuity
payments described in Option 5 are determined on the basis of (1) the number of
years in the payment period and (2) the interest rate guaranteed with respect to
the option.
OPTION 1 -- LIFE ANNUITY
An Annuity payable monthly during the lifetime of an individual, ceasing
with the last payment due prior to the death of an individual. This option
offers the maximum level of monthly payments since there is no guarantee of a
minimum number of payments or of death benefits for beneficiaries.
OPTION 2 -- LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
An Annuity payable monthly during the lifetime of an individual with a
guaranteed minimum number of monthly payments of not less than 120, 180 or 240
months, as elected. If at the death of the individual the specified number of
payments have not been made, Annuity payments will be continued during the
remainder of such period to the designated beneficiary.
OPTION 3 -- INSTALLMENT REFUND LIFE ANNUITY
An Annuity payable monthly during the lifetime of an individual with a
guaranteed minimum number of monthly payments equal to the amount applied under
this option divided by the first monthly payment.
OPTION 4 -- JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of an individual and
thereafter during the lifetime of the survivor, ceasing with the last payment
due prior to the death of the survivor.
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OPTION 5 -- PAYMENTS FOR A DESIGNATED PERIOD
A fixed dollar Annuity payable monthly for a specified number of years from
5 to 30. The amount of each payment will be based on an interest rate determined
by Security First Life, which will not be less than 4% per annum for designated
periods of 10 to 30 years, and 3% per annum for designated periods of 5 to 9
years. Participants who are age 60 or older on the Annuity Date, or who have
submitted evidence of their election to begin payments under their employer's
retirement program, may elect a designated period of 3 years for the Fixed
Annuity payments under this option. Fixed Annuity payments under this option may
not be commuted to a lump sum, except as provided under "Death Benefits," page
19.
FREQUENCY OF PAYMENT
Payments under all options will be made on a monthly basis, unless a
different arrangement has been requested by the Participant and agreed to by
Security First Life. If at any time any payments to be made to any individual
under any Series are or become less than $50 each, Security First Life shall
have the right to decrease the frequency of payments to such interval as will
result in a payment of at least $50.
LEVEL PAYMENTS VARYING ANNUALLY
Under the Contracts, Variable Annuity payments are determined annually
rather than monthly, so that Annuity payments, uniform in amount, are made
monthly during each Annuity year. The level of payments for each year is based
on the investment performance of the Separate Account up to the Valuation Date
as of which the payments are determined for the year. Thus, amounts of the
Annuity payments vary with the investment performance of the Separate Account
from year to year rather than from month to month. An amount is removed from the
Separate Account at the beginning of each year during which Annuity income
payments are to be made. The monthly Annuity payments for the year are made from
the General Account and are determined using an assumed investment rate of 4.25%
unless an alternate assumed investment rate has been selected by the individual.
(See "Alternate Assumed Investment Rates," below.) Security First Life will
profit on the amounts placed in the General Account to provide level monthly
payments during that year to the extent that net investment income and gains in
the General Account exceed the assumed investment rate selected.
ALTERNATE ASSUMED INVESTMENT RATES
Variable Annuity payments will vary to reflect the investment experience of
the Separate Account and the assumed investment rate is the base rate around
which Variable Annuity payments will fluctuate to reflect whether the investment
experience of the Separate Account is better or worse than the assumed rate. A
higher assumed investment rate will result in a higher initial payment, but more
slowly rising or more rapidly falling subsequent payments than a lower assumed
investment rate.
Unless otherwise provided, the assumed investment rate will be 4.25% per
annum. To the extent permitted by state law and regulations, Security First Life
will permit election of an assumed investment rate of 3.50%, 5% or 6%. It should
not be inferred, however, that such rates will bear any relationship to the
actual net investment experience of the Separate Account.
ANNUITY UNIT VALUES
The value of an Annuity Unit for each Series on any date is determined by
multiplying the value of an Annuity Unit at the end of the preceding Valuation
Period by the "Annuity change factor" for the second preceding Valuation Period.
The Annuity change factor is an adjusted measurement of the investment
performance of the Separate Account since the end of the preceding Valuation
Period. The Annuity change factor is determined by dividing the value of an
Accumulation Unit at the end of the Valuation Period by the value of an
Accumulation Unit at the end of the preceding Valuation Period and multiplying
the result by a neutralization factor.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY DATE
For Certificates issued on or after January 19, 1985, other than in
connection with a Section 401 plan, a Section 403(b) plan or an IRA, the
following provisions apply:
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1. If the beneficiary is the participant's spouse, the spouse shall be
deemed to be the Participant and succeeds to all the Contract rights
that relate to the Contract.
2. If the beneficiary is not the Participant's spouse, the beneficiary may
elect to receive a lump sum settlement, or to receive annuity income
under Annuity Income Options One, Two, or Five. (See "Annuity Payments,"
page 17). The lump sum settlement must be made within 5 years of the
death of the Participant. Payments under the Annuity Income Options must
begin within one year of the Participant's death and the period of
payments may not be longer than the beneficiary's life expectancy as
specified by the Internal Revenue Service tables.
For certificates issued in connection with a Section 401 plan, a Section
403(b) plan or an IRA, the following provisions apply:
1. If the beneficiary is the Participant's spouse, the spouse may elect to
receive Annuity income under Annuity Income Options One, Two, or Five,
or to treat the Contract as his or her own. Payments under the Annuity
Income Options must begin prior to the date on which the deceased
Participant would have attained age 70 1/2.
2. If the beneficiary is not the Participant's spouse, the beneficiary may
elect to receive a lump sum settlement or to receive annuity income
under Annuity Income Options One, Two, or Five. The lump sum settlement
must be made within 5 years of the death of the Participant. Payments
under the Annuity Income Options must begin within one year of the
Participant's death and the period of payments may not be longer than
the beneficiary's life expectancy as specified by the Internal Revenue
Service tables.
The death benefit under the Contracts will be calculated as of the date of
payment after receipt of due proof of death.
DEATH AFTER THE ANNUITY DATE
With respect to Section 401 and 403(b) plans and IRA certificates, whenever
issued, and all other Certificates issued after January 18, 1985, if the
Annuitant dies on or after the Annuity Date, the remaining portion of his or her
interest will be distributed at least as rapidly as under the method of
distribution being used at the date of the Annuitant's death. If no designated
beneficiary survives the Annuitant, the present value of any remaining payments
certain on the date of death of the Annuitant may be paid in one sum, calculated
on the basis of the assumed investment rate previously elected, to the estate of
the Annuitant unless another provision has been made and approved by Security
First Life. This value is calculated as of the date of payment following receipt
of due proof of death.
WITHDRAWAL
Unless otherwise restricted, a beneficiary receiving variable payments under
Annuity Income Options 2 or 3 after the death of the Annuitant may elect at any
time to receive the present value of the remaining number of Annuity payments
certain in a single payment calculated on the basis of the assumed investment
rate previously elected. However, such election is not available to a
beneficiary receiving Fixed Annuity payments.
FEDERAL INCOME TAX STATUS
Note: The following description is based upon Security First Life's
understanding of current federal income tax law applicable to Annuity contracts.
Security First Life cannot predict the probability that any changes in such laws
will be made. Security First Life does not guarantee the tax status of the
Contracts and Certificates. Purchasers bear the complete risk that the Contracts
may not be treated as "annuity contracts" under federal income tax laws.
Purchasers are cautioned to seek their own tax advice.
The operations of the Separate Account form part of the operations of
Security First Life, but the Code presently provides that no federal income tax
will be payable by Security First Life on the investment income and capital
gains of the Separate Account. No federal income tax is payable by a participant
on the investment income and capital gains under an annuity contract
(certificate) meeting the requirements of Section 817 of the Code until Annuity
payments commence or a full or partial termination (redemption) is made.
All distributions, with the exception of a return of permitted nondeductible
employee contributions, are included in gross income. In the case of Section 401
and 403(b) plans and IRAs, a distribution is includable in the year in which it
is paid. In the case of a 457 plan, a distribution is includable in the year it
is paid or made available.
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The Tax Reform Act of 1986, effective January 1, 1989, limits the redemption
of amounts attributable to contributions made pursuant to a salary reduction
agreement (as defined in Section 403(b)(11) of the Code) to the following
circumstances only: when the Participant attains age 59 1/2, separates from
service, dies, becomes disabled (within the meaning of Section 72(m)(7) of the
Code), or in the case of hardship. Withdrawals for hardship may not include any
investment results. These limitations apply only to salary reduction
contributions made after December 31, 1988 and to income attributable to such
contributions and to income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect rollovers or exchanges
between retirement plans which receive favorable tax treatment under the Code.
Participants should consult their own tax counsel or other tax adviser regarding
any distributions.
In the case of tax-qualified plans generally, Annuity payments for life or a
period not exceeding the life expectancy of the Participant or the Participant
and a designated beneficiary must commence by April 1 of the calendar year
following the calendar year in which the Participant attains age 70 1/2. There
are some exceptions to this general rule, however: In the case of governmental
plans or church plans, or in some cases where the Participant attained age
70 1/2 prior to January 1, 1988, the payments must begin by April 1 of the
calendar year following the year in which the Participant retires, if that date
is later than the one computed under the general rule.
WITHHOLDING TAX -- ELIGIBLE ROLLOVER DISTRIBUTIONS
An Eligible Rollover Distribution is the taxable portion of any distribution
(other than those in prescribed forms of annuity payments and required
distributions) from certain types of Qualified Plans. Security First Life is
required to withhold federal income tax on Annuity payments, lump sum
distributions, and partial surrenders. For Eligible Rollover Distributions made
after December 31, 1992, payors are required to withhold 20 percent of the
amount of the distribution. This withholding tax cannot be waived, but it can be
avoided by rolling the distribution over to another eligible Qualified Plan or
IRA at the election of the Contract Owner, in a direct (trustee to trustee)
transfer. In regard to fixed annuity transfers, Security First Life (or the plan
administrator) will notify Participants who are to receive Eligible Rollover
Distributions of a more detailed explanation of their distribution options and
how to elect a direct transfer of the distribution to another eligible plan or
IRA. Participants will be given a reasonable time to elect a direct transfer.
Section 22(e) of the 1940 Act, however, requires that requests for the
withdrawal of Contract Values from a separate account must be honored and paid
to the surrendering Participant within seven days from the receipt of the
request. As of the date of this prospectus, the conflict between the 1940 Act
and the IRS requirements has not been resolved. Therefore, to meet the
requirements of the 1940 Act, Participants wishing to transfer an Eligible
Rollover Distribution to another qualified plan must arrange for a "trustee to
trustee" transfer when requesting such a withdrawal in order to avoid
withholding on the transfer.
VOTING RIGHTS
Unless otherwise restricted by the plan under which a Contract is issued,
each Participant will have the right to instruct Security First Life with
respect to voting the Fund shares which are the assets underlying his interest
in the Separate Account, at all shareholders' meetings. Security First Life will
mail to each person having voting rights under the Contracts, at his or her last
known address, all periodic reports and proxy material of the applicable Fund
and a form with which to give voting instructions. Fund shares as to which no
timely instructions are received will be voted by Security First Life in
proportion according to the instructions received from all persons giving timely
instructions. Security First Life is under no duty to inquire as to the
instructions received or the authority of persons to instruct the voting of Fund
shares, and unless Security First Life has actual knowledge to the contrary, the
instructions given it will be valid as they affect Security First Life or the
Funds.
To the extent that a Participant has vested rights in the Contract pursuant
to Sections 403(b) or 408(b) of the Code, such Participant will have the right
to instruct Security First Life as to how Fund shares attributable to such
Participant are to be voted on his or her behalf. In all other cases, the Owner
shall have the right to instruct Security First Life as to the casting of votes
under the Contract. Once Annuity payments with respect to a Participant's
Account have begun, the Annuitant shall have any voting rights exercisable with
respect to such account.
The number of votes to be cast by each person having the right to vote shall
be determined as of a record date within 90 days prior to the meeting of the
Fund, and voting instructions will be solicited by written communication at
least 10 days prior to such meeting. To be entitled to vote, an Owner or
Participant or Annuitant must have been such on the record date. The number of
Fund shares as to which voting instructions may be given to Security First Life
is determined by dividing the value, on such record date, of that portion of the
Participant's Account then allocated to the Series for that Fund by the net
asset value for that Fund share as of the same date.
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<PAGE> 24
LEGAL PROCEEDINGS
Security First Life, in the ordinary course of its business, is engaged in
litigation of various kinds which in its judgment is not of material importance
in relation to its total assets. There are no present or pending material legal
proceedings affecting the Separate Account.
EARLIER CONTRACTS
Security First Life has assumptively reinsured a number of variable annuity
contracts which are funded in the Separate Account but which are no longer being
offered or sold at the time of the assumption. (See "Reinsurance of Previously
Issued Contracts.") Some of these earlier contracts differ in certain respects
from those described in this prospectus, in particular as regards the various
charges deducted from the account values. Any copy of this prospectus required
to be delivered to an Owner of or Participant under such an earlier contract
will contain a supplement setting forth all material differences.
ADDITIONAL INFORMATION
For further information, Security First Life Insurance Company, the address
and phone number of which are set forth on the cover of this prospectus, may be
contacted. A copy of the Statement of Additional Information, dated May 1, 1996,
which provides more detailed information about the Contract, may also be
obtained. Set forth below is the Table of Contents for the Statement of
Additional Information.
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to the Contracts
offered hereby. This Prospectus does not contain all the information set forth
in the registration statement and the amendments and exhibits to the
registration statement to all of which reference is made for further information
concerning the Separate Account, Security First Life and the Contracts offered
hereby. Statements contained in this Prospectus as to the contents of the
Contracts and other legal instruments are summaries. For a complete statement of
the terms thereof reference is made to such instruments as filed.
