<PAGE> 1
PURSUANT TO RULE 497(c)
SECURITY FIRST LIFE SEPARATE ACCOUNT A
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GROUP FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
Security First Life Insurance Company
11365 West Olympic Boulevard
Los Angeles, California 90064
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The group flexible payment fixed and variable contracts (the "Contracts")
described in this prospectus are issued by Security First Life Insurance Company
("Security First Life"). These Contracts are designed to provide annuity
benefits to employees of public school systems and certain tax-exempt
organizations as tax deferred annuity contracts under the provisions of Section
403(b) of the Internal Revenue Code (the "Code"), to retirement plans that
qualify under Section 401 of the Code, to employees covered under employer
deferred compensation plans which are qualified under Section 457 of the Code,
and to individuals as individual retirement annuities.
Participants may allocate premiums and cash value to one or more of eleven
series of the Separate Account (the "Series"). The assets of the Series will be
used to purchase, at net asset value, shares of (i) the Money Market Portfolio,
Growth Portfolio and Overseas Portfolio of the Variable Insurance Products Fund;
(ii) the Asset Manager Portfolio, Contrafund Portfolio and Index 500 Portfolio
of the Variable Insurance Products Fund II; (iii) the T. Rowe Price Bond Series
(formerly the Bond Series) and T. Rowe Price Growth and Income Series (formerly
the Growth and Income Series) of the Security First Trust; (iv) the
International Portfolio of the Scudder Variable Life Investment Fund; (v) the
Small Capitalization Portfolio of The Alger American Fund; and (vi) the T. Rowe
Price Growth Stock Fund (available only for plans that qualify under Sections
401 or 457 of the Code) [herein referred to as "The Funds"]. The prospectuses
for the Funds describe their investment objectives.
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 ("SEC") 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(800)283-4536.
The table of contents of the Statement of Additional Information appears on Page
25 of this Prospectus.
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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. THIS PROSPECTUS AND THE PROSPECTUS FOR THE UNDERLYING
FUND(S) SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Prospectus dated May 1, 1996 SF 226RI (228) (5/96)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Glossary....................................................................................... 3
Summary of the Contract........................................................................ 4
Fee Tables..................................................................................... 7
Explanation of Fee Tables and Examples..................................................... 8
Condensed Financial Information................................................................ 10
Performance Information........................................................................ 11
Financial Information.......................................................................... 11
Description of Security First Life Insurance Company,
the Separate Account and the Funds........................................................... 11
The Insurance Company...................................................................... 11
The General Account........................................................................ 11
The Separate Account....................................................................... 11
The Funds.................................................................................. 12
Principal Underwriter.......................................................................... 13
Servicing Agent................................................................................ 14
Custody of Securities.......................................................................... 14
Contract Charges............................................................................... 14
Premium Taxes.............................................................................. 14
Sales Charges.............................................................................. 14
Administrative Fees........................................................................ 15
Transaction Charges........................................................................ 15
Mortality and Administrative Expense Risk Charge........................................... 15
Distribution Expense Charge (Sales Load)................................................... 15
20-Day Free Look........................................................................... 16
Deferred Compensation Plans................................................................ 16
Description of the Contracts................................................................... 16
General.................................................................................... 16
Purchase Payments.......................................................................... 16
Conversions................................................................................ 16
Loans (Section 403(b) Plans Only).......................................................... 17
Modification of the Contracts.............................................................. 17
Assignment................................................................................. 17
Accumulation Period............................................................................ 18
Crediting Accumulation Units in the Separate Account....................................... 18
Valuation of Accumulation Units............................................................ 18
Net Investment Factor...................................................................... 18
Surrenders................................................................................. 18
Statement of Account....................................................................... 18
Annuity Benefits............................................................................... 19
Variable Annuity Payments.................................................................. 19
Level Payments Varying Annually............................................................ 19
Assumed Investment Return.................................................................. 19
Election of Annuity Date and Form of Annuity............................................... 20
Frequency of Payment....................................................................... 20
Annuity Unit Values........................................................................ 21
Death Benefits................................................................................. 21
Death Benefit Before the Annuity Date...................................................... 21
Death Benefit After the Annuity Date....................................................... 21
Federal Income Tax Status...................................................................... 22
Withholding................................................................................ 23
Multiple Contracts......................................................................... 23
Obtaining Tax Advice....................................................................... 23
Voting Rights.................................................................................. 23
Legal Proceedings.............................................................................. 24
Additional Information......................................................................... 24
Table of Contents of Statement of Additional Information....................................... 24
</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> 3
GLOSSARY
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 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 a defined
period of time.
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 after such payments have
commenced.
ASSUMED INVESTMENT RETURN -- The investment rate selected by the Annuitant for
use in determining the Variable Annuity payments.
BENEFICIARY -- The person who has the right to receive a Death Benefit on the
death of the Participant.
BUSINESS DAY -- Each Monday through Friday except for days the New York Stock
Exchange is not open for trading.
CERTIFICATE -- The form given to Participants describing their rights under a
Contract. No Certificates are issued to Participants under certain deferred
compensation or qualified retirement plans.
CERTIFICATE DATE -- The date a Participant's Certificate is issued, or the date
when a Participant's Account is established where no Certificate is issued.
CERTIFICATE YEAR -- A period of 12 consecutive months beginning on the
Certificate Date and each anniversary of that date.
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 -- An open end management investment company, or series thereof, registered
under the Investment Company Act of 1940 ("1940 Act"), which serves as the
underlying investment medium for a Series of the Separate Account.
GENERAL ACCOUNT -- All assets of Security First Life other than those in the
Separate Account or any of its other segregated asset accounts.
NORMAL ANNUITY DATE -- The earlier of (i) the first day of the month coincident
with or immediately preceding the date on which a distribution must commence
under the terms of the Plan to which the Contract is issued, or (ii) the first
day of the month coincident with or next following the anniversary of the
Certificate Date nearest the Participant's 75th birthday.
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 the values of all Accumulated Units credited
for a Participant under a Contract.
PLAN -- The 403(b) plan, deferred compensation plan, qualified retirement plan
or individual retirement annuity with respect to which the Contract is issued.
PURCHASE PAYMENT -- The amounts paid to Security First Life in order to provide
Annuity benefits under the Contract.
SEPARATE ACCOUNT -- The segregated asset account entitled "Security First Life
Separate Account A" which has been established by Security First Life pursuant
to Delaware law to receive and invest amounts allocated to provide Variable
Annuity benefits under the Contracts. The Separate Account is registered as a
unit investment trust under the 1940 Act.
3
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SERIES -- A division of the Separate Account, the assets of which consist of
shares of a Fund, or an accounting series maintained for Security First Life's
General Account to determine values used to provide Fixed Annuity accumulation
under the Contracts.
SURRENDER CHARGE -- A percentage charge, deducted upon full or partial
surrender, which varies according to the period of time that Purchase Payments
have remained with Security First Life prior to surrender.
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 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 annually in
accordance with the net investment experience of the applicable Separate Account
Series.
SUMMARY OF THE CONTRACT
THE CONTRACT
The Contract is a combined fixed and variable annuity contract which may be
issued to plans qualified for special tax treatment under Section 403(b) of the
Code (tax shelter annuities), retirement plans which qualify under Section 401
of the Code, deferred compensation plans under Section 457 of the Code and
individual retirement annuities under Section 408 of the Code. This prospectus
is intended to serve as a disclosure document only for the variable portion of
the Contract.
PURCHASE PAYMENTS
Purchase Payments under the Contract may be made to the General Account, the
Separate Account or allocated between them in accordance with the election of
the Participant. The minimum Purchase Payment is $20 with an annual minimum of
$240. There is no initial sales charge, however, certain charges and deductions
will be made to the Participant's Account. (See "Contract Charges," page 14.)
Amounts allocated to a Series of the Separate Account may be converted to one or
more of the other Separate Account Series at any time and may be transferred to
the General Account at any time before the Annuity Date. Amounts allocated to
the General Account may be transferred to the Separate Account subject to
certain limitations as to time and amount. (See "Conversions," page 16.) The
minimum conversion amount is the lesser of $500 or the balance of the
Participant's Account in the Series.
