<PAGE>
'33 ACT FILE NO. 33-9221
'40 ACT FILE NO. 811-3365
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 2[1] [X]
AND/OR
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 88[1] [X]
(CHECK APPROPRIATE BOX OR BOXES.)
----------------
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
SECURITY FIRST LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
----------------
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 312-6100
RICHARD C. PEARSON
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SECURITY FIRST LIFE INSURANCE COMPANY
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
It is proposed that this filing will become effective (check appropriate
space)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on [date] pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a) of Rule 485
[_] on [date] pursuant to paragraph (a) of Rule 485
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Company has elected pursuant to Rule 24f-2 under the Investment Company
Act of 1940 to register an indefinite number of securities. The most recent
Rule 24-F-2 Notice was filed on February 27, 1997.
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- - --------------------------------------------------------------------------------
NOTE TO EDGAR VERSION: Deleted language is indicated by brackets, not
strike-throughs.
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM N-4 CAPTION IN PROSPECTUS
----------------------- ---------------------
<S> <C>
1. Cover Page................... Cover Page
2. Definitions.................. Glossary
3. Synopsis..................... Summary of the Contracts; Fee Tables
4. Condensed Financial Informa-
tion......................... Condensed Financial Information; Financial
Information
5. General Description of Regis-
trant, Depositor and Portfo-
lio Companies................ Description of Security First Life Insurance
Company, The Separate Account and The Funds;
Voting Rights
6. Deductions and Expenses...... Contract Charges
7. General Description of
Variable Annuity Contracts... Description of the Contracts; Accumulation
Period; Annuity Benefits
8. Annuity Period............... Annuity Benefits
9. Death Benefit................ Death Benefits
10. Purchases and Contract Val-
ue........................... Description of the Contracts; Accumulation
Period; Principal Underwriter
11. Redemptions.................. Accumulation Period
12. Taxes........................ Federal Income Tax Status
13. Legal Proceedings............ Legal Proceedings
14. Table of Contents of the
Statement of Additional In-
formation.................... Table of Contents of the Statement of
Additional Information
PART B--STATEMENT OF ADDITIONAL INFORMATION
15. Cover Page................... Cover Page
16. Table of Contents............ Table of Contents
17. General Information and His-
tory......................... The Insurance Company; The Separate Account
18. Services..................... Servicing Agent; Safekeeping of Securities;
Independent Public Accountant; Legal Matters
19. Purchase of Securities Being
Offered...................... Purchase of Securities Being Offered
20. Underwriters................. Distribution of the Contracts
21. Calculation of Yield
Quotations of Money Market
Subaccounts.................. Not Applicable
22. Annuity Payments............. Annuity Payments
23. Financial Statements......... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this registration statement.
<PAGE>
Intelligent
Investments
For
Intelligent
Investors
Security First
Flexible Value
Annuity
[LOGO OF SECURITY FIRST LIFE INSURANCE COMPANY]
SFG 6001-2 (1/97) SF230
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT
- - -------------------------------------------------------------------------------
GROUP FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
Security First Life Insurance Company
11365 West Olympic Boulevard
Los Angeles, California 90064
- - -------------------------------------------------------------------------------
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 of 1986 (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
under Section 408 of the Code.
Participants may allocate premiums and cash value to one or more 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 and
Growth 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 Bond Series, the T. Rowe Price
Growth and Income Series and the Virtus U.S. Government Income Series of the
Security First Trust; (iv) the International Portfolio of the Scudder Variable
Life Investment Fund; and (v) the Small Capitalization Portfolio of The Alger
American Fund (referred to herein as the "Funds").
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, 1997, 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 23 of the 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. PLEASE READ AND RETAIN THIS PROSPECTUS FOR FUTURE
REFERENCE.