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<PAGE> 25
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
The Insurance Company............................................................................ 3
The Separate Account............................................................................. 3
The Funds........................................................................................ 3
Purchase of Securities Being Offered............................................................. 6
Net Investment Factor............................................................................ 7
Annuity Payments................................................................................. 7
Additional Federal Income Tax Information........................................................ 10
Distribution of the Contracts.................................................................... 12
Voting Rights.................................................................................... 13
Safekeeping of Securities........................................................................ 13
Independent Auditors............................................................................. 13
Legal Matters.................................................................................... 13
State Regulation of Security First Life.......................................................... 13
Financial Statements............................................................................. 14
</TABLE>
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<PAGE> 26
'33 Act File No. 33-61370
STATEMENT OF
ADDITIONAL INFORMATION
SECURITY FIRST LIFE SEPARATE ACCOUNT A
--------------------------------------------------------------------
GROUP FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS
--------------------------------------------------------------------
SECURITY FIRST LIFE INSURANCE COMPANY
MAY 1, 1996
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus. A copy of the prospectus, dated May 1, 1996,
may be obtained without charge by writing Security First Life Insurance Company,
P.O. Box 92193, Los Angeles, California 90009 or by calling 1-310-477-1059 (in
California) or 1-800-992-9785 (outside California).
SF 1700
1
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Insurance Company 3
The Separate Account 3
The Funds 3
Purchase of Securities Being Offered 6
Net Investment Factor 7
Annuity Payments 7
Additional Federal Income Tax Information 10
Distribution of the Contracts 12
Voting Rights 13
Safekeeping of Securities 13
Independent Auditors 13
Legal Matters 13
State Regulation of Security First Life 13
Financial Statements 14
</TABLE>
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<PAGE> 28
THE INSURANCE COMPANY
Security First Life Insurance Company ("Security First Life") is a stock life
insurance company founded in 1960 and organized under the laws of the State of
Delaware. Its principal executive offices are located at 11365 West Olympic
Boulevard, Los Angeles, California 90064. Security First Life is a wholly-owned
subsidiary of Security First Group, Inc. ("SFG"). The outstanding voting stock
of SFG is owned by London Insurance Group, Inc., a Canadian insurance service
corporation and publicly traded subsidiary of Trilon Financial Corporation of
Toronto, Canada. Security First Life is authorized to transact the business of
life insurance, including annuities. Security First Life presently is licensed
to do business in 49 states and the District of Columbia.
THE SEPARATE ACCOUNT
The Separate Account was established by Security First Life on May 29, 1980, in
accordance with the provisions of the Delaware Insurance Code. The Separate
Account is registered as a unit investment trust under the Investment Company
Act of 1940. Registration with the Securities and Exchange Commission does not
involve supervision of the management or investment practices or policies of the
Separate Account or Security First Life by the Commission.
On December 1, 1993, Security First Life Separate Account B, another segregated
asset account of Security First Life, was merged with and into the Separate
Account. See the section in the prospectus entitled "Description of Security
First Life and the Separate Account - Merger of Former Security First Life
Separate Account B with and into Security First Life Separate Account A". The
Contracts described in this Statement of Additional Information which were
formerly funded in Security First Life Separate Account B are now funded in the
Separate Account.
Amounts allocated to the Separate Account under the Contract are invested in the
securities of five Funds: the T. Rowe Price Bond Series and the T. Rowe Price
Growth and Income Series of the Security First Trust; the T. Rowe Price Growth
Stock Fund; the T. Rowe Price Prime Reserve Fund; and the Money Market Portfolio
of the Variable Insurance Products Fund. The Separate Account is divided into
Series which correspond, respectively, to these five Funds.
THE FUNDS
Security First Trust is a Massachusetts business trust which was formed on
February 13, 1987. Two of the series of the Trust are offered under the
Contracts:
The principal investment objective of the T. Rowe Price Bond Series (formerly
Bond Series) is to achieve the highest investment income over the long-term
consistent with the preservation of principal through investment primarily in
marketable debt instruments. A secondary objective
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<PAGE> 29
is growth of principal and income with respect to those Fund assets that are
invested in common and preferred stocks.
The principal investment objectives of the T. Rowe Price Growth and Income
Series (formerly Growth and Income Series) are capital growth and production of
income. Conservation of principal is a secondary objective. While this Fund will
generally invest in common stocks and other equities, it may, depending on
economic conditions, reduce such investments and substitute fixed income
instruments.
T. Rowe Price Growth Stock Fund, Inc. is an open-end management investment
company which seeks long-term growth of capital through investments, primarily
in common stocks of growth companies.
T. Rowe Price Prime Reserve Fund, Inc. is an open-end management investment
company which seeks the highest possible levels of current income while
preserving capital and maintaining liquidity by investing primarily in money
market (short-term debt) instruments.
Variable Insurance Products Fund is a Massachusetts business trust. It is
divided into a number of portfolios, one of which is offered under the
Contracts:
The principal investment objective of the Money Market Portfolio is to seek to
obtain as high a level of current income as is consistent with preserving
capital and providing liquidity. The portfolio will invest only in high quality
U.S. dollar denominated money market securities of domestic foreign issuers.
Security First Investment Management Corporation ("Security Management"), a
wholly-owned subsidiary of SFG, and an affiliate of Security First Life and
Security First Financial, Inc. provides advisory and administrative services to
each of the Funds which constitute the Security First Trust. Security Management
receives an annual fee, accrued daily and payable in monthly installments of
0.50% of the average daily net assets of each Fund, from which it must pay any
subadvisory fees. Shareholders of the two Funds of Security First Trust have
approved contracts to receive subadvisory services from T. Rowe Price Associates
("Price Associates") in accordance with their respective investment objectives,
policies and restrictions. Price Associates receives from Security Management a
fee at the annual rate of 0.35% of the average daily net assets of each Fund,
accrued daily and payable monthly. The investment advisory, subadvisory and
administrative fees will not exceed 0.50% of each Fund's average daily net
assets.
T. Rowe Price Growth Stock Fund, Inc. and T. Rowe Price Prime Reserve Fund, Inc.
are managed by Price Associates, which provides administrative services and
investment advice and makes all investment decisions for the Funds. Price
Associates receives from the T. Rowe Price Growth Stock Fund and T. Rowe Price
Prime Reserve Fund an investment management
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<PAGE> 30
fee consisting of two elements: a flat Individual Fund Fee of 0.25% and 0.05%,
respectively, of the Fund's net assets, and a Group Fee of 0.34% as of December
31, 1995.
The Group Fee varies and is based on the combined net assets of all mutual funds
sponsored and managed by Price-Fleming and Price Associates, excluding T. Rowe
Price Spectrum Fund Inc., and any institutional or private label mutual funds,
and distributed by T. Rowe Price Investment Services, Inc.
Variable Insurance Products Fund is a Massachusetts business trust divided into
separate portfolios. The investment adviser of the Variable Insurance Products
Fund is Fidelity Management & Research Company ("FMR").
Money Market Portfolio's advisory fee is made up of two components: (a) a basic
fee rate and (b) an income-based component. The basic fee rate is the sum of the
following two components:
a. A group fee rate based on the monthly average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .37%, and it drops as total
assets in all these funds rise. The effective group fee rate for December 1995
was .1482%.
b. An individual fund fee rate of 0.03%.
One-twelfth of the combined annual fee rate is applied to the fund's net assets
averaged over the most recent month, giving a dollar amount which is the fee for
that month. If the fund's gross yield is 5% or less, the basic fee is the total
management fee. The income-based component is added to the basic fee only when
the fund's yield is greater than 5%. The income-based fee is 6% of that portion
of the fund's yield that represents a gross yield of more than 5% per year. The
maximum income-based component is .24%.
For fiscal year 1995, the Portfolio's Management fee was .24% of the average net
assets of the Portfolio, approximately $2.40 for every $1,000 of the Portfolio's
average net assets.
The mutual funds advised by FMR have over 25 million shareholder accounts with a
total value of more than 374 billion.
The T. Rowe Price Prime Reserve Fund and the Money Market Portfolio of the
Variable Insurance Products Fund have instituted procedures to assure, to the
extent reasonably practicable, that the price per share of their Fund portfolios
will remain at $1.00 in accordance with Rule 2a-7 under the Investment Company
Act of 1940. However, Participants who select either of these Funds as the basis
for Annuity payments should be aware that the value of Accumulation Units
representing an investment in these Funds will not be stabilized. Furthermore,
despite the procedures that will be followed to maintain a stabilized price,
there is no assurance that at some future time there will not be a rapid
increase in interest rates, a
5
<PAGE> 31
default by an issuer of a portfolio security or some other event that could
cause the Funds' price per share to change from $1.00.
The primary objective of a Variable Annuity having Separate Account assets
chiefly invested in a portfolio of common stocks is to provide Annuitants with
Annuity payments which will tend to remain level during a period when the
economy is relatively stable and to provide increased Annuity payments during
periods of economic growth and inflation. It is believed that the value of such
Separate Account investment will, over the long-term, tend to reflect changes in
the general economic price level. Historically, the value of a diversified
portfolio of common stocks held for an extended period of time has tended to
rise during periods of economic growth and inflation. However, there is no exact
correlation between the two. In some periods the value of a common stock
portfolio has declined while the cost of living has increased.
The primary objective of a Variable Annuity having Separate Account assets
chiefly invested in fixed income securities is to provide Annuitants with
Annuity payments which will be higher in amount than those provided by
conventional Fixed Annuities. It should be recognized, however, that a portfolio
consisting of nonconvertible fixed income securities and which is designed to
obtain a high level of current yield involves market risks that are not found in
a Fixed Annuity and differ from those found in a Variable Annuity which is
invested primarily in common and preferred stocks. The market value of
nonconvertible fixed income securities usually reflects yields then generally
available in securities of similar quality and type. Based upon historical
analysis, when interest rates decline, the market value of a portfolio already
invested at higher interest rates may be expected to rise if such securities are
not subject to call at the option of the issuer. Conversely, when such interest
rates increase, the market value of a portfolio already invested at lower
interest rates may be expected to decline. The T. Rowe Price Bond Series and the
T. Rowe Price Growth and Income Series of the Security First Trust may, pursuant
to their investment policies, invest a significant portion of their assets in
long-term fixed income securities. Because of this, Participants who select one
of these Funds as the basis for Annuity payments should recognize that Annuity
payments may decrease during periods when interest rates and general prices are
rising.
Participants should carefully consider which of the available underlying Funds
is best suited to an Annuitant's long-term needs.
PURCHASE OF SECURITIES BEING OFFERED
Purchase payments may be made on an annual, semi-annual, quarterly, or monthly
basis, or at such intervals as may be agreed to by Security First Life. The
minimum annual purchase payment is $240, with each monthly purchase payment
subject to a $20 minimum. All payments will be initially invested in the General
Account Series. Thereafter, and before any Annuity payments have commenced, the
Participant may elect to transfer all or a portion of the
6
<PAGE> 32
resulting General Account values from additional payments to the Separate
Account to provide Variable Annuity benefits.
Each transfer is subject to a sales charge (refundable in whole or in part upon
annuitization as an Annuity Bonus) that varies in amount from 0% to 7% depending
on the length of time the payment amount remains in the General Account before
transfer, as described in the prospectus. These charges are applied by reducing
the Participant's interest in the General Account Series by an amount determined
by dividing the amount to be transferred by a factor derived from the percentage
charges indicated above. The factor used in determining the number of
Accumulation Units to be cancelled from the General Account Series is determined
by the calendar year in which the transfer of amounts is made in relation to the
year such amounts were deposited in the General Account, and is equivalent to
(a) - (b) where (a) is 1 and (b) is the applicable percentage charge expressed
as a decimal. Such General Account Accumulation Units will be cancelled on a
first-in, first-out basis. Thus, for example, if a Participant elects to
transfer $500 to Series B of the Separate Account prior to or concurrent with
his making a periodic purchase payment, the factor would be .93, determined by
subtracting .07 from 1, and the General Account Series would be reduced by
$537.63, which is the result obtained by dividing $500 by .93. Alternatively, if
the Participant elected in the second year following the deposit of the purchase
payment to transfer the same $500 amount the factor would be .95 (obtained by
subtracting .05 from 1), and the General Account Series would be reduced by only
$526.32, the result obtained by dividing $500 by .95. The foregoing charges are
subject to possible restoration in the form of an Annuity Bonus.
NET INVESTMENT FACTOR
The Separate Account net investment factor is an index of the percentage change
(adjusted for distributions by the Fund and the deduction of the actuarial risk
fee) in the net asset value of the Fund in which the Series is invested, since
the preceding Business Day. The Separate Account net investment factor for each
Series of Accumulation Units is determined for any Business Day by dividing (i)
the net asset value of a share of the Fund which is represented by such Series
at the close of business on such day, plus the per share amount of any
distributions made by such Fund on such day by (ii) the net asset value of a
share of such Fund determined as of the close of business on the preceding
Business Day and then subtracting from this result an amount based upon the
actuarial risk fee factor of 0.0000244 for each calendar day between the
preceding Business Day and the end of the current Business Day.
ANNUITY PAYMENTS
Basis of Variable Annuity Benefits
The Variable Annuity benefit rates used in determining Annuity payments under
the Contracts are based on actuarial assumptions, reflected in tables in the
Contracts, as to the expected mortality of a large group of Annuitants of the
same sex, where permitted, and adjusted age
7
<PAGE> 33
and the form of Annuity selected. The mortality basis for these tables is a
Modified Select Annuity Mortality Table, projected to the year 2000 on
Projection Scale C, with interest at 4.25% for all functions involving life
contingencies and the portion of any period certain beyond 10 years, and 3.25%
for the first 10 years of any certain period. Adjusted age in those tables means
actual age to the nearest birthday at the time the first payment is due,
adjusted according to the following table:
8
<PAGE> 34
<TABLE>
<CAPTION>
Calendar Year Adjusted
of Birth Age Is
Before 1916 Actual Age
------------- ----------
<S> <C>
1916-1935 Actual Age Minus 1
1936-1955 Actual Age Minus 2
1956-1975 Actual Age Minus 3
1976-1995 Actual Age Minus 4
</TABLE>
Determination of Amount of Monthly Variable Annuity Payments for First Year
The Separate Account value used to establish the monthly payment for the first
payment year consists of the value of Accumulation Units of each Series of the
Separate Account held in the Participant's Account on the last day of the second
calendar week before the Annuity Date. The Contracts contain tables showing
monthly payment factors and Annuity premium rates per $1,000 of Separate Account
value to be applied under Options 1 through 4.