SEPARATE ACCOUNT
Pursuant to the Participant's designation, Purchase Payments allocated to
the Separate Account are invested at net asset value in Accumulation Units of
one or more of eleven series, each of which consists of the shares of a
different Fund. The Funds consist of the Money Market Portfolio, Growth
Portfolio and Overseas Portfolio of the Variable Insurance Products Fund, the
Asset Manager Portfolio, Contrafund Portfolio and Index 500 Portfolio of the
Variable Insurance Products Fund II, the T. Rowe Price Bond Series and T. Rowe
Price Growth and Income Series of the Security First Trust, the International
Portfolio of the Scudder Variable Life Investment Fund, the Small Capitalization
Portfolio of The Alger American Fund, and the T. Rowe Price Growth Stock Fund
(available only for plans which qualify under Sections 401 or 457 of the Code).
The investment adviser of the Variable Insurance Products Fund and the Variable
Insurance Products Fund II is Fidelity Management & Research Company ("FMR").
The investment adviser and manager of Security First Trust is Security First
Investment Management Corporation ("Security Management"). T. Rowe Price
Associates, Inc., ("Price Associates") is subadvisor to Security Management with
respect to the above described series of Security First Trust. The investment
adviser and manager of the Scudder Variable Life Investments Fund is Scudder,
Stevens & Clark, Inc. ("Scudder"). The investment adviser and manager of The
Alger American Fund is Fred Alger Management, Inc. ("Alger Management"). Price
Associates is the investment adviser of the T. Rowe Price Growth Stock Fund.
(See "The Separate Account," page 11 and "The Funds," page 12.)
4
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CHARGES AND DEDUCTIONS
The Contract permits Security First Life to deduct a maximum administrative
fee of $21.50 plus $2.50 for each Series in which the Participant invests. The
fee is payable on each anniversary of the Certificate Date. (See "Administrative
Fees," page 15.) Effective as of March 8, 1993, the administrative fee will be
waived for any policy year during which the participant contributes purchase
payments of $2,000 or more or has an aggregate account value at the end of the
policy year of $10,000 or more.
A transaction charge of $10 will be deducted from the Participant's Account
for each conversion from a Separate Account Series or between the Separate
Account and the General Account and upon annuitization of all or a portion of
the Participant's Account. In addition, a transaction charge of the lesser of
$10 or 2% of the amount withdrawn will be deducted from the Participant's
Account upon each partial or full surrender. Effective as of March 8, 1993,
transaction charges for conversions from one series of the Separate Account to
another series of the Separate Account will be waived. (See "Transaction
Charges," page 15.)
Daily deductions will be made for mortality risks in the amount of .002192%
(.80% per annum), for expense risks in the amount of .001233% (.45% per annum)
and for distribution expenses (sales load) in the amount of .000274% (.10% per
annum).
A surrender charge (contingent deferred sales charge) may be deducted in the
event the Participant requests a full or partial surrender from the Separate
Account. The charge is based on a percentage of the amount surrendered. The
surrender charge amounts to 7% for amounts attributable to Purchase Payments
received within 60 months prior to the date of the surrender. (See "Sales
Charges," page 14.)
In contracts issued to Participants in Section 403(b) plans, the Company
will not deduct any percentage surrender charge after nine full calendar years
have elapsed since the Participant's Certificate Date. Further, in the first
surrender in each calendar year, a Participant in a Section 403(b) plan may
surrender up to 10% of the value of the Participant's interest in the Separate
Account without deduction of a percentage surrender charge.
Premium taxes payable to any state or other governmental agency may be
deducted from the Participant's Account on or after the time the tax is payable
by Security First Life. Premium taxes currently range from 0% to 2.35% (except
Nevada where it is 3.5%). In states where a premium tax is imposed, rates may be
lower for tax qualified contracts. Until further notice to the Participant,
Security First Life will waive deduction of premium taxes. (See "Premium Taxes,"
page 14.)
Security First Life may reduce or waive administrative fees, transaction
charges and the distribution expense fee on Contracts issued to deferred
compensation plans qualifying under Code Section 457. In addition sales charges
may be waived on certain surrenders by such plans. (See "Deferred Compensation
Plans," page 16.)
FREE LOOK PERIOD
At any time within twenty days (or such longer period as required by state
law) after the receipt of the Contract it may be returned for cancellation and a
full refund of all Purchase Payments or, if required by state law, the greater
of the Purchase Payments or the account value. (See "Free Look Period," page
16).
VARIABLE ANNUITY PAYMENTS
Annuity payments will start on the Annuity Date. The Participant selects the
Annuity Date, an Annuity payment option, and an Assumed Investment Return. Any
of these selections may be changed prior to the Annuity Date. The Variable
Annuity payment will vary annually based on a comparison of the Assumed
Investment Returns with the investment experience of the Series in which the
Annuity Units are invested. (See "Variable Annuity Payments," page 19.) If
Annuity payments from any one Series would be less than $50, Security First Life
reserves the right to change the frequency of the payments from that Series to
such intervals as will result in payments of at least $50 from each Series. (See
"Frequency of Payment," page 21.)
SURRENDERS
If permitted by the Plan, a Participant may surrender all or part of his or
her account before the Annuity Date. Requests for partial or full surrenders
must be made in writing. However, no partial surrender from a Series is
permitted if it would reduce the Participant's interest in the Series to less
than $200, unless the entire amount allocated to that Series is being
surrendered. A surrender charge may be assessed and a transaction charge will be
assessed. (See "Sales Charges," page 14 and "Transaction Charges," page 15.) In
addition, the amounts surrendered, less any basis,
5
<PAGE> 6
will be taxed as ordinary income and may be subject to a penalty tax under the
Code. Certain restrictions are applicable to withdrawals from Contracts funding
retirement plans qualified for special tax treatment under the Code. (See
"Federal Income Tax Status," page 22.)
LOANS (SECTION 403(B) PLANS ONLY)
Participants whose Contracts are issued under a Plan that qualifies under
Section 403(b) of the Code may be entitled to obtain a loan from that portion of
the Participant's Account allocated to the General Account. Security First Life
reserves the right to terminate loans and to change the terms under which loans
may be made. Any such action would not affect outstanding loans. (See "Loans,"
page 17.) Loan proceeds may be considered a "distribution" for tax purposes.
(See "Federal Income Tax Status," page 22.)
DEATH BENEFIT
Unless otherwise restricted by the Plan, in the event of the Participant's
death prior to the Annuity Date, the Beneficiary may elect either to receive
death benefits in a lump sum or to apply the Annuity Value under any of the
available Annuity options contained in the Contract. If a Participant who has
not attained age 65 dies before the Annuity Date, the amount of any lump sum
settlement will be the greater of the value of the Participant's Account or the
total of the Participant's Purchase Payments, less any Purchase Payments
previously withdrawn as partial surrenders or applied to annuity options. (See
"Death Benefits," page 21.)
6
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FEE TABLES
PARTICIPANT TRANSACTION EXPENSES
Surrenders prior to the expiration of nine full calendar years following the
Certificate Date will be subject to a Surrender Charge (contingent deferred
sales charge) indicated in the following table.
<TABLE>
<CAPTION>
Elapsed Months
Between Purchase
Payment Date and Surrender
Surrender Date Charge
----------------------- ---------
<S> <C> <C>
(a) Contingent Deferred Sales Charge (as a 60 or less 7%
percentage of amount surrendered) More than 60 0%
(b) Transaction Charge $10 for each surrender
or annuitization
(c) Administrative Charges $21.50 plus $2.50 for
each Series to which
Participant's Account
is allocated (Maximum
$41.50 per year)
(d) Conversion Charge $10 per conversion to
convert Accumulation or
Annuity Units from any
one Series to another
</TABLE>
SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE.
DEDUCTED DAILY FROM THE SEPARATE ACCOUNT.)