- - -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- - -------------------------------------------------------------------------------
Prospectus dated May 1, 1997 SF 230 (5/97)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Glossary................................................................... 3
Summary of the Contract.................................................... 4
Fee Tables................................................................. 6
Condensed Financial Information............................................ 9
Performance................................................................ 9
Financial Information...................................................... 10
Description of Security First Life Insurance Company,
The Separate Account and The Funds........................................ 10
The Insurance Company.................................................... 10
The General Account...................................................... 10
The Separate Account..................................................... 10
The Funds................................................................ 11
Principal Underwriter...................................................... 12
Servicing Agent............................................................ 12
Custody of Securities...................................................... 12
Contract Charges........................................................... 12
Premium Taxes............................................................ 13
Sales Charges............................................................ 13
Administration Fees...................................................... 13
Contract Maintenance Charge.............................................. 14
Transaction Charges...................................................... 14
Mortality and Expense Risk Charges....................................... 14
Free Look Period......................................................... 14
Deferred Compensation Plans.............................................. 15
Description of the Contracts............................................... 15
General.................................................................. 15
Purchase Payments........................................................ 15
Transfers................................................................ 15
Dollar Cost Averaging.................................................... 16
Reallocation Election.................................................... 16
Loans.................................................................... 16
Modification of the Contracts............................................ 16
Assignment............................................................... 17
Accumulation Period........................................................ 17
Crediting Accumulation Units in the Separate Account..................... 17
Valuation of Accumulation Units.......................................... 17
Net Investment Factor.................................................... 17
Surrenders............................................................... 17
Statement of Account..................................................... 18
Annuity Benefits........................................................... 18
Variable Annuity Payments................................................ 18
Level Payments Varying Annually.......................................... 18
Assumed Investment Return................................................ 18
Election of Annuity Date and Form of Annuity............................. 19
Frequency of Payment..................................................... 20
Annuity Unit Values...................................................... 20
Death Benefits............................................................. 20
Death Benefit Before the Annuity Date.................................... 20
Death Benefit After the Annuity Date..................................... 21
Federal Income Tax Status.................................................. 21
Withholding.............................................................. 22
Multiple Contracts....................................................... 22
Obtaining Tax Advice..................................................... 22
Voting Rights.............................................................. 23
Legal Proceedings.......................................................... 23
Additional Information..................................................... 23
Table of Contents of Statement of Additional Information................... 23
</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>
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 General Account or 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 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 this date.
CONTRACT -- The agreement between Security First Life and the group
contractholder covering the rights of the whole group and the certificate
issued to the Participants.
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 and the Participant's interest in
the General Account.
PLAN -- The 403(b) plan, 457 deferred compensation plan, 401 qualified
retirement plan or 408 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.
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 benefits
under the Contracts.
SURRENDER CHARGE (Contingent Deferred Sales Charge) -- A percentage charge
which may be deducted upon full or partial surrender, which varies according
to the period of time that Purchase Payments have remained with Security Life
prior to surrender.
3
<PAGE>
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, Section 457 deferred compensation plans and Section 408
individual retirement annuities. This prospectus is intended to serve as a
disclosure document only for the variable portion of the Contract. (See
"Description of Contracts, General," page 14.)
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 12.) Amounts allocated to a Series of the Separate Account may be
transferred 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
"Transfers," page 15, and "Reallocation," page 15.) Unless the Participant has
made an election of a special option, the minimum conversion 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 ten series, each of which consists of the Shares of a different
Fund. The Funds presently consist of the Money Market Portfolio and Growth
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 Bond Series, T. Rowe Price Growth and Income
Series and Virtus U.S. Government Income Series of the Security First Trust,
the International Portfolio of the Scudder Variable Life Investment Fund, and
the Small Capitalization Portfolio of The Alger American Fund. 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 Bond Series and T. Rowe Price Growth and Income Series,
and Virtus Capital Management, Inc. ("Virtus") is subadvisor to Security
Management with respect to the Virtus U.S. Government Income Series. The
investment adviser and manager of the Scudder Variable Life Investment Fund is
Scudder, Stevens & Clark Inc. ("Scudder"). The investment adviser and manager
of The Alger American Fund is Fred Alger Management, Inc. ("Alger
Management"). (See "The Separate Account," page 10 and "The Funds," page 10.)
CHARGES AND DEDUCTIONS
A transaction charge of $10 will be deducted from the Participant's Account
for each transfer from a Series 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. (See "Transaction Charges," page
13.) Transfer transaction fees are currently waived and such waiver is
permanent for Certificates issued before termination of this waiver.
An administration fee will be deducted daily from the Participant's
interests in the Separate Account in the amount of .000274% (.10% per annum).
(See "Administration Fees," page 13.)
Daily deductions will be made for mortality and expense risks in the amount
of .003425% (1.25% per annum).(See "Mortality and Expense Risk Charge," page
13).
4
<PAGE>
A surrender charge (contingent deferred sales charge) may be deducted in the
event the Participant requests a full or partial surrender. The charge is
based on a graduated table of charges starting at 7% for Purchase Payments
credited within the calendar year of the surrender and decreasing 1% for each
preceding calendar year or part thereof from the date of receipt and declining
to 0% for Purchase Payments received earlier than the fourth calendar year
prior to the surrender. No charge will be made for that part of the first
surrender in a Certificate Year that does not exceed 10% from the
Participant's interest in the Separate Account and 10% from his or her
interest in the General Account. (See "Sales Charges," page 12.)