At the beginning of the first payment year an amount is transferred from the
Separate Account to the General Account and level monthly Annuity payments for
the year are made out of the General Account for that year. The amount
transferred is determined by multiplying the Annuity premium rate per $1,000 set
forth in Contract tables by the number of thousands of dollars of Separate
Account value in the individual's account. The level monthly payment for the
first payment year is then determined by multiplying the amount transferred (the
Annuity premium) by the monthly payment factor in the same table. In the event
the account involved has Separate Account Accumulation Units in more than one
Series of the Separate Account, the total monthly Annuity payment for the first
year is the sum of the monthly Annuity payments, determined in the same manner
as above, for each Separate Account Series.
At the time the first year's monthly payments are determined, a number of
Annuity Units for each Separate Account Series is also established for the
Annuitant by dividing the monthly payment derived from that Series for the first
year by the Separate Account Annuity Unit values for the Series on the last
Business Day of the second calendar week before the first Annuity payment is
due. The number of Annuity Units remains fixed during the Annuity period unless
Annuity Units are converted to another Series.
Determination of Amount of Monthly Variable Annuity Payments for Second and
Subsequent Years
As of each anniversary of the Annuity Date, Security First Life will determine
the amount of the monthly Variable Annuity payments for the year then beginning.
Separate determinations will be made for each Separate Account Series in which
the Annuitant has Annuity Units, with
9
<PAGE> 35
the total Annuity payment being the sum of the payments derived from the Series.
The amount of monthly payments for any Separate Account Series for any year
after the first will be determined by multiplying the number of Annuity Units
for that Series by the Annuity Unit value for that Series for the Valuation
Period in which the first payment for the year is due. It will be Security First
Life's practice to mail Variable Annuity payments no later than seven days after
the last day of the Valuation Period upon which they are based or the monthly
anniversary thereof.
Annuity Unit Values
The value of an Annuity Unit was, or will be, set at $5 for each Series for the
first Valuation Period as of which the first Variable Annuity payment from such
Series was or is made. The value of an Annuity Unit for each Series on any later
date is determined by multiplying the value of an Annuity Unit at the end of the
preceding Valuation Period by the "Annuity change factor" for the second
preceding Valuation Period. The Annuity change factor is an adjusted measurement
of the investment performance of the Fund since the end of the preceding
Valuation Period. The Annuity change factor is determined by dividing the value
of an Accumulation Unit at the end of the Valuation Period by the value of an
Accumulation Unit at the end of the preceding Valuation Period and multiplying
the result by a neutralization factor.
Variable Annuity payments for each year after the first reflect variations in
the investment performance of the Separate Account above and below an assumed
investment rate (see below). This assumed investment rate is included for
purposes of actuarial computations and does not relate to the actual investment
performance of the underlying fund. Therefore, the assumed investment rate must
be "neutralized" in computing the Annuity change factor. For weekly Valuation
Periods and a 4.25% assumed investment rate, the neutralization factor is
0.9991999.
Alternate Assumed Investment Rates
The choice of the assumed investment rate affects the pattern of Annuity
payments. Over a period of time, if the Separate Account achieved a net
investment result equal to the assumed investment rate applicable to a
particular option, the Annuity Unit would not change in value, and the amount of
the Annuity payments would be level. However, if the Separate Account achieved a
net investment result greater than the assumed investment rate, the Annuity Unit
would increase in value and the amount of the Annuity payments would increase
each year. Similarly, if the Separate Account achieved a net investment result
smaller than the assumed investment rate, the Annuity Unit would decrease in
value and the amount of the Annuity payments would decrease each year. Although
a higher initial payment would be received under a higher assumed investment
rate, there is a point in time after which payments under a lower assumed
investment rate would be greater, assuming payments continue through that point
in time. The effect of a higher or lower assumed investment rate can be
summarized as follows: a higher assumed investment rate will result in a larger
initial payment but more
10
<PAGE> 36
slowly rising or more rapidly falling subsequent payments than a lower assumed
investment rate.
The objective of a variable annuity contract is to provide level payments during
periods when the economy is relatively stable and to reflect as increased
payments only the excess of investment results flowing from inflation or an
increase in productivity. The achievement of this objective will depend in part
upon the validity of the assumption that the net investment rate of the Separate
Account equals the assumed investment rate during periods of stable prices.
Subsequent years' payments will be smaller than, equal to or greater than the
first year's payments depending on whether the actual net investment rate for
the Separate Account is smaller than, equal to or greater than the assumed
investment rate.
ADDITIONAL FEDERAL INCOME TAX INFORMATION
Qualified Plans
Certain tax advantages are available when the Contract is issued under a
retirement plan which meets the qualification requirements of sections 401, 403,
or 408 of the Internal Revenue Code ("Code") ("qualified plan"). Security First
Life does not purport to render tax advice; however, a general discussion
regarding Security First Life's understanding of the current federal income tax
aspects of the various types of qualified plans is set forth below. A purchaser
should consult his or her tax adviser regarding the tax implications of an
investment in the Contract.
Public School Systems, Churches and Certain Tax-Exempt Organizations
Under section 403(b) of the Code, purchase payments made to purchase annuities
by public school systems, churches, or certain tax-exempt organizations for
their employees are excludible from the gross income of the employee to the
extent that aggregate purchase payments for the employee do not exceed certain
limitations imposed by the Code.
Effective January 1, 1989, the limits withdrawals from 403(b) Annuity Contracts
to the following circumstances only: when the Participant attains age 59-1/2,
separates from service, dies, becomes disabled (within the meaning of section
72(m)(7) of the Code), or in the case of hardship. Withdrawals for hardship are
restricted to the portion of the Participant's Account Value which represents
contributions made by the Participant and does not include any investment
results. The limitations on withdrawals apply only to: (1) salary reduction
contributions made after December 31, 1988; (2) income attributable to such
contributions; and (3) income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect rollovers or exchanges
between retirement plans which receive favorable tax treatment under the Code.
11
<PAGE> 37
Pension, Profit-Sharing, and Annuity Plans for Corporations and Unincorporated
Businesses
Purchase payments for a Contract issued under a pension or profit sharing plan
qualified under section 401(a) of the Code are currently deductible. Subject to
certain limitations, an employee may also be permitted to make nondeductible
voluntary payments under the Contract. Earnings on both the employer and
employee contributions are not currently taxable to the employee, but are
taxable only on actual distribution. Employee contributions, however, are
subject to FICA withholding when made.
The tax treatment of pension and profit sharing plans established by
self-employed individuals (known as "Keogh" or "H.R. 10" plans) is essentially
the same as corporate plans. Some special restrictions apply to self-employed
individuals who are "owner-employees." An owner employee is a sole proprietor or
a partner who owns more than a specified percentage of a capital or profits
interest in the partnership.
Eligible Deferred Compensation (section 457) Plans
The Code permits employees and independent contractors of state and local
government units and tax-exempt organizations under "eligible deferred
compensation plans" to defer compensation up to certain amounts.
In the case of a section 457 plan, the employer is the owner of the Contract and
has all of the rights and powers attributable to such ownership. These include
the exclusive right to partially or fully terminate any Participant's Account
under such a Contract and to receive all payments under the Contract, including
Annuity payments. Employees participating in such plans are referred to as
Participants in such Contracts and in this prospectus solely for the purpose of
establishing a method of recording allocations applicable to such employees'
accounts. Such employees have no elective rights under the Contracts.
Employees receiving amounts under such section 457 plans from their employers
include such amounts in income in the year they are received or made available
and pay ordinary income taxes thereon. Amounts may not be made available to any
employee except upon separation from service or for an unforeseeable emergency.
Individual Retirement Annuities ("IRAs")
Any individual is permitted to establish an individual retirement arrangement
described in section 408 of the Code. Of these, only the individual retirement
Annuity described in section 408(b) is available in connection with the
Contract.
The annual limits on purchase payments do not apply to tax-free rollovers to an
IRA from another qualified retirement plan. An individual can roll over: all or
a portion of a termination or lump sum, or partial distribution from a section
401(a) plan, excluding
12
<PAGE> 38
nondeductible employee contributions; all or a portion of a lump sum or partial
distribution from a section 403(b) Annuity plan; or all or a portion of a
distribution received from another IRA or from an individual retirement account,
but only once a year. An individual must make a rollover to the IRA within 60
days after receiving the distribution from the other plan if it is to be
considered to be tax free. Under particular circumstances involving qualified
total distributions the rollover may be subject to a mandatory 20% withholding
unless the transfer is "trustee to trustee".
Withholding on Annuity Payments and Other Distributions
Security First Life is required to withhold federal income tax on Contract
distributions (such as Annuity payments, lump sum distributions or partial
surrenders). However, except for qualified total distributions, recipients of
Contract distributions are allowed to make an election not to have federal
income tax withheld. After such election is made with respect to Annuity
payments, an Annuitant may revoke the election at any time, and thereafter
commence withholding. In such a case, Security First Life will notify the payee
at least annually of his or her right to change such election.
The withholding rate followed by Security First Life will be applied only
against the taxable portion of Contract distributions. This rate will be
determined based upon the nature of the distribution. Federal tax will be
withheld from Annuity payments pursuant to the recipient's withholding
certificate. If no withholding certificate is filed with Security First Life,
federal tax will be withheld from Annuity payments on the basis that the payee
is married with three withholding exemptions. Federal tax on the taxable portion
of partial or total surrenders generally will be withheld at the rate specified
by the Code and regulations thereunder. If the balance to the credit of a
Participant in a qualified plan is distributed within one taxable year to the
recipient ("qualified total distribution"), the payor is required to withhold
20% of the income portion of the distribution unless the transfer is made by the
closing plan trustee to the replacement trustee directly. If a qualified total
distribution is made from a qualified plan or a tax-sheltered annuity contract
on account of the Participant's death, the amount of withholding will reflect
the exclusion from federal income tax for employer-provided death benefits.
Payees are required by law to provide Security First Life (as payor) with their
correct taxpayer identification number ("TIN"). If the payee is an individual,
the TIN is his or her social security number. If the payee elects not to have
federal income tax withheld on an Annuity payment or a non-periodic distribution
and a correct TIN has not been provided, such election is ineffective, and such
payment will be subject to withholding as noted above.
Obtaining Tax Advice
It should be recognized that the federal income tax information in this
Statement of Additional Information is not exhaustive and is for information
purposes only. The description does not purport to cover all situations
involving the purchase of an Annuity or the election of an option
13
<PAGE> 39
under the Contract. Tax results may vary depending upon individual situations
and special rules may apply in certain cases. State and local tax results may
also vary. For these reasons a qualified tax adviser should be consulted.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold as a continuous offering by individuals who are
appropriately licensed as insurance agents of Security First Life for the sale
of life insurance and variable annuity contracts in the state where the sale is
made. Commissions on sales of contracts by such agents are paid from the General
Account of Security First Life and bear no direct relationship to any of the
charges under the Contracts. In addition, these individuals will be registered
representatives of the principal underwriter, Security First Financial, Inc., or
of other broker-dealers registered under the Securities Exchange Act of 1934
whose registered representatives are authorized by applicable law to sell
variable annuity contracts issued by Security First Life. It is expected that
the Contracts will be sold in all jurisdictions where Security First Life is
licensed to do business and where it has the requisite variable contract
authority. No direct underwriting commissions are paid to Security First
Financial, Inc.
VOTING RIGHTS
Unless otherwise restricted by the plan under which a Contract is issued, each
Participant will have the right to instruct Security First Life with respect to
voting the Fund shares which are the assets underlying his interest in the
Separate Account, at all shareholders meetings. An Annuitant's voting power with
respect to Fund shares held by the Separate Account declines during the time he
is receiving a Variable Annuity based on the investment performance of the
Separate Account, because amounts attributable to his interest are being
transferred annually to the General Account to provide the variable payments.
SAFEKEEPING OF SECURITIES
All assets of the Separate Account are held for safekeeping by Security First
Life. The assets of each Separate Account Series will be kept physically
segregated by Security First Life and held separate from the assets of any other
firm, person, or corporation. Additional protection for the assets of the
Separate Account is afforded by fidelity bonds covering all of Security First
Life's officers and employees.
INDEPENDENT AUDITORS
Ernst & Young LLP serves as the independent auditors for the registrant and
performs audits of the financial statements of the Separate Account and Security
First Life. The financial statements of the Separate Account contained herein
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing herein, and are included in reliance upon such
report given upon the authority of such firm as experts in
14
<PAGE> 40
accounting and auditing.
LEGAL MATTERS
Legal matters concerning federal securities laws applicable to the issue and
sale of the Contracts have been passed upon by Routier and Johnson, P.C., 1700 K
Street, N.W., Suite 1003, Washington, D.C. 20006.
STATE REGULATION OF SECURITY FIRST LIFE
Security First Life is subject to the laws of the State of Delaware governing
insurance companies and to regulation by the Delaware Commissioner of Insurance.
An annual statement, in a prescribed form, is filed with the Commissioner on or
before March 1 each year covering the operations of Security First Life for the
preceding year and its financial condition on December 31 of such year. Security
First Life's books and assets are subject to review or examination by the
Commissioner or his agents at all times, and a full examination of its
operations is usually conducted by the National Association of Insurance
Commissioners at least once in every three years. Security First Life was last
examined as of December 31, 1993. While Delaware insurance law prescribes
permissible investments for Security First Life, it does not prescribe
permissible investments for the Separate Account, nor does it involve
supervision of the investment management or policy of Security First Life.
In addition, Security First Life is subject to the insurance laws and
regulations of other jurisdictions in which it is licensed to operate. State
insurance laws generally provide regulations for the licensing of insurers and
their agents, govern the financial affairs of insurers, require approval of
policy forms, impose reserve requirements and require filing of an annual
statement. Generally, the insurance departments of these other jurisdictions
apply the laws of Delaware in determining permissible investments for Security
First Life.