Mortality Risk Charge 0.80% per annum
Expense Risk Charge 0.45% per annum
Distribution Expense Charge(1) 0.10% per annum
Total Separate Account 1.35% per annum
FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Money Asset Index
Market Growth Overseas Manager Contrafund 500
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ---------- ------------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
(a) Management Fee................ 0.24% 0.61% 0.76% 0.71% 0.61% 0.09%
(b) Other Expenses................ 0.09% 0.09% 0.15% 0.08% 0.11% 0.19%
(c) Total Annual Expenses......... 0.33% 0.70% 0.91% 0.79% 0.72% 0.28%
</TABLE>
<TABLE>
<CAPTION>
T. Rowe
T. Rowe Price
Price Growth and Small
Bond Income International Capitalization Growth
Series Series Portfolio Portfolio Stock Fund
---------- ----------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
(a) Management Fee........... 0.50% 0.50% 0.88% 0.85% 0.59%
(b) Other Expenses........... 0.79% 0.24% 0.20% 0.07% 0.21%
(c) Total Annual Expenses.... 1.29% 0.74% 1.08% 0.92% 0.80%
</TABLE>
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(1) This charge may be deemed a deferred sales charge.
7
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EXAMPLES
<TABLE>
<CAPTION>
CONDITIONS
SEPARATE A PARTICIPANT WOULD PAY THE FOLLOWING EXPENSES ON TIME PERIODS
ACCOUNT A $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>
Money Market (a) upon surrender at the end of the stated time (a) $ 99 $ 139 $ 182 $205
Portfolio period
(b) if the Certificate WAS NOT surrendered (b) 17 52 90 195
- ------------- ------------------------------------------------- ------ ------- ------- --------
Growth SAME (a) 103 150 200 244
Portfolio
Series
(b) 21 63 109 234
- ------------- ------------------------------------------------- ------ ------- ------- --------
Overseas SAME (a) 105 156 209 266
Portfolio
(b) 23 70 119 256
- ------------- ------------------------------------------------- ------ ------- ------- --------
Asset SAME (a) 103 152 204 254
Manager
Portfolio
Series
(b) 21 66 113 244
- ------------- ------------------------------------------------- ------ ------- ------- --------
Contrafund SAME (a) 103 150 201 247
Portfolio
(b) 21 64 110 237
- ------------- ------------------------------------------------- ------ ------- ------- --------
Index 500 SAME (a) 99 138 180 200
Portfolio
Series
(b) 16 51 87 190
- ------------- ------------------------------------------------- ------ ------- ------- --------
T. Rowe Price SAME (a) 108 166 227 304
Bond
Series
(b) 26 81 138 294
- ------------- ------------------------------------------------- ------ ------- ------- --------
T. Rowe Price SAME (a) 103 151 202 249
Growth &
Income Series
(b) 21 65 111 239
- ------------- ------------------------------------------------- ------ ------- ------- --------
International SAME (a) 106 160 217 283
Portfolio
(b) 24 75 128 273
- ------------- ------------------------------------------------- ------ ------- ------- --------
Small SAME (a) 105 156 210 267
Capitalization
Portfolio
(b) 23 70 120 257
- ------------- ------------------------------------------------- ------ ------- ------- --------
Growth SAME (a) 103 153 204 255
Stock Fund
(b) 22 66 114 245
- ------------- ------------------------------------------------- ------ ------- ------- --------
</TABLE>
8
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EXPLANATION OF FEE TABLES AND EXAMPLES
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 14.
2. Amounts surrendered are attributed to Purchase Payments made (and interest
thereon) on a first-in, first-out basis.
3. The investment advisers to the Index 500 Portfolio voluntarily reimbursed
certain expenses of the Portfolio. If there had been no reimbursement, total
expenses would have been 0.81% (see the Variable Insurance Products Fund II
prospectus for more information).
4. The examples reflect a $10 transaction charge for full surrender (see
"Transaction Charges", page 15). Premium taxes are not reflected in the
examples. Presently, premium taxes ranging from 0% to 2.35% (3.5% in Nevada)
may be deducted from a Participant's Account on or after the time the tax is
payable by Security First Life. Until further notice, Security First Life
currently absorbs these charges.
5. NEITHER THE TABLE NOR THE EXAMPLES ARE REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
9
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CONDENSED FINANCIAL INFORMATION
The following table sets forth condensed financial information on
accumulation units respecting Contracts issued under this prospectus through the
Separate Account. This information is derived from the financial statements of
the Separate Account which have been audited by Ernst & Young LLP, the Separate
Account's independent auditors. No Accumulation Units for Series T (Growth Stock
Fund) had been issued as of December 31, 1995. 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>
Twelve Months Five Months Twelve Months Twelve Months
Period Ended Ended Ended Ended Ended
7/31/92 7/31/93 12/31/93 12/31/94 12/31/95
------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Series B (T. Rowe Price Bond
Series)
Beg. AUV $ (11/27/91)........... 5.00 5.34 7.66 7.78 7.42
End. AUV $...................... 5.34 7.66 7.78 7.42 8.55
End. No. Non-Qualified AUs...... 36 19 33
End. No. Qualified AUs.......... 4,339 16,762 25,717 42,525 64,141
Series G (T. Rowe Price Growth and
Income Series)
Beg. AUV $ (10/22/91)........... 5.00 5.63 8.27 8.70 8.85
End. AUV $...................... 5.63 8.27 8.70 8.85 11.46
End. No. Non-Qualified AUs...... 3 17 108
End. No. Qualified AUs.......... 43,927 133,858 183,603 328,780 567,174
Series FA (Asset Manager
Portfolio)
Beg. AUV $ (5/13/93)............ 5.00 5.15 5.62 5.21
End. AUV $...................... 5.15 5.62 5.21 6.02
End. No. Non-Qualified AUs...... 22,279 36,999
End. No. Qualified AUs.......... 38,782 258,061 2,494,047 4,145,919
Series FG (Growth Portfolio)
Beg. AUV $ (5/24/93)............ 5.00 5.06 5.40 5.33
End. AUV $...................... 5.06 5.40 5.33 7.13
End. No. Non-Qualified AUs...... 7,202 8,786
End. No. Qualified AUs.......... 5,573 110,644 1,195,256 2,750,127
Series FI (Index 500 Portfolio)
Beg. AUV $ (6/30/93)............ 5.00 4.97 5.20 5.19
End. AUV $...................... 4.97 5.20 5.19 7.04
End. No. Non-Qualified AUs...... -- -- -- 169
End. No. Qualified AUs.......... 5.93 13,988 82,152 416,388
Series FM (Money Market Portfolio)
Beg. AUV $ (11/12/93)........... 5.00 5.01 5.16
End. AUV $...................... 5.01 5.16 5.40
End. No. Non-Qualified AUs...... 9,114 6,823
End. No. Qualified AUs.......... 2,080 58,578 233,160
Yield........................... 1.95% 4.45% 3.95%
Series FO (Overseas Portfolio)
Beg. AUV $ (11/17/94)........... 5.33 5.67
End. AUV $...................... 5.67 6.14
End. No. Qualified AUs.......... 114 1,721
Series FC (Contrafund Portfolio)
Beg. AUV $ (5/16/95)............ 5.00
End. AUV $...................... 6.29
End. No. Non-Qualified AUs...... 149
End. No. Qualified AUs.......... 691,504
Series SI (International
Portfolio)
Beg. AUV $ (5/22/95)............ 5.00
End. AUV $...................... 5.84
End. No. Qualified AUs.......... 691,505
Series AS (Small Capitalization
Portfolio)
Beg. AUV $ (5/22/95)............ 5.00
End. AUV $...................... 6.54
End. No. Non-Qualified AUs...... 858
End. No. Qualified AUs.......... 457,442
- --------------------------------------------------------------------------------------------------------------
AUV -- Accumulation Unit Value
AUs -- Accumulation Units
</TABLE>
10
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PERFORMANCE INFORMATION
Security First Life may, from time to time, advertise the yield and
effective yield of the Series invested in the Money Market Portfolio of the
Separate Account and the average annual total returns for the other Series in
the Separate Account. Yields and average annual total returns are determined in
accordance with the methods of computation set forth by the SEC in the Form N-4
Registration Statement and are more particularly described in the Statement of
Additional Information. Yields are expressed for a seven day period, and average
annual total returns are expressed for at least one, five and ten year periods
(or from inception if shorter).