The Contract permits Security First Life to deduct a contract maintenance
charge of $27.50 plus $2.50 for each Series in which the Participant invests.
The fee is payable on each anniversary of the Certificate Date. Until further
notice, Security First Life will waive these administrative fees and this
reduction is permanent for Certificates issued prior to the termination or
reduction of the waiver. (See "Contract Maintenance Charge, page 13.")
Premium taxes payable to any state or other governmental agency may be
deducted from the Participant's Account when incurred. Premium taxes currently
range from 0% to 2.35% (3.5% in Nevada). Until further notice to the
Participant, Security First Life will waive deduction of premium taxes. (See
"Premium Taxes," page 12.)
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 14).
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 18.) 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 19.)
SURRENDERS
If permitted by the Plan and the Contract, 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 12 and "Transaction Charges,"
page 13.) In addition, the amounts surrendered, less any basis, 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 21.)
LOANS (SECTION 403(b) PLANS ONLY)
Participants whose Contracts are issued under a Plan which qualifies under
Section 403(b) of the Code may be eligible 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 16.) A default in the repayment of a loan may result in unrepaid
loan proceeds being considered a distribution for tax purposes (See "Federal
Income Tax Status," page 21.)
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 20.)
5
<PAGE>
FEE TABLES(1)(6)
PARTICIPANT TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Calendar
Years Between
Purchase Payment
and Surrender Percentage
---------------- ----------
<S> <C> <C>
(a) Contingent Deferred Sales Charge 0 7%
(as a percentage of amount 1 but not 2 6%
surrendered) 2 but not 3 5%
3 but not 4 4%
4 but not 5 3%
5 or more 0%
(b) Transaction Charge Lesser of $10 or 2% for
each surrender and $10
for annuitization
(i) Surrender or Annuitization
(ii) Transfer Charge (Currently $10 per
Waived) transfer
(c) Contract Maintenance Charge Maximum $55
(Currently Waived)
</TABLE>
SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE.
DEDUCTED DAILY FROM THE SEPARATE ACCOUNT.)
<TABLE>
<S> <C>
Administration Fee(2)..................................... .10% per annum
Mortality and Expense Risk Fees........................... 1.25% per annum
Total Separate Account Annual Expenses.................... 1.35% per annum
</TABLE>
FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Money Asset
Market Growth Manager Contrafund Index 500
Portfolio Portfolio Portfolio Portfolio Portfolio(3)
--------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
(a) Management Fee........ 0.21% 0.61% 0.64% 0.61% 0.13%
(b) Other Expenses
(After Expense
Reimbursement)(3)..... 0.09% 0.08% 0.10% 0.13% 0.15%
(c) Total Annual
Expenses.............. 0.30% 0.69% 0.74% 0.74% 0.28%
</TABLE>
<TABLE>
<CAPTION>
T. Rowe
Virtus Price
U.S. Govt. Growth Small
Income Bond & Income International Capitalization
Series Series Series Portfolio Portfolio
---------- ------ -------- ------------- --------------
<S> <C> <C> <C> <C> <C>
(a) Management Fee...... 0.47% 0.50% 0.50% 0.70% 0.85%
(b) Other Expenses...... 0.23% 0.40% 0.14% 0.35% 0.03%
(c) Total Annual
Expenses............ 0.70% 0.90% 0.64% 1.05% 0.88%
</TABLE>
6
<PAGE>
EXAMPLES(4)(5)
<TABLE>
<CAPTION>
SEPARATE CONDITIONS TIME PERIODS
ACCOUNT A PARTICIPANT WOULD PAY THE FOLLOWING EXPENSES ON A -------------------------------
SERIES $1,000 INVESTMENT ASSUMING 5% ANNUAL RETURN ON ASSETS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- ------------------------------------------------------------- ------ ------- ------- --------
<C> <S> <C> <C> <C> <C> <C>
Money (a) upon surrender at the end of the stated time period (a) $83 $102 $100 $205
Market
Portfolio
(b) if the Certificate WAS NOT surrendered (b) 17 52 90 195
(c) if you annuitize at the end of the applicable time period (c) 27 62 100 205
------------- ------------------------------------------------------------- --- ---- ---- ----
Growth SAME (a) 86 113 120 247
Portfolio
(b) 21 64 110 237
(c) 31 74 120 247
------------- ------------------------------------------------------------- --- ---- ---- ----
Asset SAME (a) 87 115 122 252
Manager
Portfolio
(b) 21 65 112 242
(c) 31 75 122 252
------------- ------------------------------------------------------------- --- ---- ---- ----
Contrafund SAME (a) 87 115 122 252
Portfolio
(b) 21 65 112 242
(c) 31 75 122 252
------------- ------------------------------------------------------------- --- ---- ---- ----
Index SAME (a) 82 101 99 203
500
Portfolio
(b) 17 51 89 193
(c) 27 61 99 203
------------- ------------------------------------------------------------- --- ---- ---- ----
Virtus U.S. SAME (a) 86 114 120 248
Govt.