FINANCIAL STATEMENTS
The financial statements of Security First Life included herein should be
considered only as bearing upon the ability of Security First Life to meet its
obligations under the Contracts. The financial statements of the Separate
Account are also included in this Statement of Additional Information.
15
<PAGE> 41
[LETTERHEAD]
Report of Independent Auditors
To the Board of Directors
Security First Life Insurance Company
and Contract Owners
Security First Life Separate Account A
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Security First Life Separate Account A
(comprised of Series B, G, T, P, I, FA, FG, FI, FO, FM, SU, SV, and commencing
on May 16, 1995, Series FC, commencing on May 22, 1995, Series AS and SI, and
commencing on May 25, 1995, Series FE) as of December 31, 1995, and the related
statements of operations for the year or period then ended and changes in net
assets for each of the two years or periods then ended. These financial
statements are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the respective mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security First Life Separate
Account A (comprised of the above referenced Series) at December 31, 1995, the
results of their operations for the year or period then ended, and the changes
in their net assets for each of the two years or periods then ended, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young
------------------------
Ernst & Young
Los Angeles, California
April 5, 1996
1
<PAGE> 42
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments
Security First Trust - Bond Series (1,656,211 shares at
net asset value of $3.94 per share; cost $6,524,502) $ 6,530,291
Security First Trust - Growth and Income Series
(6,132,716 shares at net asset value of $11.52 per
share; cost $58,200,522) $ 70,635,406
T. Rowe Price Growth Stock Fund, Inc. (1,865,082 shares
at net asset value of $23.35 per share; cost
$38,474,288)
$ 43,549,662
T. Rowe Price Prime Reserve Fund, Inc. (2,625,979 shares
at net asset value of $1.00 per share; cost
$2,625,979)
$ 2,625,979
T. Rowe Price International Fund, Inc. (681,384 shares
at net asset value of $12.23 per share; cost
$8,160,138)
$ 8,333,329
Receivable from Security First Life Insurance Company for
purchases 7,703 60,695 31,863 535 35,702
Other assets 14,473 8,944 9 865
----------- ------------ ------------ ----------- -----------
TOTAL ASSETS $ 6,552,467 $ 70,705,045 $ 43,581,525 $ 2,626,523 $ 8,369,896
</TABLE>
1
<PAGE> 43
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (continued)
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance Company for
mortality and expense risk $ 5,314 $ 56,529 $ 30,437 $ 2,036 $ 7,834
Payable to Security First Life Insurance Company for
redemptions 659 3,862 1,150 51 27,985
Payable to Mutual Funds 22,109 65,348
Other liabilities 16,637 1,151 15
----------- ------------ ------------ ----------- -----------
TOTAL LIABILITIES 28,082 125,739 48,224 3,238 35,834
NET ASSETS
Cost to Investors:
Series B Accumulation Units 6,518,596
Series G Accumulation Units 58,144,422
Series T Accumulation Units 38,457,927
Series P Accumulation Units 2,623,285
Series I Accumulation Units 8,160,870
Accumulated Undistributed Gain:
Net unrealized appreciation 5,789 12,434,884 5,075,374 173,191
----------- ------------ ------------ ----------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF
CAPITAL $ 6,524,385 $ 70,579,306 $ 43,533,301 $ 2,623,285 $ 8,334,061
=========== ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 44
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 371,424 $ 2,047,981 $ 2,127,559 $ 143,086 $ 251,104
Other income 1,744 22,216 2,422 800 4,629
----------- ----------- ----------- ----------- -----------
373,168 2,070,197 2,129,981 143,886 255,733
EXPENSES:
Charges for mortality and expense risk 56,396 555,472 322,986 23,948 61,500
----------- ----------- ----------- ----------- -----------
Net Investment Income 316,772 1,514,725 1,806,995 119,938 194,233
REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) (36,046) 1,021,117 764,380 17,327
Unrealized appreciation of investments 560,723 12,817,755 6,849,189 506,270
----------- ----------- ----------- -----------
Net investment gains 524,677 13,838,872 7,613,569 523,597
----------- ----------- ----------- ----------- -----------
Increase in net assets resulting from operations $ 841,449 $15,353,597 $ 9,420,564 $ 119,938 $ 717,830
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 45
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 316,772 $ 1,514,725 $ 1,806,995 $ 119,938 $ 194,233
Net realized investment gains (losses) (36,046) 1,021,117 764,380 17,327
Net unrealized investment appreciation during the year 560,723 12,817,755 6,849,189 506,270
----------- ----------- ----------- ----------- -----------
Increase in net assets resulting from operations 841,449 15,353,597 9,420,564 119,938 717,830
Increase (decrease) in net assets resulting from capital
unit transactions 577,456 6,487,662 4,713,786 (98,627) 2,662,352
----------- ----------- ----------- ----------- -----------
Total Increase 1,418,905 21,841,259 14,134,350 21,311 3,380,182
Net Assets at December 31, 1994 5,105,480 48,738,047 29,398,951 2,601,974 4,953,879
----------- ----------- ----------- ----------- -----------
Net Assets at December 31, 1995 $ 6,524,385 $70,579,306 $43,533,301 $ 2,623,285 $ 8,334,061
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 46
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series M Series I
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 238,821 $ 1,215,163 $ 2,367,834 $ 74,197 $ 1,285 $ 278,259
Net realized investment gains 19,242 2,736,099 1,786,634 147,429
Net unrealized investment
depreciation during the year (508,208) (3,086,482) (4,153,007) (555,178)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net
assets resulting from
operations (250,145) 864,780 1,461 74,197 1,285 (129,490)
Increase in net assets resulting
from capital unit transactions (279,127) 4,586,417 4,781,841 (564,963) (2,478,148) 3,540,284
------------ ------------ ------------ ------------ ------------ ------------
Total Increase (Decrease) (529,272) 5,451,197 4,783,302 (490,766) (2,476,863) 3,410,794
Net Assets at December 31, 1993 5,634,752 43,286,850 24,615,649 3,092,740 2,476,863 1,543,085
------------ ------------ ------------ ------------ ------------ ------------
Net Assets at December 31, 1994 $ 5,105,480 $ 48,738,047 $ 29,398,951 $ 2,601,974 $ 0 $ 4,953,879
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 47
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1995
SCHEDULE I
<TABLE>
<CAPTION>
Carrying Unrealized
Name of Issue Shares Value Appreciation Cost
- ---------------------------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Security First Trust Bond Series -
capital shares 1,656,211 $ 6,530,291 $ 5,789 $ 6,524,502
Security First Trust Growth and Income
Series - capital shares 6,132,716 $70,635,406 $12,434,884 $58,200,522
T. Rowe Price Growth Stock Fund, Inc. -
capital shares 1,865,082 $43,549,662 $ 5,075,374 $38,474,288
T. Rowe Price Prime Reserve Fund, Inc. -
capital shares 2,625,979 $ 2,625,979 $ 2,625,979
T. Rowe Price International Stock Fund,
Inc. - capital shares 681,384 $ 8,333,329 $ 173,191 $ 8,160,138
</TABLE>
Note A The carrying value of the investments is the reported net asset value of
the investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 48
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments
Fidelity Investments - VIP Asset Manager
(2,782,258 shares at net asset value
of $15.79 per share; cost $39,902,742) $43,931,846
Fidelity Investments - VIP Growth Portfolio
(1,518,582 shares at net asset
value of $29.20; cost $37,606,829) $44,342,589
Fidelity Investments - VIP Index 500
(86,186 shares at net asset
value of $75.71; cost $5,776,430) $ 6,525,133
Fidelity Investments - VIP Overseas
Portfolio (284,670 shares at net asset
value of $17.05; cost $4,603,656) $ 4,853,623
Fidelity Investments - VIP Money Market Series
(8,395,157 shares at net asset
value of $1.00 per share; cost $8,395,157) $ 8,395,157
Receivable from Security First Life Insurance
Company for purchases 75,517 213,505 64,542 62,379 56,584
Other assets 3,180 4,999 10,357 59
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $44,010,543 $44,561,093 $ 6,600,032 $ 4,916,002 $ 8,451,800
</TABLE>
7
<PAGE> 49
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (continued)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance
Company for mortality and expense risk $ 44,158 $ 42,932 $ 5,949 $ 4,550 $ 7,351
Payable to Security First Life Insurance
Company for redemptions 14,433 19,499 11,207 750 492
Payable to Mutual Funds 71,222 198,340 61,878 62,436 54,732
Other liabilities 680 1,852
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES 129,813 261,451 79,034 67,736 64,427
NET ASSETS
Cost to Investors:
Series FA Accumulation Units 39,851,626
Series FG Accumulation Units 37,563,882
Series FI Accumulation Units 5,772,295
Series FO Accumulation Units 4,598,299
Series FM Accumulation Units 8,387,373
Accumulated Undistributed Income:
Net unrealized appreciation 4,029,104 6,735,760 748,703 249,967
----------- ----------- ----------- ----------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL $43,880,730 $44,299,642 $ 6,520,998 $ 4,848,266 $ 8,387,373
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 50
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 562,504 $ 81,618 $ 20,704 $ 15,919 $ 339,310
EXPENSES:
Charges for mortality and expense risk 414,098 320,517 31,873 36,283 62,783
Other expense (income) (10,299) (101,082) (16,698) 2,443 39,243
----------- ----------- ----------- ----------- -----------
403,799 219,435 15,175 38,726 102,026
----------- ----------- ----------- ----------- -----------
Net Investment Income (Loss) 158,705 (137,817) 5,529 (22,807) 237,284
REALIZED AND UNREALIZED INVESTMENT GAINS:
Realized investment gains 64,929 93,864 36,253 6,514
Unrealized investment appreciation during the year 5,020,534 6,383,879 741,445 294,152
----------- ----------- ----------- -----------
Net investment gains 5,085,463 6,477,743 777,698 300,666
----------- ----------- ----------- ----------- -----------
Increase in net assets resulting from
operations $ 5,244,168 $ 6,339,926 $ 783,227 $ 277,859 $ 237,284
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 51
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 158,705 $ (137,817) $ 5,529 $ (22,807) $ 237,284
Net realized investment gain 64,929 93,864 36,253 6,514
Net unrealized investment appreciation
during the year 5,020,534 6,383,879 741,445 294,152
------------ ------------ ------------ ------------ ------------
Increase in net assets resulting from
operations 5,244,168 6,339,926 783,227 277,859 237,284
Increase in net assets resulting from capital
unit transactions 13,466,719 24,403,159 4,791,886 2,585,161 4,276,144
------------ ------------ ------------ ------------ ------------
Total Increase 18,710,887 30,743,085 5,575,113 2,863,020 4,513,428
Net Assets at December 31, 1994 25,169,843 13,556,557 945,885 1,985,246 3,873,945
------------ ------------ ------------ ------------ ------------
Net Assets at December 31, 1995 $ 43,880,730 $ 44,299,642 $ 6,520,998 $ 4,848,266 $ 8,387,373
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 52
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 87,421 $ 31,856 $ (5,934) $ (10,535) $ 106,832
Net realized investment gains (losses) (5,869) (40,668) (412) 1,749
Net unrealized investment appreciation
(depreciation) during the year (1,215,262) 324,465 9,612 (47,106)
------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from operations (1,133,710) 315,653 3,266 (55,892) 106,832
Increase in net assets resulting from
capital unit transactions 21,658,209 11,739,399 773,367 1,931,599 3,736,108
------------ ------------ ------------ ------------ ------------
Total Increase 20,524,499 12,055,052 776,633 1,875,707 3,842,940
Net Assets at December 31, 1993 4,645,344 1,501,505 169,252 109,539 31,005
------------ ------------ ------------ ------------ ------------
Net Assets at December 31, 1994 $ 25,169,843 $ 13,556,557 $ 945,885 $ 1,985,246 $ 3,873,945
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 53
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1995
SCHEDULE I
<TABLE>
<CAPTION>
Carrying
Value Unrealized Cost
Name of Issue Shares (Note A) Appreciation (Note B)
- -------------------------------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Fidelity Investments VIP Asset Manager -
capital shares 2,782,258 $43,931,846 $ 4,029,104 $39,902,742
Fidelity Investments VIP Growth Portfolio -
capital shares 1,518,582 $44,342,589 $ 6,735,760 $37,606,829
Fidelity Investments VIP Index 500 -
capital shares 86,186 $ 6,525,133 $ 748,703 $ 5,776,430
Fidelity Investments Overseas Portfolio -
capital shares 284,670 $ 4,853,623 $ 249,967 $ 4,603,656
Fidelity Investments VIP Money Market Fund -
capital shares 8,395,157 $ 8,395,157 $ 8,395,157
</TABLE>
Note A The carrying value of the investments is the reported net asset value of
the investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
12
<PAGE> 54
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Security First Trust - U.S. Government
Income Series (1,788,475 shares at
net asset value of $5.18 per
share; cost $9,015,628) $ 9,263,160
Security First Trust - Value Equity
Series (2,216,873 shares at net asset
value of $5.91 per share; cost $11,968,596) $13,100,908
Alger American Small Capitalization
Portfolio (122,440 shares at net asset
value of $39.41 per share; cost $4,918,114) $ 4,825,362
Scudder International Fund (32,389 shares
at net asset value of $11.82 per share;
cost $372,264) $ 382,835
Fidelity Investments - VIP Contra Fund
(426,703 shares at net asset value of
$13.78 per share; cost $5,787,530) $ 5,879,966
Fidelity Investments - VIP Equity Income
Portfolio (41,802 shares at net asset value
of $19.27 per share; cost $759,759) $ 805,524
Receivable from Security First Life Insurance
Company for purchases 47,996 144,892 34,274 331 60,377 17,300
Other assets 170 1,009 15 8,845
----------- ----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $ 9,311,326 $13,246,809 $ 4,859,636 $ 383,181 $ 5,949,188 $ 822,824
</TABLE>
13
<PAGE> 55
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (continued)
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance
Company for mortality and expense risk $ 8,574 $ 12,101 $ 4,639 $ 402 $ 5,644 $ 752
Payable to Security First Life Insurance
Company for redemptions 4,378 5,431 552 653
Payable to Mutual Funds 46,895 143,791 34,286 331 68,064 17,300
Other liabilities 13,670 252
----------- ----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES 59,847 161,323 53,147 733 74,361 18,304
NET ASSETS - NOTES 4 AND 5
Cost to Investors:
Series SU Accumulation Units 9,003,947
Series SV Accumulation Units 11,953,174
Series AS Accumulation Units 4,899,241
Series SI Accumulation Units 371,877
Series FC Accumulation Units 5,782,391
Series FE Accumulation Units 758,755
Accumulated Undistributed Income (loss):
Net unrealized appreciation (depreciation) 247,532 1,132,312 (92,752) 10,571 92,436 45,765
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $ 9,251,479 $13,085,486 $ 4,806,489 $ 382,448 $ 5,874,827 $ 804,520
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 56
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series SU Series SV Series AS(1) Series SI(1) Series FC(1) Series FE(1)
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 349,446 $ 444,126 $ 70,263 $ 5,416
Other income 2,208 4,077 $ 19,725 $ 349 30,772 490
---------- ---------- ---------- ---------- ---------- ----------
351,654 448,203 19,725 349 101,035 5,906
EXPENSES:
Charges for mortality and expense risk 70,358 88,613 14,826 1,349 18,477 2,303
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) 281,296 359,590 4,899 (1,000) 82,558 3,603
REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES)
Net realized investment gains (losses) (29,574) 13,023 26,373 304 26,862 452
Unrealized investment appreciation
(depreciation) 436,539 1,352,775 (92,752) 10,571 92,436 45,765
---------- ---------- ---------- ---------- ---------- ----------
Net investment gains (losses) 406,965 1,365,798 (66,379) 10,875 119,298 46,217
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets
resulting from operations $ 688,261 $1,725,388 $ (61,480) $ 9,875 $ 201,856 $ 49,820
========== ========== ========== ========== ========== ==========
</TABLE>
(1) Series FC commenced operations May 16, 1995; Series AS and SI on May 22,
1995; and Series FE on May 25, 1995.