The yields of the Money Market Portfolio are determined based upon the
change in the value of an outstanding unit in the Separate Account over a seven
day period and annualizing the result. Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
computation takes into account recurring deductions from account values, but no
deduction is made for transaction or surrender charges which may apply upon a
full or partial surrender. These charges are described in "Sales Charges," page
14 and "Transaction Charges," page 15. In the event of a surrender of the
Contract, the imposition of surrender and transaction charges will have the
effect of reducing the yield earned over the period of ownership.
The computation of average annual total returns does take into consideration
recurring charges and any non-recurring charges applicable to a Contract which
is surrendered in full at the end of the stated holding period.
FINANCIAL INFORMATION
Financial statements of Security First Life and of the Separate Account are
contained in the Statement of Additional Information.
DESCRIPTION OF SECURITY FIRST LIFE INSURANCE COMPANY,
THE SEPARATE ACCOUNT AND THE FUNDS
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 a 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 GENERAL ACCOUNT
The General Account is made up of all of the assets of Security First Life,
other than those in the Separate Account and any other segregated asset account.
The Participant may allocate amounts to the General Account at the time of
purchase or by subsequent transfers from the Separate Account. Amounts allocated
to the General Account will be credited with interest on the basis of interest
rates guaranteed or declared by Security First Life under the terms of the
Contract. Instead of the Participant bearing the risk of fluctuations in the
value of the assets as is the case for amounts invested in the Separate Account,
Security First Life bears the full investment risk for amounts in the General
Account. Security First Life has sole discretion to invest the assets of the
General Account, subject to applicable law. The General Account provisions of
the Contract are not intended to be offered by this Prospectus. Participants are
referred to the terms of the Contract itself for more information concerning the
General Account 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. It is
registered with the SEC as a unit investment trust under the 1940 Act.
Registration with the SEC does not involve supervision by the Commission of the
management or investment practices or policies of the Separate Account or
Security First Life.
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 and
realized capital gains or losses of each Series are credited to or charged
against the assets held for that Series in accordance with the terms of the
Contracts. This is done without regard to the income, realized capital gains or
losses of any other Series or the experience of Security First Life in any other
business it may conduct. The assets of each of these Series are not chargeable
with the liabilities of any other Series, or arising out of any other business
Security First Life may conduct.
All obligations under the Contracts, 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 the
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Contracts, the amount of such payments is guaranteed only to the extent of the
level amount calculated at the beginning of each Annuity year. (See "Level
Payments Varying Annually," page 19.)
The Funds consist of (i) the Money Market Portfolio, Growth Portfolio and
Overseas Portfolio of the Variable Insurance Products Fund, (ii) the Asset
Manager Portfolio, Contrafund Portfolio and Index 500 Portfolio of the Variable
Insurance Products Fund II, (iii) the T. Rowe Price Bond Series and T. Rowe
Price Growth and Income Series of the Security First Trust, (iv) the
International Portfolio of the Scudder Variable Life Investment Fund, (v) the
Small Capitalization Portfolio of The Alger American Fund, and (vi) the T. Rowe
Price Growth Stock Fund (available only for plans that qualify under Sections
401 or 457 of the Code). The shares of each Fund are purchased, without sales
charge, for the corresponding Separate Account Series at the net asset value per
share next determined by each Fund following receipt of the applicable payment.
Any dividend or capital gain distributions received from a Fund are reinvested
in Fund shares which are retained as assets of the applicable Series. Fund
shares will be redeemed without fee to the Series to the extent necessary for
Security First Life to make Annuity or other payments under the Contracts.
If shares of any Fund should no longer be available for investment by a
Series or if in the judgment of Security First Life's management further
investment in shares of any Fund should become inappropriate in view of the
purposes of the Contracts, Security First Life may substitute for each Fund
share 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 Series may take place, however, without notice to
Participants and the prior approval of the SEC.
THE FUNDS
Each of the Funds is a portfolio or series of an open-end management
investment company registered with the SEC under the 1940 Act. Registration does
not involve supervision by the SEC of the investments or investment policies of
the Funds. There can be no assurance that the investment objectives of the Funds
will be achieved. The investment objectives of the Funds are set forth below.
Variable Insurance Products Fund and Variable Insurance Products Fund II are
Massachusetts business trusts. Each is divided into separate portfolios. The
following portfolios are available under the Contracts:
Money Market Portfolio seeks 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 and foreign issuers.
Growth Portfolio seeks to achieve capital appreciation normally through the
purchase of common stocks (although the portfolio's investments are not
restricted to any one type of security). Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities. Overseas Portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
Asset Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among stocks, bonds and short-term, fixed
income instruments.
Contrafund Portfolio seeks capital appreciation by investing in companies
that the investment adviser believes to be undervalued due to an overly
pessimistic appraisal by the public.
Index 500 Portfolio seeks investment results that correspond to the total
return (i.e., the combination of capital changes and income) of common stocks
publicly traded in the United States, as represented by the Standard & Poor's
500 Composite Stock Price Index while keeping transaction costs and other
expenses low.
FMR is the investment adviser to each of the portfolios of the Variable
Insurance Products Fund and the Variable Insurance Products Fund II.
The Security First Trust is a Massachusetts business trust which presently
has four series, two of which are available under the Contracts:
T. Rowe Price Bond Series (formerly Bond Series) seeks to achieve the
highest investment income over the long term consistent with the preservation of
principal through investment primarily in marketable debt instruments. Growth of
principal and income will also be objectives with respect to up to 10% of the T.
Rowe Price Bond Series' assets that may be invested in common and preferred
stocks.
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T. Rowe Price Growth and Income Series (formerly Growth and Income Series)
seeks capital growth and a reasonable level of current income. While this series
will generally invest in common stocks and other equities, it may, depending on
economic conditions, reduce such investments and substitute fixed income
instruments.
Security First Investment Management Corporation ("Security Management")
provides investment advisory, administrative and management services to the two
Funds. T. Rowe Price Associates, Inc. ("Price Associates") serves as sub-adviser
to these Funds.
Scudder Variable Life Investment Fund is a Massachusetts business trust
which is divided into separate Portfolios. The following Portfolio is available
under the Contracts.
International Portfolio seeks long-term growth of capital primarily through
diversified holdings of marketable foreign equity investments. The Portfolio
invests in companies, wherever organized, which do business primarily outside
the United States. The Portfolio intends to diversify investments among several
countries and to have represented in its holdings business activities in not
less than three different countries. The Portfolio does not intend to
concentrate investments in any particular industry.
The investment adviser of the Scudder Variable Life Investment Fund is
Scudder.
The Alger American Fund is a Massachusetts business trust which has a number
of portfolios, one of which is available under the Contracts.
Small Capitalization Portfolio seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies within the range of companies included in the Russell
2000 Growth Index. Income is a consideration in the selection of investments
but is not an investment objective of the Portfolio.
The investment adviser of The Alger American Fund is Alger Management.
T. Rowe Price Growth Stock Fund. The investment objective of the T. Rowe
Price Growth Stock Fund, Inc. is long-term growth of capital and increasing
dividend income through investment primarily in common stocks of well-
established growth companies.
T. Rowe Price Associates is the investment adviser to the Growth Stock Fund.
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). 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 Participants or Beneficiaries to instruct Security First Life
on voting shares of the Funds are described under "Voting Rights," page 23.
Detailed information about the Funds, their investment objectives,
investment portfolios and the charges may be found in the prospectuses of the
Funds. An investor should carefully read the Funds' prospectuses before
investing. Prospectuses for the Variable Insurance Products Fund, the Variable
Insurance Products Fund II, the Security First Trust, the Scudder Variable Life
Investment Fund, The Alger American Fund and the T. Rowe Price Growth Stock Fund
accompany this prospectus. Additional copies may be obtained without charge by
written request to Security First Life Insurance Company, P.O. Box 92193, Los
Angeles, California 90009.
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
a Delaware corporation and a subsidiary of SFG.
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SERVICING AGENT
Security First Life receives certain administrative services such as office
space, supplies, utilities, office equipment, travel expenses and periodic
reports pursuant to an agreement with SFG.
CUSTODY OF SECURITIES
The custodian of assets of the Separate Account is Security First Life. The
assets of each Series will be kept physically segregated by Security First Life
and held separate from the assets of the other Series and 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
Charges under the Contract are assessed for the following: (i) premium
taxes; (ii) surrenders and distribution expense charges, which may be deemed to
be sales charges; (iii) administrative charges; (iv) certain transactions; and
(v) assumption of mortality and administrative expense risks with respect to the
Separate Account. These charges may not be changed under the Contract, and
Security First Life may profit from the surrender, distribution expense and risk
charges.