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 57
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series SU Series SV Series AS(1) Series SI(1) Series FC(1) Series FE(1)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 281,296 $ 359,590 $ 4,899 $ (1,000) $ 82,558 $ 3,603
Net realized investment gains (losses) (29,574) 13,023 26,373 304 26,862 452
Unrealized investment appreciation
(depreciation) during the year 436,539 1,352,775 (92,752) 10,571 92,436 45,765
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting
from operations 688,261 1,725,388 (61,480) 9,875 201,856 49,820
Increase in net assets resulting from capital
unit transactions 4,043,705 6,807,136 4,867,969 372,573 5,672,971 754,700
----------- ----------- ----------- ----------- ----------- -----------
Total Increase 4,731,966 8,532,524 4,806,489 382,448 5,874,827 804,520
Net assets at December 31, 1994 4,519,513 4,552,962
----------- ----------- ----------- ----------- ----------- -----------
Net assets at December 31, 1995 $ 9,251,479 $13,085,486 $ 4,806,489 $ 382,448 $ 5,874,827 $ 804,520
=========== =========== =========== =========== =========== ===========
</TABLE>
(1) Series FC commenced operations May 16, 1995; Series AS and SI on May 22,
1995; and Series FE on May 25, 1995.
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 58
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Series SU Series SV
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 100,307 $ 15,569
Net realized investment losses (31,739) (16,538)
Unrealized investment depreciation during the year (157,317) (226,588)
----------- -----------
Decrease in net assets resulting from operations (88,749) (227,557)
Increase in net assets resulting from capital unit
transactions 3,081,435 3,471,901
----------- -----------
Total Increase 2,992,686 3,244,344
Net assets at December 31, 1993 1,526,827 1,308,618
----------- -----------
Net assets at December 31, 1994 $ 4,519,513 $ 4,552,962
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 59
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1995
SCHEDULE I
<TABLE>
<CAPTION>
Carrying Unrealized
Value Appreciation Cost
Name of Issue Shares (Note A) (Depreciation) (Note B)
- ---------------------------------------------- --------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Security First Trust U. S. Government Series -
capital shares 1,788,475 $ 9,263,160 $ 247,532 $ 9,015,628
Security First Trust Value Equity Series -
capital shares 2,216,873 $13,100,908 $ 1,132,312 $11,968,596
Alger American Small Capitalization
Portfolio - capital shares 122,440 $ 4,825,362 $ (92,752) $ 4,918,114
Scudder International Portfolio - capital
shares 32,389 $ 382,835 $ 10,571 $ 372,264
Fidelity Investments VIP Contra Fund - capital
shares 426,703 $ 5,879,966 $ 92,436 $ 5,787,530
Fidelity Investments VIP Equity Income
Portfolio - capital shares 41,802 $ 805,524 $ 45,765 $ 759,759
</TABLE>
Note A The carrying value of the investments is the reported net asset value of
the investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 60
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 -- BASIS OF PRESENTATION
Security First Life Separate Account A (Separate Account) was established on May
29, 1980, as a separate account of Security First Life Insurance Company
(Security Life), the sponsor company, and is registered under the Investment
Company Act of 1940 as a unit investment trust. The Separate Account is designed
to provide annuity benefits pursuant to certain variable annuity contracts (the
Contracts) issued by Security Life.
In accordance with the terms of the Contracts, all payments allocated to the
Separate Account by the contract owners must be allocated to purchase shares of
any or all of four series of Security First Trust (the Trust), a Massachusetts
business trust, and twelve mutual funds (investment companies). The series of
the Trust are Bond Series, Growth and Income Series, Value Equity Series, and
U.S. Government Income Series and the mutual funds are T. Rowe Price Growth
Stock Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe Price
International Stock Fund, Inc., Alger American Small Capitalization Portfolio,
Scudder International Fund, and Fidelity Investments: VIP Asset Manager, VIP
Growth Portfolio, VIP Index 500, VIP Overseas Portfolio, VIP Contra Fund, VIP
Equity Income Portfolio and VIP Money Market Fund. The Trust and the (investment
companies) are registered as diversified, open-end management investment
companies under the Investment Company Act of 1940. The Separate Account is
correspondingly divided into sixteen series of Accumulation Units, Series B, G,
SU, SV, T, P, I, AS, SI, FA, FG, FI, FO, FC, FE and FM, relating to investments
in each of the investment companies, respectively. For the year ended December
31, 1994 and prior, assets held by certain Series (SF 135R2S contracts) were
reported separately in the financial statements. For the year ended December 31,
1995 these contracts were combined with the other contracts that shared the same
series.
All series of the Trust receive administrative services for a fee from Security
First Investment Management Corporation (Security Management). Security First
Financial, Inc. is the principal underwriter for the Contracts. Security Life,
Security Management, and Security First Financial, Inc. are wholly-owned
subsidiaries of Security First Group, Inc. Investment advice is provided to the
Security First Trust Bond Series and Growth and Income Series by T. Rowe Price
Associates, Inc. and to the Security First Trust Value Equity and U. S.
Government Income Series by Virtus Capital Management.
19
<PAGE> 61
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 1 -- BASIS OF PRESENTATION (continued)
The Separate Account and each series therein are administered and accounted for
as part of the business of Security Life, but the investment income and capital
gains and losses of each Separate Account series are identified with the assets
held for that series in accordance with the terms of the Contracts, without
regard to investment income and capital gains and losses arising out of any
other business Security Life may conduct.
The Separate Account incurs no liability for remuneration to directors, advisory
boards, officers or such other persons who may from time to time perform
services for the Separate Account.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS -- Investments are carried at market value, which is
determined by multiplying the investment company's shares owned by the Separate
Account by the reported net asset value per share of each respective investment
company. Realized investment gains and losses are determined on the first-in,
first-out cost basis.
EXPENSES AND CHARGES -- The Separate Account accrues charges incurred for the
mortality and expense risk assumed by Security Life. The charges are calculated
daily by multiplying the value of the assets of the Separate Account by the
daily mortality and expense risk rate. Security Life has the option of calling
for payment of such charges at any time. The following table illustrates the
rates for the respective contracts:
<TABLE>
<CAPTION>
Contract Type Annual Rate Daily Rate
- -------------------------------------- ----------- ----------
<S> <C> <C>
SF 234; SF 89; SF 224FL;
SF 236FL; SF 1700 Contracts .89% .0000244
SF 135R; SF 135R2V; SF 226RI Contracts 1.25% .0000342
SF 135R2S Contracts 1.15% .0000315
</TABLE>
The following charges are deducted from a contract holder's account by Security
Life as a capital transaction by reducing the separate account units held, and
such charges are not an expense of the Separate Account. An administration
charge (contract charge) is deducted from each contract and paid to Security
Life at the end of each contract year prior to the annuity date, and when the
entire contract value is withdrawn on any date other than a contract
anniversary. In the event that a participant withdraws
20
<PAGE> 62
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (continued)
all or a portion of the participant's account, a contingent deferred sales
charge (CDSC) may be applied to the amount of the contract value withdrawn to
cover certain expense relating to the sale of contracts. The following table
illustrates contract charges and CDSC with respect to the various types of
contracts:
<TABLE>
<CAPTION>
Maximum Contract
Contract Type Charge Per Year CDSC
- ------------- ---------------- ---------------------------------------------
<S> <C> <C>
SF 236FL $12.00 Based on elapsed time since premium received.
Disappears on or before 6th anniversary.
SF 224FL $40.00 Based on elapsed time since premium received.
Disappears on or before 6th anniversary.
SF 1700 $42.50 Based on elapsed time since premium received.
Disappears on or before 6th anniversary.
Group Form
226RI $41.50 Seven percent of premium received.
Disappears on or before 6th anniversary.
All other group $19.50 Five percent of premium received.
Disappears on or before 6th anniversary.
SF 135R2V * None
SF 135R2S and other
individual * Based on elapsed time since premium received.
Disappears after 7th year.
</TABLE>
* .15% annually of average account value (currently being waived).
In addition, transaction charges of $10 are incurred for each surrender or
annuitization. Upon conversion of either accumulation or annuity units from one
series to another, a $10 conversion charge is incurred. The amount deducted for
contract charges and CDSC was $273,809 for the year ended December 31, 1995, and
$132,959 for the year ended December 31, 1994.
INCOME RECOGNITION AND REINVESTMENT -- Income is recognized as declared payable
by the investment companies. All distributions received are reinvested in the
investment companies.
21
<PAGE> 63
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3 -- FEDERAL INCOME TAXES
The operations of the Separate Account form a part of, and are taxed with, the
operations of Security Life, which is taxed as a "life insurance company" under
the Internal Revenue Code, and as such, Security Life is liable for income
taxes, if any, which become payable with respect to the Separate Account's
operations.
Separate accounts are generally required to meet certain diversification
requirements for their assets. However, separate accounts which solely provide
benefits for "pension plan contracts" are exempt from the diversification
requirements. Pension plan contracts include: (i) tax qualified plans; (ii)
employee annuities; (iii) plans for employees of life insurance companies; (iv)
tax sheltered annuities of exempt organizations; (v) individual retirement
accounts or annuities, and (vi) deferred compensation plans of certain
governmental or tax-exempt organizations. The Contracts issued by Security Life
are offered in connection with both pension plan contracts and non-qualified
contracts, therefore the Separate Account is subject to the diversification
requirements. Management believes that the Separate Account has met the
diversification requirements.
NOTE 4 -- CAPITAL TRANSACTIONS
Additions and deductions to Units of Capital consisting of the effect of capital
unit transactions were as follows:
<TABLE>
<CAPTION>
Additions to Capital Deductions From Capital
$ Units $ Units
---------- --------- --------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1995:
SF 135R; SF 226RI Contracts
- ---------------------------
Series B Accumulation Units 434,597 54,077 110,016 13,561
Series G Accumulation Units 4,305,620 420,939 881,557 89,611
Series FA Accumulation Units 14,071,749 2,554,939 4,044,605 724,251
Series FG Accumulation Units 14,711,150 2,249,747 1,345,976 204,887
Series FI Accumulation Units 3,146,381 487,693 135,735 21,838
Series FO Accumulation Units 505,089 87,729 336,120 58,663
Series FM Accumulation Units 4,916,221 921,317 1,605,571 302,600
Series SU Accumulation Units 105,370 19,715
Series AS Accumulation Units 4,947,271 746,279 79,302 11,979
Series SI Accumulation Units 376,043 66,110 3,470 605
Series FC Accumulation Units 5,777,070 950,446 104,099 16,764
</TABLE>
22
<PAGE> 64
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<S> <C> <C> <C> <C>
Series FE Accumulation Units 760,961 132,235 6,261 1,114
</TABLE>
NOTE 4 -- CAPITAL TRANSACTIONS (continued)
<TABLE>
<CAPTION>
Additions to Capital Deductions From Capital
$ Units $ Units
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
SF 234; SF 89; SF 224FL; SF 236FL; SF 1700 Contracts
- ----------------------------------------------------
Series B Accumulation Units 833,258 48,874 580,383 33,929
Series G Accumulation Units 9,125,759 294,937 6,062,160 196,489
Series T Accumulation Units 9,366,192 347,286 4,652,406 171,305
Series P Accumulation Units 634,124 50,176 732,751 57,732
Series I Accumulation Units 4,605,139 660,163 1,942,787 276,598
Series FA Accumulation Units 5,110,732 961,908 1,671,157 311,571
Series FG Accumulation Units 6,918,341 1,058,309 692,639 106,251
Series FI Accumulation Units 1,988,299 318,789 207,059 32,436
Series FM Accumulation Units 1,745,516 329,755 1,217,457 229,906
SF 135R2S
- ---------
Series SU Accumulation Units 4,886,186 942,800 947,851 188,764
Series SV Accumulation Units 7,552,784 1,366,412 745,648 142,445
Series FM Accumulation Units 511,763 95,847 74,328 14,079
Series FG Accumulation Units 5,215,983 786,021 403,700 61,003
Series FO Accumulation Units 2,521,718 501,641 105,526 21,247
Year ended December 31, 1994:
SF 135R; SF 226RI Contracts
- ---------------------------
Series B Accumulation Units 450,410 59,234 1,964,889 255,231
Series G Accumulation Units 2,256,171 255,847 11,816,179 1,346,467
Series M Accumulation Units 3,404 513 1,896,616 286,075
Series T Accumulation Units 25,699 2,710 11,921,075 1,244,060
Series FA Accumulation Units 18,699,464 3,451,499 1,087,647 202,875
Series FG Accumulation Units 8,227,024 1,580,400 278,031 53,770
Series FI Accumulation Units 588,897 113,711 6,953 1,338
Series FO Accumulation Units 1,019,668 174,720 22,111 3,810
Series FM Accumulation Units 1,187,375 234,573 571,042 111,981
</TABLE>
23
<PAGE> 65
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4 -- CAPITAL TRANSACTIONS (continued)
<TABLE>
<CAPTION>
Additions to Capital Deductions From Capital
$ Units $ Units
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
SF 234; SF 89; SF 224FL; SF 236FL; SF 1700 Contracts
- ----------------------------------------------------
Series B Accumulation Units 2,365,192 145,428 1,129,840 70,689
Series G Accumulation Units 19,236,016 714,441 5,089,591 188,577
Series M Accumulation Units 163 17 585,099 60,337
Series T Accumulation Units 20,139,827 857,260 3,462,610 148,948
Series P Accumulation Units 610,483 49,901 1,175,446 96,364
Series I Accumulation Units 4,068,516 585,985 528,232 76,552
Series FA Accumulation Units 4,252,178 825,943 205,786 40,076
Series FG Accumulation Units 2,075,220 420,944 87,975 17,729
Series FI Accumulation Units 194,766 39,124 3,343 662
Series FM Accumulation Units 3,785,144 753,094 945,024 186,554
SF 135R2S
- ---------
Series SU Accumulation Units 3,327,573 685,345 246,138 51,484
Series SV Accumulation Units 3,719,973 755,973 248,072 51,516
Series FM Accumulation Units 289,695 56,479 10,040 1,962
Series FG Accumulation Units 1,843,704 367,479 40,543 8,061
Series FO Accumulation Units 952,968 191,482 18,926 3,926
</TABLE>
NOTE 5 -- UNITS OF CAPITAL
The following are the units outstanding and corresponding unit values as of
December 31, 1995:
<TABLE>
<CAPTION>
Units Unit Value
Description Outstanding $
- ------------------------------------------ ----------- ----------
<S> <C> <C>
SF 135R2C; SF 226 RI Contracts
- ------------------------------
Series B Accumulation Units 170,728 8.55
Series G Accumulation Units 1,105,394 11.46
Series FA Accumulation Units 5,868,185 6.02
Series FG Accumulation Units 3,819,793 7.13
Series FI Accumulation Units 610,372 7.04
Series FO Accumulation Units 219,402 6.14
Series FM Accumulation Units 743,389 5.40
Series SU Accumulation Units 19,715 5.43
Series AS Accumulation Units 734,300 6.54
Series SI Accumulation Units 65,505 5.84
Series FC Accumulation Units 933,682 6.29
Series FE Accumulation Units 131,121 6.13
</TABLE>
24
<PAGE> 66
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 5 -- UNITS OF CAPITAL (continued)
<TABLE>
<CAPTION>
Units Unit Value
Description Outstanding $
- ------------------------------------------ ----------- ----------
<S> <C> <C>
SF 234; SF 89; SF 224FL; SF 236FL; SF 1700 Contracts
- ----------------------------------------------------
Series B Accumulation Units 277,508 18.25
Series G Accumulation Units 1,640,191 35.31
Series T Accumulation Units 1,430,263 30.44
Series P Accumulation Units 202,251 12.97
Series I Accumulation Units 1,118,228 7.45
Series FA Accumulation Units 1,475,597 5.79
Series FG Accumulation Units 1,386,442 6.84
Series FI Accumulation Units 325,198 6.83
Series FM Accumulation Units 666,389 5.42
SF 135R2S
- ---------
Series SU Accumulation Units 1,692,672 5.40
Series SV Accumulation Units 2,186,595 5.98
Series FM Accumulation Units 140,365 5.44
Series FG Accumulation Units 1,084,436 6.99
Series FO Accumulation Units 667,950 5.24
</TABLE>
NOTE 6 -- SECURITY FIRST TRUST - MONEY MARKET SERIES INVESTMENT OPTION
Effective January 31, 1994, the Security First Trust Money Market Series (Series
M) was closed and liquidated. Policyholders were notified of this and allowed to
transfer their funds. The Fidelity Investments VIP Money Market Fund has similar
investment objectives and many policyholders elected to transfer their Security
First Trust Money Market investments into it.
25
<PAGE> 67
[LETTERHEAD]
Report of Independent Auditors
Board of Directors
Security First Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security First
Life Insurance Company and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security First
Life Insurance Company and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes 3 and 5 to the consolidated financial statements, Security
First Life Insurance Company and subsidiaries made certain accounting changes in
1994 and 1993.
/s/ Ernst & Young
------------------------
Ernst & Young
February 9, 1996
26
<PAGE> 68
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1995 1994
---------- ----------
(In thousands)
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed maturities:
Available-for-sale $2,176,985 $1,602,387
Held-for-investment 197,379
Equity securities 5,129 5,827
Investment real estate 2,311 2,298
Policy and mortgage loans 18,798 16,239
Short-term investments 7,024 26,215
---------- ----------
2,210,247 1,850,345
CASH AND CASH EQUIVALENTS 7,990 13,359
ACCRUED INVESTMENT INCOME 30,459 27,018
DEFERRED POLICY ACQUISITION COSTS 56,515 47,985
OTHER ASSETS
Property under capital lease 10,680 11,260
Assets held in separate accounts 340,287 184,196
Other 4,318 4,517
---------- ----------
$2,660,496 $2,138,680
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 69
<TABLE>
<CAPTION>
December 31
1995 1994
----------- -----------
(In thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholder liabilities $ 2,047,818 $ 1,790,456
Obligation under capital lease 15,966 16,183
Notes payable to parent 35,000 35,000
Note payable 1,000 2,000
Federal income taxes 35,052 1,723
Liabilities related to separate accounts 340,287 184,196
Other 5,293 5,060
----------- -----------
2,480,416 2,034,618
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Preferred stock, $1 par value
Authorized, issued and outstanding -- 200,000 shares 200 200
Common stock, $200 par value
Authorized -- 15,000 shares
Issued and outstanding -- 11,000 shares 2,200 2,200
Additional paid-in capital 48,147 48,147
Net unrealized investment gains (losses) 38,972 (21,561)
Retained earnings 90,561 75,076
----------- -----------
180,080 104,062
----------- -----------
$ 2,660,496 $ 2,138,680
=========== ===========
</TABLE>
28
<PAGE> 70
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
REVENUES
Net investment income $ 158,174 $ 146,101 $ 137,450
Annuity product income 14,815 6,121 2,499
Net realized investment gains (losses) 1,347 (1,735) 921
Other 701 709 721
--------- --------- ---------
TOTAL REVENUES 175,037 151,196 141,591
BENEFITS AND EXPENSES
Interest credited to policyholders 103,959 102,776 102,513
Benefits in excess of policyholder liabilities 5,738 4,119 1,907
Amortization of deferred policy acquisition costs 15,505 5,612 1,981
Operating expenses 28,201 23,543 17,397
--------- --------- ---------
TOTAL BENEFITS AND EXPENSES 153,403 136,050 123,798
--------- --------- ---------
21,634 15,146 17,793
Income tax expense
Current 3,044 1,776 5,467
Deferred 3,105 3,388 597
--------- --------- ---------
6,149 5,164 6,064
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 15,485 9,982 11,729
Cumulative effect of change in accounting for
income taxes 1,510
--------- --------- ---------
NET INCOME $ 15,485 $ 9,982 $ 13,239
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 71
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Net
Additional Unrealized Total
Preferred Common Paid-in Investment Retained Stockholder's
Stock Stock Capital Gains (Losses) Earnings Equity
--------- --------- ---------- -------------- --------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ 200 $ 2,200 $ 48,147 $ 226 $ 51,855 $ 102,628
Net income 13,239 13,239
Net unrealized investment losses (269) (269)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1993 200 2,200 48,147 (43) 65,094 115,598
Net income 9,982 9,982
Cumulative effect of change in
accounting principle at
January 1 28,618 28,618
Net unrealized investment losses (50,136) (50,136)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1994 200 2,200 48,147 (21,561) 75,076 104,062
Net income 15,485 15,485
Net unrealized investment gains 60,533 60,533
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1995 $ 200 $ 2,200 $ 48,147 $ 38,972 $ 90,561 $ 180,080
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE> 72
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
------------- ------------- -----------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 15,485 $ 9,982 $ 13,239
Adjustments to reconcile net income to net cash
provided by operations:
Cumulative effect of accounting change (1,510)
Net realized investment losses (gains) (1,347) 3,014 (12,121)
Depreciation and amortization 1,391 2,281 1,703
Accretion of discount and amortization of
premium on investments 1,059 (2,423) (8,212)
Changes in operating assets and liabilities:
Accrued investment income (3,441) (648) (3,957)
Deferred policy acquisition costs (15,676) (4,915) (16,946)
Other assets 2,194 4,560 (4,504)
Other liabilities 673 (9,050) 2,207
------------- ------------- -----------
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES 338 2,801 (30,101)
INVESTING ACTIVITIES
Fixed maturity securities -- available-for-sale
Purchases (636,371) (1,033,097)
Sales and maturities 439,897 860,239
Fixed maturity securities -- held-for-investment
Purchases (1,037,222)
Sales and maturities 783,570
Equity securities
Purchases (117)
Sales 931 1,085
Disposal (acquisition) of real estate, net (13) 2,192 (161)
Net sale (purchase) of short-term investments 19,191 (26,215)
Repayment (issuance) of loans, net (2,558) 5,792 (359)
Purchase of equipment (388) (896)
-------------- ------------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (179,428) (190,900) (254,172)
FINANCING ACTIVITIES
Receipts credited to policyholder accounts 565,698 468,898 509,223
Amounts returned to policyholders (390,760) (326,691) (208,422)
Issuance of note payable to parent 10,000 25,000
Repayment of notes payable (1,000) (1,000) (1,000)
Reduction of capital lease obligation (217) (192) (170)
-------------- ------------- -----------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 173,721 151,015 324,631
------------- ------------- -----------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (5,369) (37,084) 40,358
Cash and cash equivalents at beginning of year 13,359 50,443 10,085
------------- ------------- -----------
CASH AND CASH
EQUIVALENTS AT END OF YEAR $ 7,990 $ 13,359 $ 50,443
============= ============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE> 73
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- Security First Life Insurance Company (Security First
Life) and subsidiaries (collectively, the Company) is a wholly-owned subsidiary
of Security First Group, Inc. (SFG), formerly The Holden Group, Inc. SFG has
been a wholly-owned subsidiary of London Insurance Group, Inc. (LIG) since May
1994. The Company sells a broad range of fixed and variable annuity contracts.
The Company's consolidated financial statements are prepared in conformity with
generally accepted accounting principles (GAAP) which vary in some respects from
statutory accounting practices prescribed or permitted by regulatory authorities
(statutory basis) and include the accounts of its wholly-owned subsidiaries,
Fidelity Standard Life Insurance Company (Fidelity Standard Life) and Security
First Life Insurance Company of Arizona (SFL-Arizona). All significant
intercompany transactions and accounts are eliminated in consolidation.
INVESTMENTS -- Investments are reported on the following bases:
Fixed Maturities:
Available-for-sale -- at fair value, which differs from the amortized
cost of such investments. Unrealized gains and losses on these
investments (net of related adjustments for deferred policy acquisition
costs and applicable deferred income taxes) are credited or charged to
stockholder's equity and, accordingly, have no effect on net income.
Held-for-investment -- at cost, adjusted for amortization of premium or
accretion of discount and other-than-temporary declines in fair value.
The amortized cost of such investments differs from their fair values.
See Note 3 regarding the reclassification in 1995 of
held-for-investment securities to available-for-sale.
For those fixed maturities which are mortgage-backed, the Company
recognizes income using a constant effective yield based on anticipated
prepayments and the estimated economic life of the securities. When
actual prepayments differ significantly from anticipated prepayments,
the effective yield is recalculated to reflect actual payments to date
and anticipated future payments. The net investment in the security is
adjusted to the amount that would have existed had the new effective
yield been applied since the acquisition of the security. Such
adjustment is included in net investment income.
The Company does not maintain a trading portfolio, or at December 31,
1995, a held-for-investment portfolio.
32
<PAGE> 74
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity securities (common and non-redeemable preferred stocks) -- at fair
value if publicly traded. Changes in fair values of equity securities, net
of applicable deferred income taxes, are reported as unrealized gains or
losses directly in stockholder's equity and, accordingly, have no effect on
net income.
Investment real estate -- at lower of cost less accumulated depreciation or
fair value.
Mortgage loans and policy loans -- at unpaid balances.
Short-term investments -- at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined on a
specific identification basis.
CASH EQUIVALENTS -- Cash equivalents consist of investments in money market
funds. The carrying amount of cash equivalents approximates fair value.
DEFERRED POLICY ACQUISITION COSTS -- As of January 1, 1995, the Company adopted
the account value deposit method of reporting on two-tier annuities (those
annuities that have a different interest credited rate for annuitization as
compared to withdrawal). The Company had previously adopted this method for
single-tier annuities. Under this method, commissions and other costs of
acquiring annuities that vary with and are primarily related to the acquisition
of such business are included in deferred policy acquisition costs. Prior to
that date, certain commission costs for two-tier annuities were reported as a
component of policyholder liabilities. As a result of this change, deferred
policy acquisition costs and policyholder liabilities increased by $38,590,000
on January 1, 1995 with no effect on stockholder's equity. Additionally, the
presentation of certain revenue and expense items in the consolidated statement
of income for the year ended December 31, 1995 has been effected by this change
with no significant impact on net income.