A Participant should note that there are deductions from and expenses paid
out of the assets of the Funds that are described in the Funds' prospectuses.
PREMIUM TAXES
Certain state and governmental entities impose a premium tax of up to 2.35%
(Nevada charges 3.5%) of Purchase Payments on amounts applied to an Annuity
option. The Contract permits Security First Life to deduct any applicable
premium taxes from the Participant's Account on or after the time the tax is
payable by Security First Life. Until further notice, such premium taxes will be
absorbed by Security First Life and will not be charged against a Participant's
Account.
SALES CHARGES
No sales charge is deducted from any Purchase Payment. However, a surrender
charge (contingent deferred sales charge) may be imposed upon a partial or full
surrender of the Participant's Account. The surrender charge covers expenses
relating to the sale of the Contract, including commissions paid to sales
personnel and other promotional costs.
The surrender charge is a charge based upon the amount surrendered and
applies to amounts attributable to purchase payments made within 60 months of
the date of surrender. The charge amounts to:
7% with respect to amounts surrendered attributable to Purchase Payments
received within 60 months of the date of surrender; and 0% with respect
to amounts surrendered attributable to Purchase Payments received more
than 60 months prior to the date of the surrender.
In no event will surrender charges exceed an amount equal to 9% of Purchase
Payments. Purchase Payments will be surrendered on a first-in, first-out basis.
These charges are applied by reducing the Series from which the surrender
will be taken by an amount determined by dividing the amount elected to be
surrendered, plus the transaction charge described below, 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. Accumulation
Units are cancelled on a first-in, first-out basis.
In contracts issued to Participants in Section 403(b) plans, the Company
will not deduct any percentage surrender charge after nine full calendar years
have elapsed since the Participants' Certificate Date. Further, in the first
surrender in each calendar year, a Participant in a Section 403(b) plan may
surrender up to 10% of the value of the Participants' interest in the Separate
Account without deduction of a percentage surrender charge. In such cases, the
"amount surrendered" is construed to be the amount requested from the Separate
Account, less 10% of the Participant's interest in the Separate Account.
In the event of a partial surrender, the Participant will receive a check in
the amount requested. Surrender charges, if any, will be deducted from the
Series from which the partial surrender was taken, or proportionally from the
remaining Series in the event that the Series is fully surrendered. Deductions
from the Participant's interest in the General Account, if any, will be from
Purchase Payments and accumulations thereon on a first-in, first-out basis.
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Surrender charges will be waived on a lump sum withdrawal if the Owner is
confined to a hospital for a minimum of 30 consecutive days or a skilled nursing
home for a minimum of 90 consecutive days and the withdrawal is requested within
60 days after termination of confinement. Surrender charges will be eliminated
when the Contracts are issued to officers, directors or full-time employees of
Security First Life or its affiliates. Contracts so purchased are purchased for
investment purposes only.
ADMINISTRATIVE FEES
At the end of each Certificate Year Security First Life will deduct an
administrative fee. This fee will not exceed $21.50 plus $2.50 for each Series
for which there are Accumulation Units included in the value of the
Participant's Account. Therefore, the maximum fee on an annual basis will not
exceed $41.50. The fee will be prorated between Series in the Participant's
Account on the basis of their respective values on the date of the deduction.
Administrative expenses include the cost of policy issuance, salaries, postage,
telephone, travel expenses, legal, administrative, actuarial, management and
accounting fees, periodic reports, office equipment, stationery, office space
and custodial expenses. Effective as of March 8, 1993, the administrative fee
will be waived for any policy year during which the participant contributes
purchase payments of $2,000 or more or has an aggregate account value at the end
of the policy year of $10,000 or more.
TRANSACTION CHARGES
A $10 transaction charge will be deducted from the Participant's Account for
each conversion from a Series (See "Conversions," page 16) and upon
annuitization of all or a portion of the Participant's Account (see "Annuity
Benefits," page 19). Similarly, in the event of a full or partial surrender, a
transaction charge will be deducted from the Participant's Account in an amount
equal to the lesser of $10 or 2% of the amount surrendered. These charges are at
cost, and Security First Life does not anticipate profiting from them. Effective
as of March 8, 1993, transaction charges for conversions from one series of the
Separate Account to another series of the Separate Account will be waived.
MORTALITY AND ADMINISTRATIVE EXPENSE RISK CHARGE
The minimum death benefit provided for by the Contract requires Security
First Life to assume a mortality risk that the Participant's Account will be
less than the Participant's Purchase Payments adjusted for prior surrenders
and/or amounts applied to Annuity options. (See "Death Benefit Before the
Annuity Date," page 22.) In addition, because the Contract provides life Annuity
options, Security First Life assumes a mortality risk that the death rate of
Participants as a group will be lower than the death rate upon which the
mortality table specified in the Contract is based. A fee will be charged to
compensate Security First Life for assuming these mortality risks in an amount
equal to .002192% on a daily basis (.80% per year) from the Separate Account
assets funding the Contract.
Security First Life also assumes the risk that the amount, if any, deducted
for administrative fees will be insufficient to cover its actual costs for
administrative services. Contract administration expenses include the cost of
policy issuance, salaries, rent, postage, travel expenses, legal,
administrative, actuarial and accounting fees, periodic reports, office
equipment, stationery, office space and custodial expenses. There is no
assurance that the margins will be sufficient to absorb the expenses during the
term of the Contract. As compensation for assuming this risk, Security First
Life will make a deduction of .001233% on a daily basis (.45% per year) from the
value of the Separate Account assets funding the Contract.
DISTRIBUTION EXPENSE CHARGE (SALES LOAD)
Security First Life also assumes the risk that surrender charges described
above will be insufficient to cover the actual costs of distribution. These
costs include commissions, fees, registration costs, direct and indirect selling
expenses including advertising, sales materials, illustrations, marketing
personnel, printing and related overhead expenses. As compensation for assuming
this risk, Security First Life will make a deduction of .000274% on a daily
basis (.10% per year) from the value of the Separate Account assets funding the
Contract (the staff of the Securities and Exchange Commission deems this charge
a deferred sales charge). The distribution expense charge (sales load), together
with any contingent deferred sales charge imposed as described on page 14 above,
will never exceed 9% of purchase payments.
If Security First Life has gains from the mortality, administrative expense
and distribution expense charges over its costs of assuming these risks, it may
profit from these gains. Any gains derived from the mortality and administrative
expense risk charges may be used to cover shortfalls in amounts available to pay
distribution expenses.
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Security First Life may, in its discretion, voluntarily waive a portion of
the mortality, administrative expense, and/or distribution risk fees, which
waiver may be terminated at any time.
FREE LOOK PERIOD
The Contract provides for an initial "Free Look" period. The Owner has the
right to return the Contract within 20 days (or such longer period as required
by state law) after the Owner receives the Contract by delivering or mailing it
to Security First Life at its administrative office. If the Contract is mailed,
it will be deemed mailed on the date of the postmark or, if sent by certified or
registered mail, the date of certification or registration. The returned
Contract will be treated as if the Company never issued it, and the Company will
refund the Purchase Payments or, if required by state law, the greater of the
Purchase Payments or the account value.
DEFERRED COMPENSATION PLANS
With respect to certain Contracts issued to fund deferred compensation plans
qualifying under Section 457 of the Code for state and local government
employees, Security First Life may agree to reduce or waive the administrative
fees, transaction charges and the distribution expense fee. In addition,
deductions for sales charges may be reduced or waived in the event of a
surrender under the plan resulting from a Participant's death, disability,
retirement, termination of employment, financial hardship or transfer to another
investment provider.
DESCRIPTION OF THE CONTRACTS
GENERAL
The Contracts (designated Form 226R1) are group contracts designed to
provide annuity benefits to employees of public school systems, churches and
certain tax-exempt organizations as tax deferred annuity contracts under the
provisions of Section 403(b) of the Code, to employees covered under various
types of employer deferred compensation plans which qualify under the provisions
of Section 457 of the Code, to trusts under retirement plans which qualify under
Section 401 of the Code and to individuals as individual retirement annuities
under Section 408 of the Code. (See "Federal Income Tax Status," page 22.) Since
the Contracts are designed to fulfill long-term financial needs, purchasers
should not consider them as short-term or temporary investments.