Deferred policy acquisition costs are being amortized in proportion to the
present value of estimated future gross margins which includes the impact of
realized investment gains and losses.
33
<PAGE> 75
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
POLICYHOLDER LIABILITIES -- As indicated previously, the Company adopted the
account value deposit method for reporting on two-tier annuities as of January
1, 1995. Under this method, the policyholder liabilities for two-tier annuities
are the lower tier account values. Prior to that date, policyholder liabilities
for the Company's two-tier fixed annuity products were calculated using a
prospective approach. Under the prospective approach, the policyholder liability
was equal to the present value of future benefits using a "break-even" discount
rate which resulted in no gain or loss when a policy was issued. This method
allowed profits to emerge in relation to the difference between actual
investment earnings and the break-even discount rate used in the calculation of
the policyholder liabilities. Policyholder liabilities for the Company's
single-tier fixed annuity products are the account values.
The fair value of policyholder liabilities is estimated assuming all
policyholders surrender their policies. The carrying amounts and estimated fair
values are as follows (in thousands):
<TABLE>
<CAPTION>
Carrying Amount Estimated Fair Value
--------------- --------------------
<S> <C> <C>
December 31, 1995 $2,047,818 $1,976,079
December 31, 1994 1,790,456 1,760,999
</TABLE>
NOTES PAYABLE -- Notes payable are carried at their unpaid balances which
approximate fair value because the interest rates on these notes approximate
market rates.
INCOME TAXES -- The Company files consolidated federal income tax returns with
SFG. Income taxes are provided on the basis as if the companies filed
separately.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Such differences are related principally to the deferral of policy
acquisition costs, the valuation of fixed maturities and the provision for
policyholder liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
SEPARATE ACCOUNTS -- The assets held in separate accounts represent funds which
are separately administered by the Company pursuant to variable annuity
contracts. The liabilities related to separate accounts consist of policyholder
liabilities for variable annuities. The separate account assets and liabilities
are reported at fair value. The Company receives a fee for administrative
services provided to the separate accounts. Investment risks associated with
fair value changes are borne by the contract holders.
34
<PAGE> 76
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ANNUITY REVENUES AND BENEFITS -- Annuity product income represents fees earned
from policyholders of annuity contracts, including surrender charges,
annuitization charges and administration fees. Benefits in excess of
policyholder liabilities consists of the difference between the policyholder
account values surrendered or annuitized during the period and the related
policyholder liability balances.
ESTIMATES -- Certain amounts reported in the accompanying consolidated financial
statements are based on management's best estimates and judgments. Actual
results could differ from those estimates.
NEW ACCOUNTING STANDARD -- In March 1995, the Financial Accounting Standards
Board (FASB) issued a new standard on accounting for long-lived assets which are
impaired or to be disposed of. The Company must adopt the standard by 1996. The
standard requires that an impaired long-lived asset be measured based on the
fair value of the asset to be held and used or the fair value less cost to sell
the asset to be disposed of. When adopted, this standard is not expected to have
a material effect on the financial position or results of operations of the
Company.
RECLASSIFICATIONS -- Certain reclassifications of prior-year amounts have been
made to conform with current-year classifications.
35
<PAGE> 77
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 2 -- STATUTORY CAPITAL AND RESTRICTIONS
Security First Life and each of its subsidiaries are required to file annual
statements with various state insurance regulatory authorities on a statutory
basis.
The statutory-basis capital and surplus at December 31, 1995, 1994 and 1993, and
statutory-basis net income (loss) for those years are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Net
and Surplus Income (Loss)
----------- -------------
<S> <C> <C>
December 31, 1995
Security First Life Insurance Company $ 100,027* $ 3,161*
Fidelity Standard Life Insurance Company 15,573* 831*
Security First Life Insurance Company of Arizona 12,715* 612*
December 31, 1994
Security First Life Insurance Company $ 99,272 $ 1,758
Fidelity Standard Life Insurance Company 14,894 409
Security First Life Insurance Company of Arizona 12,118 1,246
December 31, 1993
Security First Life Insurance Company $ 90,967 $ 5,057
Fidelity Standard Life Insurance Company 14,651 (160)
Security First Life Insurance Company of Arizona 10,890 1,358
</TABLE>
* These unaudited amounts are preliminary and subject to change
upon completion of the statutory annual statements.
The difference between statutory-basis net income (loss) and net income reported
based on GAAP relates primarily to different reserving methods used to calculate
policyholder liabilities, the recognition of deferred policy acquisition costs
and deferred income taxes.
Security First Life and Fidelity Standard Life are incorporated and domiciled in
Delaware. SFL-Arizona is incorporated and domiciled in Arizona. The payment of
dividends by Security First Life and each of its subsidiaries is subject to
statutory limitations which are based on each company's statutory-basis net
income and surplus levels. At December 31, 1995, the maximum amount of dividends
Security First Life could pay SFG without prior approval from state insurance
regulatory authorities is $9,762,000.
36
<PAGE> 78
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS
The Company adopted Statement of Financial Accounting Standards No. 115 (SFAS
No. 115), Accounting for Certain Investments in Debt and Equity Securities, as
of January 1, 1994. In accordance with SFAS No. 115, prior period financial
statements were not restated to reflect the change in accounting principle. The
cumulative effect as of January 1, 1994 of adopting SFAS No. 115 was an increase
in stockholder's equity of $28,618,000 -- net of related adjustments for
deferred policy acquisition costs of $62,166,000 which was recorded as an
adjustment to policyholder liabilities and deferred income taxes of $14,743,000
- -- to reflect the net unrealized gains on securities previously carried at
amortized cost. There was no effect on net income as a result of the adoption of
SFAS No. 115.
In November 1995, the FASB issued a Special Report, A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities. In accordance with provisions in that Special Report, the Company
chose to reclassify securities from held-for-investment to available-for-sale.
At the date of transfer, the amortized cost of those securities was $169,879,000
and the unrealized gain on those securities was $2,291,000, which is included in
stockholder's equity.
Unrealized investment gains and losses reported in the accompanying financial
statements are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
----------- ------------
<S> <C> <C>
Unrealized investment gains (losses) $ 104,593 $ (76,004)
Less: Adjustment for deferred policy acquisition costs 45,736 (43,719)
Deferred income taxes (benefit) 19,885 (10,724)
----------- -----------
Net unrealized investment gains (losses) $ 38,972 $ (21,561)
=========== ===========
</TABLE>
The adjustment for deferred policy acquisition costs of $43,719,000 in 1994 was
recorded as an adjustment to policyholder liabilities. Included in unrealized
investment gains (losses) are net losses related to equity securities of $58,000
and $230,000 at December 31, 1995 and 1994, respectively.
37
<PAGE> 79
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
The amortized cost and fair value of fixed maturities as of December 31, 1995
and 1994 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
December 31, 1995
Available-for-sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 131,672 $ 12,467 $ (153) $ 143,986
Debt securities issued by foreign
governments 16,779 1,687 18,466
Corporate securities 894,766 64,723 (5,194) 954,295
Mortgage-backed securities 1,029,090 33,049 (1,901) 1,060,238
----------- ----------- ----------- -----------
$ 2,072,307 $ 111,926 $ (7,248) $ 2,176,985
=========== =========== =========== ===========
December 31, 1994
Available-for-sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 114,207 $ 2,100 $ (4,649) $ 111,658
Debt securities issued by foreign
governments 21,916 334 (481) 21,769
Corporate securities 760,618 9,679 (39,496) 730,801
Mortgage-backed securities 781,296 6,735 (49,872) 738,159
----------- ----------- ----------- -----------
$ 1,678,037 $ 18,848 $ (94,498) $ 1,602,387
=========== =========== =========== ===========
Held-for-investment:
Mortgage-backed securities $ 197,379 $ 1,471 $ (13,215) $ 185,635
=========== =========== =========== ===========
</TABLE>
38
<PAGE> 80
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
The amortized cost and fair value of fixed maturities by contractual maturity at
December 31, 1995, are summarized below. Actual maturities will differ from
contractual maturities because certain borrowers have the right to call or
prepay obligations.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------- -------------
(In thousands)
<S> <C> <C>
Available-for-sale:
Due in one year or less $ 18,459 $ 18,666
Due after one year through five years 162,465 172,269
Due after five years through ten years 580,386 611,671
Due after ten years 281,907 314,142
Mortgage-backed securities 1,029,090 1,060,237
------------- -------------
$ 2,072,307 $ 2,176,985
============= =============
</TABLE>
Proceeds from sales of fixed maturities are $441,790,000 and $695,755,000 in
1995 and 1994, respectively.
The Company reports realized gains (losses) on investment transactions net of
any adjustment to the amortization of deferred policy acquisition costs when
such amortization is accelerated or decelerated as a result of the realization
of gains or losses other than as originally anticipated on the sale of
investments associated with annuity products. Net realized investment gains
(losses) reported in the accompanying financial statements are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -------
<S> <C> <C> <C>
Fixed maturities -- available-for-sale
Gross gains $ 6,181 $ 7,174
Gross losses (4,621) (6,328)
----------- -----------
1,560 846
Fixed maturities -- held-for-investment
Gross gains $ 14,755
Gross losses (2,634)
-----------
12,121
Loss on equity securities (213) (31)
Loss on real estate (2,250)
Accelerated amortization
of deferred policy acquisition costs (300) (11,200)
----------- ----------- ------------
Net realized investment gains (losses) $ 1,347 $ (1,735) $ 921
=========== =========== ===========
</TABLE>
39
<PAGE> 81
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
The Company has recorded a valuation reserve for possible other-than-temporary
impairment in the value of fixed maturities of $2,000,000 at December 31, 1995
and 1994.
Concentrations of credit risk with respect to fixed maturities are limited due
to the large number of issues owned and their dispersion across many different
industries and geographic areas. Accordingly, at December 31, 1995, the Company
had no significant concentration of credit risk.
The fair values for fixed maturities and equity securities are primarily based
on values obtained from independent pricing services.
The cost of equity securities was $5,214,000 and $6,177,000 on December 31, 1995
and 1994, respectively.
Investment real estate is net of accumulated depreciation of $1,596,000 and
$1,538,000 as of December 31, 1995 and 1994, respectively, and a $2,250,000
provision for decline in fair value at those dates.
The carrying amount of mortgage loans ($945,000 and $934,000 at December 31,
1995 and 1994, respectively) and policy loans ($17,853,000 and $15,305,000 at
December 31, 1995 and 1994, respectively) approximates fair value because the
interest rates on these loans approximate market rates.
The Company places its temporary cash investments with high-credit quality
financial institutions and, by corporate policy, limits the amount of credit
exposure to any one financial institution.
At December 31, 1995, investment securities having an amortized cost of
$10,561,000 were on deposit with various states in accordance with state
insurance department requirements.
40
<PAGE> 82
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
Investment income by major category of investment is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturities $ 159,266 $ 148,303 $ 139,404
Policy loans 884 749 620
Real estate 894 406 367
Mortgage loans 345 769 974
Short-term investments 1,943 114
Cash and cash equivalents 388 783 831
----------- ----------- -----------
163,720 151,124 142,196
Investment expenses (5,546) (5,023) (4,746)
------------ ----------- -----------
Net investment income $ 158,174 $ 146,101 $ 137,450
=========== =========== ===========
</TABLE>
The Company has no significant amounts of non-income producing investments.
NOTE 4 -- NOTES PAYABLE
Notes payable consist of the following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
5% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval $25,000 $25,000
8% Note due to The Capitol Life Insurance Company,
interest payable quarterly, principal payments of
$1,000,000 each paid annually on December 31 1,000 2,000
8% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval 10,000 10,000
------- -------
$36,000 $37,000
======= =======
</TABLE>
Security First Life has a $15,000,000 bank revolving credit line which bears
interest at a floating rate based on London Interbank Offered Rates. There were
no borrowings outstanding under this revolving credit line at December 31, 1995
and 1994. The $25,000,000 and $10,000,000 surplus notes payable to SFG are
pledged, along with the common and preferred stock of Security First Life, as
collateral for SFG's bank revolving credit line.
Principal payments due on the notes payable during the next five years are
$1,000,000 in 1996.
41
<PAGE> 83
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 4 -- NOTES PAYABLE (continued)
Interest paid by the Company totaled $2,225,000 in 1995, $1,799,000 in 1994 and
$343,000 in 1993.
NOTE 5 -- INCOME TAXES
The Company files a consolidated federal income tax return with SFG and its
subsidiaries. Taxes are provided for and paid to SFG as if the Company filed
separately.
The Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, effective January 1, 1993 and, as permitted under
the new rules, did not restate prior years' financial statements. The cumulative
effect of this change in accounting for income taxes as of January 1, 1993 of
$1,510,000 is reported separately in the consolidated statement of income for
the year ended December 31, 1993.
The liability for federal income taxes includes deferred taxes of $35,875,000
and $3,324,000 at December 31, 1995 and 1994, respectively. Significant
components of these deferred taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $ 32,937 $ 14,701
Fixed maturities 19,980
Other assets 301
Other, net 495 1,050
----------- -----------
Total deferred tax liabilities 53,412 16,052
Deferred tax assets:
Fixed maturities 8,654
Policyholder liabilities 13,384 1,674
Capital lease 765 628
Other liabilities 3,388 1,772
----------- -----------
Total deferred tax assets 17,537 12,728
----------- -----------
Net deferred tax liabilities $ 35,875 $ 3,324
=========== ===========
</TABLE>
Income taxes paid by the Company were $3,248,000 in 1995, $2,000,000 in 1994 and
$4,325,000 in 1993.