A group Contract is issued to an employer, to a trustee of a qualified
corporate retirement plan, or to another organization, which will be the Owner,
covering all present and future Participants. Except as described below, after
completing an enrollment form and arranging for Purchase Payments to begin, each
enrolled Participant receives a Certificate that summarizes the provisions of
the group Contract and evidences his or her participation in the Plan. The group
Contracts described below may be restricted by the governing instrument of the
Plan as to the exercise by the Participant of certain rights provided in such
Contracts. Owners and Participants should refer to the Plan for information
concerning such restrictions, if any. No Certificates are issued to Participants
under deferred compensation or qualified corporate retirement Plans.
PURCHASE PAYMENTS
Purchase Payments may be 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 Plan. The
minimum Purchase Payment is $20, with an annual minimum of $240. Purchase
Payments may be allocated to the Separate Account, the General Account or
between them in accordance with the election of the Participant. Confirmation of
each Purchase Payment received will be sent periodically to the Participant.
CONVERSIONS
Accumulation Units may be converted among the Series of the Separate Account
or from the Separate Account to the General Account at any time. In addition,
amounts accumulated in the General Account may be converted to the Separate
Account subject to the following limitations: (i) conversions are limited to
once per Certificate year; (ii) unless otherwise permitted by Security First
Life, the total value converted from the General Account during any Certificate
Year may not exceed 20% of the accumulated value of the Participant's interest
in the General Account and (iii) the amount converted will be based upon
accumulated value less transaction fees, and proportional reduction will be made
in the annuity value of the Participant's interest in the General Account.
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Conversion instructions may be communicated in writing or, if permitted by
Security First Life, by telephone. If telephone conversions of Accumulation
Units are permitted, the Participant will be required to complete a prior
authorization on a form provided by Security First Life. Security First Life
will employ reasonable procedures to confirm that telephone instructions are
genuine (including requiring one or more forms of personal identification), and
Security First Life will not be liable for following instructions it reasonably
believes to be genuine.
Accumulation Units will be converted on the first Valuation Date after
receipt of written or telephone instructions. Because Accumulation Unit values
are determined at the close of the New York Stock Exchange (currently 4:00 P.M.
Eastern Time) on a Valuation Date, conversion instructions received after that
time will be effected as of the next Valuation Date.
Annuity Units may be converted among the Series of the Separate Account at
any time (except within two calendar weeks before the Annuity Date and any
anniversary thereof). Annuity Units may not be converted to the General Account.
However, amounts in the General Account that have not been applied to a Fixed
Annuity income option may be converted to Annuity Units in one or more Series of
the Separate Account for a Variable Annuity payout. Conversions of Annuity Units
must be elected in writing and will be effective on the first Valuation Date
following receipt of the instructions.
A minimum of $500 (or, if lesser, the balance of the Participant's account
allocated to the Series to be converted) is required to convert from any Series
of the Separate Account or from the General Account. The value of Accumulation
and Annuity Units converted will be calculated as of the close of business on
the date the conversion occurs.
LOANS (SECTION 403(B) PLANS ONLY)
Participants in Plans which qualify under Section 403(b) may obtain a loan
under the Contract from that portion of the Participant's Account which is
allocated to the General Account. Accumulation Units in the Separate Account
will be taken into account in determining the maximum amount of any loan, and
the Participant would be permitted to convert Accumulation Units from the
Separate Account to the General Account prior to any loan. The Participant's
Account will serve as sole security for a loan, and Security First Life may
terminate a loan, in its discretion, in the event of a request for a surrender.
Loan proceeds may be considered a "distribution" for tax purposes. (See "Federal
Income Tax Status," page 22.) Security First Life may modify or terminate the
granting of loans at any time, provided that any such modification or
termination will not affect outstanding loans. Fees may be charged for loan
set-up and administration. The loan set-up fee is currently $50.00, and would be
deducted from the loan proceeds. There currently is no fee for administering the
loans.
MODIFICATION OF THE CONTRACTS
The Contract guarantees that Annuity payments involving life contingencies
will be based on the minimum guaranteed Annuity purchase rates incorporated in
the Contracts, regardless of actual mortality experience. The Contract also
includes provisions legally binding on Security First Life with respect to
surrenders, death benefits and maximum charges, fees and deductions from a
Participant's Account. Security First Life may only change these provisions: (i)
with respect to terms which apply to Participants enrolling after the effective
date of the change; (ii) with respect to terms which apply to the excess of any
Purchase Payments received in any Certificate Year over the Purchase Payments
received in the first Certificate year for Certificates issued before the
effective date of the change; or (iii) to the extent necessary to conform the
Contract to any federal or state law, regulation or ruling.
A Contract may also be modified by written agreement between Security First
Life and the Owner. No such change may affect a Participant's Account where his
or her interest is nonforfeitable, without the written consent of that
Participant.
ASSIGNMENT
If permitted by the Plan, the Contracts may be assigned by the Participant
provided written notice of such assignment is received by Security First Life.
In the case of Contracts issued in connection with a deferred compensation plan,
all rights, discretion and powers under the Contract are vested in the Owner and
not the Participant.
Inquiries as to any Contract provisions should be made in writing to
Security First Life Insurance Company, P.O. Box 92193, Los Angeles, California
90009 or by telephoning 1-800-283-4536.
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ACCUMULATION PERIOD
CREDITING ACCUMULATION UNITS IN THE SEPARATE ACCOUNT
Accumulation Units are credited to a Series upon receipt of each Purchase
Payment or conversion, as the case may be. The number of Accumulation Units to
be credited is determined by dividing the net amount allocated to a Series by
the value of an Accumulation Unit in the Series next computed following receipt
of the Purchase Payment or conversion.
In the event that an application for a Contract fails to recite all of the
necessary information, Security First Life will promptly request that the
Participant furnish further instructions and will hold any initial Purchase
Payment in a suspense account, without interest, for a period not exceeding five
Business Days pending receipt of such information. If the necessary information
is not received by Security First Life within five Business Days of receipt of
the application, Security First Life will return the initial Purchase Payment.
VALUATION OF ACCUMULATION UNITS
The current value of Accumulation Units of a Series of the Separate Account
varies with the investment experience of the Fund in which the assets of the
Series are invested. Such value is determined each business day at the close of
the New York Stock Exchange (currently 4:00 P.M. Eastern Time) by multiplying
the value of an Accumulation Unit in the Series on the immediately preceding
Valuation Date by the net investment factor for the period since that day. (See
"Net Investment Factor," below.) The Participant bears the investment risk that
the current value of Accumulation Units invested in a Series may at any time be
less than the amounts originally allocated to the Series.
NET INVESTMENT FACTOR
The net investment factor is an index of the percentage change (adjusted for
distributions by the Fund and the deduction of the mortality and administrative
expense risk charges, and distribution expense charges) in the net asset value
of the Fund in which a Series is invested, since the preceding Valuation Date.
The net investment factor may be greater or less than one, depending upon the
Fund's investment performance.
SURRENDERS
To the extent permitted by the Plan, a Participant may surrender all or a
portion of the Participant's Account at any time prior to the Annuity Date. A
surrender may result in adverse federal income tax consequences to the
participant including current taxation of the distribution and a penalty tax on
a premature distribution. (See "Federal Income Tax Status," page 22). The
Participant should consult his or her tax adviser before requesting a surrender.
The cash 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 Separate Account Series credited to the Contract by
the current value of an Accumulation Unit in the Series and subtracting the
surrender charges, if any, and the transaction charges. Upon receipt of a
written request for a full or partial surrender, Security First Life will
calculate the surrender using the value of Accumulation Units computed after
receipt of such request.
A request for a partial surrender from more than one Series must specify the
allocation of the partial surrender among the Series. No partial surrender may
be made that would cause a Participant's interest in any Series to have a value
after the surrender of less than $200.
Payment of any amount surrendered from the Series will be made within seven
days of the date the written request is received by Security First Life.
Surrenders may be suspended when: (i) the New York Stock Exchange is closed for
other than customary weekends or holidays; (ii) trading on such exchange is
restricted or an emergency exists as determined by the SEC, making disposal of
portfolio securities or valuation of assets of the Funds not reasonably
practicable; or (iii) the SEC has by order permitted such suspension.
STATEMENT OF ACCOUNT
Prior to the Annuity Date, each Participant will be provided with a written
statement of account each calendar quarter in which a transaction occurs. In no
event will a statement of account be provided less often than once annually. The
statement of account will show all transactions for the period being reported.
It will also show the number of Accumulation Units of each Series in the
Participant's Account, the current Accumulation Unit value for each Series, and
the value of the Participant's Account as of the end of the reporting period.
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ANNUITY BENEFITS
VARIABLE ANNUITY PAYMENTS
Unless otherwise elected by the Participant, the Participant's interest in
the Separate Account will be applied to provide a Variable Annuity. The dollar
amount of the Variable Annuity payments will reflect the investment experience
of the Series but will not be affected by adverse mortality experience which may
exceed the mortality risk charge provided for under the Contract.
LEVEL PAYMENTS VARYING ANNUALLY
Under the Contract, 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 Series 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 Series from year to year rather than from
month to month.
The monthly Variable Annuity payments for the first year will be determined
on the last Valuation Date of the second calendar week preceding the Annuity
Date by using a formula described in the Contract. On each anniversary of the
Annuity Date, Security First Life will determine the amount of monthly payments
for the year then beginning. This is determined by multiplying the number of
Annuity Units in each Series from which payments are to be made by the Annuity
Unit value of that Series for the Valuation Period in which the first payment
for that year is due.
The amount of the year's Variable Annuity payments is transferred to the
General Account at the beginning of the Annuity year. Although an amount in the
Separate Account is credited to an Annuitant and transferred to the General
Account to make Annuity payments, it should not be inferred that the Annuitant
has any property rights in this amount. The Annuitant has only a contractual
right to Annuity payments from the amount credited to him or her in the Separate
Account.
The monthly Annuity payments are made from the General Account with interest
credited using the Assumed Investment Return of 4.25% or the alternative Assumed
Investment Return selected by the Participant. Security First Life will
experience profit or loss on the amounts placed in the General Account to
provide level monthly payments during the year to the extent that net investment
income and gains in the General Account exceed or are lower than the Assumed
Investment Return selected.
Because Annuity payments for the year are set at the beginning of the year,
the Annuitant will not benefit from increases in Annuity Unit values during the
year. However, such increases and decreases will be reflected in the calculation
of Annuity payments for the subsequent year.
ASSUMED INVESTMENT RETURN
Variable Annuity payments will vary from payments based on the Assumed
Investment Return if the actual investment experience of the Series is better or
worse than the Assumed Investment Return. The choice of the Assumed Investment
Return can affect the level of Annuity payments from year to year. Over a period
of time, if the Separate Account achieves a net investment result equal to the
Assumed Investment Return applicable to a particular option, the amount of the
Annuity payments would be level. However, if the Separate Account achieves a net
investment result greater than the Assumed Investment Return, the amount of
annuity payments would increase in value each year. Similarly, if the Separate
Account achieves a net investment result smaller than the Assumed Investment
Return, the amount of the Annuity payments would decrease each year.
Although a higher initial payment would be received under a higher Assumed
Investment Return, there is a point in time after which payments under a lower
Assumed Investment Return would be greater, assuming payments continue through
that point in time. The effect of a higher or lower Assumed Investment Return
can be summarized as follows: a higher Assumed Investment Return will result in
a larger initial payment but more slowly rising or more rapidly falling
subsequent payments than a lower Assumed Investment Return.
Unless otherwise elected the Assumed Investment Return will be 4.25% per
annum. To the extent permitted by state law and regulations, Security First Life
will permit an election of an Assumed Investment Return of 3.50%, 5% or 6%. It
should not be inferred, however, that such returns will bear any relationship to
the actual net investment experience of the Series.
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ELECTION OF ANNUITY DATE AND FORM OF ANNUITY
The Annuity Date and the form of Annuity payment are elected by the
Participant. Unless an earlier date is elected in accordance with the Plan,
Annuity payments must begin on the Normal Annuity Date.
To the extent not prohibited by the Plan, an optional Annuity Date may be
elected, which 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 payment under the Contract is Option 2, a life
Annuity, with 120 monthly payments certain. Unless indicated otherwise, Option 2
will be applied automatically. 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 year's Annuity payments described in Option 1 through 4 are
determined on the basis of: (i) the mortality table specified in the Contract,
(ii) the age and, where permitted, the sex of the Annuitant, (iii) the type of
Annuity payment option(s) selected, and (iv) the Assumed Investment Return
selected. Fixed Annuity payments described in Option 5 are determined on the
basis of: (i) the number of years in the payment period and (ii) the interest
rate guaranteed with respect to the option.
The United States Supreme Court in its decision entitled Arizona Governing
Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris
determined that an employer subject to Title VII of the Civil Rights Act of 1964
may not offer to its employees the option of receiving retirement benefits
calculated on the basis of sex. The Company will issue contracts that comply
with the Norris decision and state law.
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 the 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 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. Any payments made to the
designated Beneficiary after the death of the individual will stop when the
Company has paid out a total number of payments equal to the minimum number of
payments.
OPTION 4 -- JOINT AND FULL TO SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of two individuals and
thereafter during the lifetime of the survivor, ceasing with the last payment
due prior to the death of the survivor.
OPTION 5 -- DESIGNATED PERIOD ANNUITY -- FIXED DOLLAR ONLY
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, that will not be less than 4% per annum. Fixed Annuity
payments under this option may not be commuted to a lump sum, except as provided
under "Death Benefits."
FREQUENCY OF PAYMENT
At the election of the Payee, payments under any option may be made
annually, semi-annually, quarterly or monthly. If at any time any payments to be
made to any payee from 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.
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ANNUITY UNIT VALUES
The value of an Annuity Unit at a Valuation Date is determined by
multiplying the value of the Annuity Unit at the preceding Valuation Date by an
"Annuity Change Factor." 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 the
Accumulation Unit at the Valuation Date by the value of the Accumulation Unit at
the preceding Valuation Date and multiplying the result by a neutralization
factor.
The neutralization factor is determined by dividing 1 by the weekly
equivalent of the Assumed Investment Return previously selected by the
Annuitant. For example, the neutralization factor for the Assumed Investment
Return of 4.25% is 0.9991999.
The number of Annuity Units for a Series is determined by dividing the
monthly Annuity payment for the first year by that Series' Annuity Unit value on
the same date as the first year's Annuity payments are calculated. The number of
Annuity Units thus determined will not change throughout the annuity payment
period unless the Participant converts Annuity Units to or from other Series of
the Separate Account.
DEATH BENEFITS
DEATH BENEFIT BEFORE THE ANNUITY DATE
If the Participant dies before the Annuity Date, the Participant's Account
will be applied in accordance with the terms set forth below.
For Contracts issued other than in connection with a Plan that qualifies
under Sections 401, 403(b), 408 or 457 of the Code, the following provisions
apply:
1. The Beneficiary may elect to receive a lump sum settlement, or to receive
Annuity income under Annuity options 1, 2 or 5. (See "Election of Annuity
Date and Form of Annuity," page 20). The lump sum settlement must be made
within five years of the Participant's death. Annuity payments 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.
2. If the Beneficiary is the Participant's spouse, the spouse may delay
election of an income option as described above to the later of (a) one
year after the Participant's death, or (b) a date no later than the date
on which the Participant would have attained age 70 1/2.
For Contracts issued with respect to Plans that qualify under Section 401,
403(b), 408 or 457 of the Code, the following provisions apply:
1. If the Beneficiary is the Participant's spouse, the spouse may elect to
receive Annuity options 1, 2 or 5, or to treat the Contract as his or her
own. Payments under the Annuity 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 (cash value) or to receive Annuity
income under Annuity options 1, 2 or 5. The lump sum settlement must be
made within five years of the death of the Participant. Payments under
the Annuity 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.