42
<PAGE> 84
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 5 -- INCOME TAXES (continued)
In 1995, the Company's income tax provision differs from the statutory rate of
34%. The following is a reconciliation of the federal income tax at statutory
rates with the income tax provision as shown in the consolidated statement of
income for the year ended December 31, 1995 (in thousands):
Federal income tax at 34% $ 7,356
Dividends received deduction (317)
True up of prior year taxes (875)
Other (15)
-------
Provision for income tax expense $ 6,149
=======
NOTE 6 -- CAPITAL LEASE
Security First Life has a lease for office space that expires in 2014. This
lease is treated as a capital lease for financial reporting purposes.
The Company subleases space on an annual basis to SFG to use as its home office.
Related income offset against the lease costs was $1,663,000, $1,649,000 and
$1,578,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Future payments under the lease are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 $ 2,166
1997 2,166
1998 2,166
1999 2,166
2000 2,166
Thereafter 29,051
--------
Total minimum rental payments 39,881
Amount representing interest (23,915)
--------
Present value of minimum rental payments $ 15,966
========
</TABLE>
The property under capital lease is net of accumulated amortization of
$6,717,000 in 1995 and $6,137,000 in 1994.
43
<PAGE> 85
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 7 -- COMMITMENTS, CONTINGENCIES AND RISKS
The Company has forward contracts with commitments to purchase mortgage-backed
securities with total par values of $25,500,000 at December 31, 1995. The
Company uses these contracts to hedge the interest rate risk on future
investments that match policyholder liabilities, primarily related to
guaranteed-rate products. Gains or losses realized on such contracts are
included in the carrying value of the underlying anticipated investment. The
Company is subject to the risk that the counterparties to such contracts would
fail to deliver the securities to the Company on settlement date, if the Company
were to hold the contract on that date. The Company's current cash balances and
expected future cash flows are sufficient to settle the commitments under these
forward contracts.
Included in the accompanying balance sheet are assets of $6,000,000 at December
31, 1995 related to The Capitol Life Insurance Company (CLICO) and its parent.
CLICO is currently operating under supervision by the Colorado Division of
Insurance. The Company anticipates that CLICO will continue as an ongoing
enterprise. However, there can be no certainty that this will occur.
NOTE 8 -- RELATED PARTY TRANSACTIONS
The Company has marketing and administrative agreements with SFG and previously
with its subsidiary, Holden Financial Company, under which these companies
provide all of the Company's marketing and policyholder administration services.
Amounts incurred under these agreements were $38,954,000, $31,183,000 and
$26,026,000 for 1995, 1994 and 1993, respectively.
The Company has management agreements with SFG under which the latter provides
certain personnel, administrative services and office space. Amounts incurred
under these agreements were $4,308,000 in 1995 and 1994 and $4,248,000 in 1993.
The Company has investment advisory agreements with Security First Investment
Management Corporation, a subsidiary of SFG. Fees of $4,756,000, $4,508,000 and
$4,067,000 were paid in 1995, 1994 and 1993, respectively, pursuant to these
agreements.
44
<PAGE> 86
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements contained herein
(1) Security First Life Separate Account A
Part A - Condensed Financial Information
Part B - Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets,
Statement of Investments
(2) Security First Life Insurance Company
Part B - Depositor's financial statements with notes
(b) Exhibits
(10) Consent of Independent Auditors - herewith
(13) Organizational Chart - herewith
(27) Financial Data Schedule - herewith
All previously filed Exhibits to Security First Life Separate Account A
registration statement and all post-effective amendments thereto are
specifically incorporated herein by reference.
Item 25. Directors and Officers of the Depositor
The officers and directors of Security First Life Insurance Company are listed
below. Their principal business address is 11365 West Olympic Boulevard, Los
Angeles, California 90064.
<TABLE>
<CAPTION>
Name Position and Offices with Depositor
- ---- -----------------------------------
<S> <C>
R. Brock Armstrong Chairman of the Board and Director
Gordon R. Cunningham Director
Frank E. Farella Director
Melvin M. Hawkrigg Director
General P.X. Kelley Director
Robert G. Mepham Director, President and Chief Executive Officer
Richard C. Pearson Director, Senior Vice President, General Counsel
and Secretary
Howard H. Kayton Executive Vice President and Chief Actuary
Robert D. Badun Senior Vice President, Investments
Jane F. Eagle Senior Vice President, Finance
Peter R. Jones Senior Vice President, Public Services
Cheryl M. MacGregor Senior Vice President, Administration
Alex H. Masson Senior Vice President, Information Systems
Michael R. McCoy Senior Vice President, Banking
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
<S> <C>
Robert L. Pina Senior Vice President, Human Resources
George R. Bateman Vice President, Public Employees Services
James C. Turner Vice President, Taxation
George J. Olah Treasurer
</TABLE>
Item 26. Persons Controlled by or under Common Control with Depositor of
Registrant
The Registrant is a Separate Account of Security First Life Insurance Company
("depositor"). For a complete listing and diagram of all persons directly or
indirectly controlled by or under common control with the depositor, see Exhibit
13.
Item 27. Number of Contractowners
As of December 31, 1995 there were 14,413 owners of the Contracts which are the
subject of this post-effective amendment.
Item 28. Indemnification
None
Item 29. Principal Underwriters
Security First Financial, Inc., the principal underwriter for Security First
Life Separate Account A, also acts as principal underwriter for Fidelity
Standard Life Separate Account.
The following are the directors and officers of Security First Financial, Inc.
Their principal business address is 11365 West Olympic Boulevard, Los Angeles,
California 90064.
<TABLE>
<CAPTION>
Name Position with Underwriter
- -------------------- -------------------------
<S> <C>
Robert Grant Mepham Director and Chairman of the Board
Richard Carl Pearson Director, President, General Counsel and Secretary
Jane Frances Eagle Director, Senior Vice President, Finance and
Treasurer
Howard H. Kayton Senior Vice President and Chief Actuary
James Cyrus Turner Vice President, Taxation and Assistant Secretary
</TABLE>
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Name of Principal Discount and Redemption or Brokerage
Underwriter Commissions* Annuitization Commission Compensation
- ----------------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Security First None None None None
Financial, Inc.
</TABLE>
*Fee paid by Security First Life Insurance Company for serving as underwriter.
<PAGE> 88
Item 30. Location of Accounts and Records
Security First Financial, Inc., underwriter for the registrant, is located at
11365 West Olympic Boulevard, Los Angeles, California 90064. It maintains those
accounts and records required to be maintained by it pursuant to Section 31(a)
of the Investment Company Act of 1940 and the rules promulgated thereunder.
Security First Life Insurance Company, the depositor for the registrant, is
located at 11365 West Olympic Boulevard, Los Angeles, California 90064. It
maintains those accounts and records required to be maintained by it pursuant to
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder and as custodian of the Registrant.
Security First Group, Inc. performs substantially all of the recordkeeping and
administrative services in connection with the Registrant. Security First Group,
Inc. is located at 11365 West Olympic Boulevard, Los Angeles, California 90064.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
<PAGE> 89
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of the Securities
Act Rule 485(b) for effectiveness of this Registration Statement and has duly
caused this amended Registration Statement to be signed on its behalf in the
City of Los Angeles and State of California on this 26th day of April 1996.
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(Registrant)
By SECURITY FIRST LIFE INSURANCE COMPANY
(Sponsor)
By /s/ Robert G. Mepham
-------------------------------------
Robert G. Mepham, President
As required by the Securities Act of 1933, this amended Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert G. Mepham
- ---------------------- President, Director April 26, 1996
Robert G. Mepham
/s/ Jane F. Eagle
- ---------------------- Principal Financial and April 26, 1996
Jane F. Eagle Accounting Officer
R. Brock Armstrong* Chairman, Director April 26, 1996
- ----------------------
R. Brock Armstrong
Gordon R. Cunningham* Director April 26, 1996
- ----------------------
Gordon R. Cunningham
Melvin M. Hawkrigg* Director April 26, 1996
- ----------------------
Melvin M. Hawkrigg
Paul X. Kelley* Director April 26, 1996
- ----------------------
Paul X. Kelley
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Frank E. Farella* Director April 26, 1996
- ----------------------
Frank E. Farella
/s/ Richard C. Pearson
- ---------------------- Director April 26, 1996
Richard C. Pearson
/s/ Richard C. Pearson
- ---------------------- April 26, 1996
*(Richard C. Pearson as
Attorney-in-Fact for each
of the persons indicated)
</TABLE>
<PAGE> 1
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Independent Auditors" and to the use of our report on
Security First Life Separate Account A dated April 5, 1996 and our report on
Security First Life Insurance Company dated February 9, 1996 in the
Registration Statement (Form N-4 Post-Effective Amendment No. 5 under the
Securities Act of 1933 and No. 76 under the Investment Company Act of 1940)
contained in the Statement of Additional Information.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Los Angeles, California
April 26, 1996
<PAGE> 1
EXHIBIT 13
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------
Trilon Financial Corporation
(Canada)
------------------------------
------------------------------
London Insurance Group, Inc.
(Canada)
------------------------------
---------------------------- ----------------------------
London Life Security First Group, Inc.
Insurance Company
(Canada) 95-3947585
---------------------------- ----------------------------
----------------- -------------- --------------- -------------- -------------- ------------------- -------------- -----------------
Security First Security First Security First Security First Security First
Insurance Agency, Group of Ohio, Security First Life Insurance Investment Insurance Agency, Security First Security First
(Nevada) Inc. Financial, Inc. Company Management Inc. Management Real Estate, Inc.
Corporation (Massachusetts) Corporation
88-0272002 34-1737227 95-2869421 DE 61050 95-2844896 95-3476150 95-4087137 95-4087153
----------------- -------------- --------------- 54-0696644 --------------- ------------------- ------------- -----------------
--------------
----------------- -------------------
Fidelity Standard Security First Life
Life Insurance Insurance
Company Company
of Arizona
DE 93246 AZ 89010
51-0258372 86-0676035
----------------- -------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The accompanying notes are an integral part of these financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 6,524,502
<INVESTMENTS-AT-VALUE> 6,530,291
<RECEIVABLES> 7,703
<ASSETS-OTHER> 14,473
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,552,467
<PAYABLE-FOR-SECURITIES> 22,109
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,973
<TOTAL-LIABILITIES> 28,082
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 448,236
<SHARES-COMMON-PRIOR> 392,775
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,789
<NET-ASSETS> 6,524,385
<DIVIDEND-INCOME> 371,424
<INTEREST-INCOME> 0
<OTHER-INCOME> 1,744
<EXPENSES-NET> 56,396
<NET-INVESTMENT-INCOME> 316,772
<REALIZED-GAINS-CURRENT> (36,646)
<APPREC-INCREASE-CURRENT> 560,723
<NET-CHANGE-FROM-OPS> 841,449
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,951
<NUMBER-OF-SHARES-REDEEMED> 47,490
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,418,905
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 56,396
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The accompanying notes are an integral part of these financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> G
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 58,200,522
<INVESTMENTS-AT-VALUE> 70,635,406
<RECEIVABLES> 60,695
<ASSETS-OTHER> 8,944
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,705,045
<PAYABLE-FOR-SECURITIES> 65,348
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,391
<TOTAL-LIABILITIES> 125,739
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,745,585
<SHARES-COMMON-PRIOR> 2,315,800
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,434,884
<NET-ASSETS> 70,579,306
<DIVIDEND-INCOME> 2,047,981
<INTEREST-INCOME> 0
<OTHER-INCOME> 22,216
<EXPENSES-NET> 555,472
<NET-INVESTMENT-INCOME> 1,514,725
<REALIZED-GAINS-CURRENT> 1,021,117
<APPREC-INCREASE-CURRENT> 12,817,755
<NET-CHANGE-FROM-OPS> 15,353,597
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 715,876
<NUMBER-OF-SHARES-REDEEMED> 286,100
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,841,259
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 555,472
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The accompanying notes are an integral part of these financial statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> T
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 38,474,288
<INVESTMENTS-AT-VALUE> 43,549,662
<RECEIVABLES> 31,863
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,581,525
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,224
<TOTAL-LIABILITIES> 48,224
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,430,263
<SHARES-COMMON-PRIOR> 1,254,282
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,075,374
<NET-ASSETS> 43,533,301
<DIVIDEND-INCOME> 2,127,559
<INTEREST-INCOME> 0
<OTHER-INCOME> 2,422
<EXPENSES-NET> 322,986
<NET-INVESTMENT-INCOME> 1,806,995
<REALIZED-GAINS-CURRENT> 764,380
<APPREC-INCREASE-CURRENT> 6,849,189
<NET-CHANGE-FROM-OPS> 9,420,564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 347,286
<NUMBER-OF-SHARES-REDEEMED> 171,305
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,134,350
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 322,986
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The accompanying notes are an integral part of these financial statements.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> P
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,625,979
<INVESTMENTS-AT-VALUE> 2,625,979
<RECEIVABLES> 535
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,626,523
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,238
<TOTAL-LIABILITIES> 3,238
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 202,251
<SHARES-COMMON-PRIOR> 209,807
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,623,285
<DIVIDEND-INCOME> 143,086
<INTEREST-INCOME> 0
<OTHER-INCOME> 800
<EXPENSES-NET> 23,948
<NET-INVESTMENT-INCOME> 119,938
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 119,938
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,176
<NUMBER-OF-SHARES-REDEEMED> 57,732
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,311
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,948
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The accompanying notes are an integral part of these financial statements.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> FM
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 8,395,157
<INVESTMENTS-AT-VALUE> 8,395,157
<RECEIVABLES> 56,584
<ASSETS-OTHER> 59
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,451,800
<PAYABLE-FOR-SECURITIES> 54,732
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,695
<TOTAL-LIABILITIES> 64,427
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,550,143
<SHARES-COMMON-PRIOR> 749,809
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,387,373
<DIVIDEND-INCOME> 339,310
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 102,026
<NET-INVESTMENT-INCOME> 237,284
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 237,284
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,346,919
<NUMBER-OF-SHARES-REDEEMED> 546,585
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,513,428
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 102,026
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