If a Participant who has not attained age 65 dies before the Annuity Date,
the amount of any lump sum settlement will be the greater of the Participant's
Account less transaction fees or the total of the Participant's Purchase
Payments reduced by any Purchase Payments previously surrendered or applied to
Annuity income. If a Participant who has attained age 65 dies before the Annuity
Date, only the cash value will be paid as a death benefit.
DEATH BENEFIT AFTER THE ANNUITY DATE
If the Annuitant under a Contract dies on or after the Annuity Date, the
remaining portion of his or her interest will be distributed to the Beneficiary
at least as rapidly as under the method of distribution being used at the date
of Annuitant's death. If no designated Beneficiary survives the Annuitant, the
present value of any remaining payments certain on the date of the death of the
Annuitant, calculated on the basis of the Assumed Investment Return previously
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elected, may be paid in one sum to the estate of the Annuitant unless other
provisions have 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.
Unless otherwise restricted, a Beneficiary receiving variable payments under
Options 2 or 3 after the death of an 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 Return
previously selected. However, such election is not available to a Beneficiary
receiving Fixed Annuity payments.
FEDERAL INCOME TAX STATUS
The operations of the Separate Account form part of the operations of
Security First Life. Under the Code as it is now written, no federal income tax
is payable by Security First Life on the investment income and capital gains of
the Separate Account. Moreover, as long as the Separate Account meets the
diversification requirements of Section 817(h) of the Code, no federal income
tax is payable by the Participant on the investment income and capital gains
under a Certificate until annuity payments commence or a full or partial
withdrawal is made. It is intended that the Separate Account will continue to
meet the requirements of Section 817(h) of the Code.
Employers may deduct their contributions to self-employed and corporate
pension and profit-sharing plans described in Section 401 of the Code and tax
sheltered annuities described in Section 403(b) in the year when made up to the
limits specified in the Code. In addition, some employer plans may permit
nondeductible employee contributions.
All distributions, with the exception of tax-free rollovers as described
below or a return of permitted nondeductible employee contributions, are
included in gross income. In the case of Section 401 and Section 403(b) plans
and IRAs, a distribution is includible in the year it is paid. In the case of
457 plans, a distribution is includible in the year it is paid or made
available. Under certain limited circumstances, a lump sum distribution from a
Section 401 plan may qualify for special 5-year or 10-year forward income
averaging or long-term capital gains treatment.
In the case of Section 401, 403(b) and 457 plans and IRAs, 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 employee attains the age
of 70 1/2. Distributions under Section 401, 403(b) and 457 plans must also meet
the minimum incidental death benefit requirements of the Code.
Except as described below, the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including both 401
and 403(b) plans. To the extent amounts are not includible in gross income
because they have been rolled over to an IRA or to another 401 plan or 403(b)
annuity, no tax penalty will be imposed. The tax penalty will not apply to the
following distributions: (a) distributions made on or after the date on which
the Participant reaches age 59 1/2; (b) distributions following the death or
disability of the Participant; (c) after separation from service, distributions
that are part of substantially equal periodic payments, not less frequently than
annually, made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of such Participant and his or her designated
beneficiary; (d) distributions to a Participant who has separated from service
after attaining age 55; (e) distributions made to the Participant to the extent
such distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Participant for amounts paid during the taxable year for
medical care; and (f) distributions made to an alternate payee pursuant to a
qualified domestic relations order.
Similar rules apply to IRAs, but there are fewer exceptions to the 10%
penalty tax. The taxable portion of an IRA distribution will not be subject to
the tax penalty if: (a) it is made on or after the date on which the Participant
reaches age 59 1/2; (b) it is made following the death or disability of the
participant; or (c) it is part of substantially equal periodic payments, not
less frequently than annually, made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of such Participant
and his or her designated beneficiary. The 10% penalty tax does not apply to
Section 457 plans.
The Code prohibits the withdrawal of amounts contributed or earned under a
Section 403(b) annuity on or after January 1, 1989, except in these
circumstances: (a) the Participant attains age 59 1/2, separates from service,
dies, becomes disabled, or (b) in the case of hardship as determined in
accordance with applicable regulations. Withdrawals for hardship are restricted
to the portion of the Participant's Account which represents contributions by
the Participant and does not include any investment results. These limitations
on withdrawals apply to salary reduction contributions made after December 31,
1988 and to income attributable to such contributions. The limitations on
withdrawals do not affect rollovers or exchanges between Section 403(b)
annuities.
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Providing certain requirements of the Code are met, distributions from a
plan may be rolled over tax free to another plan. Distributions from a Section
401 plan may be rolled over to a Section 401 defined contribution plan, IRA or a
Section 403(a) annuity. Distributions from a Section 403(b) tax sheltered
annuity may be rolled over to another tax sheltered annuity or an IRA.
Distributions from an IRA may be rolled over to another IRA and, if the IRA
contains only permissible rollover amounts, to a Section 401 defined
contribution plan or a tax sheltered annuity.
The discussion contained in the Prospectus regarding withdrawals and other
distributions from a Participant's Account should be considered in light of the
above.
WITHHOLDING
Security First Life is required to withhold federal income tax on Annuity
payments, distributions and partial and full surrenders. However, recipients of
distributions are allowed to make an election not to have federal income tax
withheld. After an election is made with respect to Annuity payments, an
Annuitant may revoke the election at any time, and thereafter commence
withholding. Security First Life will notify the payee at least annually of his
or her right to revoke the election.
Security First Life is required to withhold 20% of certain taxable amounts
constituting "eligible rollover distributions" to participants (including lump
sum distributions) in retirement plans under Code Section 401 and tax deferred
annuities under Code Section 403(b). This withholding requirement does not apply
to distributions from such plans and annuities in the form of a life and life
expectancy annuity (individual or joint), an annuity with a designated period of
10 years or more, or any distribution required by the minimum distribution
requirements of Code Section 401(a)(9). Withholding on these latter types of
distribution will continue to be made under the rules described in the prior
paragraph. A participant cannot elect out of the 20% withholding requirement.
However, if an eligible rollover distribution is rolled over into an eligible
retirement plan or IRA in a direct trustee-to-trustee transfer, no withholding
will be required.
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.
MULTIPLE CONTRACTS
Code Section 72(e)(11) provides that multiple annuity contracts which are
issued within a calendar year to the same Contract Owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences.
OBTAINING TAX ADVICE
It should be recognized that the federal income tax information in this
prospectus is not exhaustive and is for information purposes only. The
discussion above does not purport to cover all situations involving the purchase
of an Annuity or the election of an option 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.
VOTING RIGHTS
Unless otherwise restricted by the Plan, each Participant holding a
Certificate will have the right to instruct Security First Life with respect to
voting the Fund shares which are the assets underlying his or her interest in
the Separate Account, at all regular and special shareholders meetings of the
Fund. Security First Life will mail to each Participant, 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 the Participants
giving timely instructions.
Even though Annuity payments have begun, the Annuitant will continue to have
any voting rights exercisable with respect to the Funds shares.
The number of votes to cast by each person having the right to vote will 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, a Participant or Annuitant
must have been such on the record date. The number of shares as to which voting
instructions may be given to Security First Life is determined by dividing
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the value on the record date on that portion of the Participant's Account then
allocated to a Series for a Fund by the net asset value of a Fund share for that
Series as of the same date.
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.
ADDITIONAL INFORMATION
For further information contact Security First Life at the address and phone
number on the cover of this Prospectus. A copy of the Statement of Additional
Information, dated May 1, 1996, which provides more detailed information about
the Contracts, may also be obtained. Set forth below is the table of contents
for the Statement of Additional Information.
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............................................................. 8
Surrender Charges................................................................................ 8
Net Investment Factor............................................................................ 8
Annuity Payments................................................................................. 8
Additional Federal Income Tax Information........................................................ 10
Calculation of Performance Data.................................................................. 11
Distribution of the Contracts.................................................................... 13
Voting Rights.................................................................................... 13
Safekeeping of Securities........................................................................ 14
Servicing Agent.................................................................................. 14
Independent Auditors............................................................................. 14
Legal Matters.................................................................................... 14
State Regulation of Security First Life.......................................................... 14
Financial Statements............................................................................. 15
</TABLE>
A registration statement has been filed with the SEC 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, 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.
24