Income
Series
(b) 21 64 110 238
(c) 31 74 120 248
------------- ------------------------------------------------------------- --- ---- ---- ----
Bond SAME (a) 88 119 130 268
Series
(b) 23 70 120 258
(c) 33 80 130 268
------------- ------------------------------------------------------------- --- ---- ---- ----
T. Rowe SAME (a) 86 112 117 242
Price
Growth &
Income
Series
(b) 20 62 107 232
(c) 30 72 117 242
------------- ------------------------------------------------------------- --- ---- ---- ----
International SAME (a) 88 119 129 266
Portfolio
(b) 23 70 119 256
(c) 33 80 129 266
------------- ------------------------------------------------------------- --- ---- ---- ----
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SEPARATE CONDITIONS TIME PERIODS
ACCOUNT A PARTICIPANT WOULD PAY THE FOLLOWING EXPENSES ON A -------------------------------
SERIES $1,000 INVESTMENT ASSUMING 5% ANNUAL RETURN ON ASSETS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------- ------------------------------------------------------------- ------ ------- ------- --------
<C> <S> <C> <C> <C> <C> <C>
Small SAME (a) 87 115 122 252
Capitalization
Portfolio
(b) 21 65 112 242
(c) 31 75 122 252
-------------- ------------------------------------------------------------- --- ---- ---- ----
</TABLE>
EXPLANATION OF FEE TABLE 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 12.
2. Security First Life has determined to voluntarily waive its administration
fee to .10% per annum. Absent this waiver, the fee would have been .15% per
annum. This may be terminated at any time, but any change in this waiver
will not affect Certificates issued prior to the change.
3. The investment adviser to the Index 500 Portfolio voluntarily reimbursed
certain expenses of the Portfolio. If there had been no reimbursement,
total expenses would have been 0.43% (see the Variable Insurance Products
Fund II prospectus for more information).
4. The examples assume that there were no transactions that would result in
the imposition of a Transaction Charge (other than in connection with the
assumed redemption or annuitization at the end of the periods shown).
Contract Maintenance Charges, which vary from $30 to $55 annually depending
on how many Series the Participant has invested in, are not reflected in
the examples because they are currently waived. Premium taxes are not
reflected. Presently, premium taxes ranging from 0% to 2.35% (3.5% in
Nevada) may be deducted from each Purchase Payment, or upon annuitization.
Until further notice, Security First Life currently absorbs these charges.
5. The examples reflect the fact that a purchase payment withdrawn at the end
of a 1 year period will necessarily be withdrawn in the calendar year
following the calendar year of the purchase payment and thus will incur a
surrender charge of 6% rather than the maximum of 7%. Similarly, the data
for the 3-year periods reflect a surrender charge of 4%.
6. NEITHER THE TABLE NOR THE EXAMPLES ARE REPRESENTATIONS OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
8
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following table sets forth condensed financial information on
Accumulation Units respecting contracts issued under this prospectus through
the Separate Account. The 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. 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>
PERIOD ENDED
SEPARATE ACCOUNT SERIES* DECEMBER 31, 1996
------------------------ -----------------
<S> <C>
Series B (Bond Series)
Beg. AUV $ (10/31/96)..................................... 8.32
End. AUV $................................................ 8.37
End. No. Qualified AUs.................................... 228,651
Series G. (T. Rowe Price Growth and Income Series)
Beg. AUV $ (10/31/96)..................................... 13.79
End. AUV $................................................ 14.50
End. No. Qualified AUs.................................... 2,180,227
Series FA (Asset Manager)
Beg. AUV $ (10/31/96)..................................... 6.54
End. AUV $................................................ 6.74
End. No. Qualified AUs.................................... 4,090,633
Series FG (Growth Portfolio)
Beg. AUV $ (10/31/96)..................................... 7.89
End. AUV $................................................ 8.05
End. No. Qualified AUs.................................... 2,743,175
Series FI (Index 500 Portfolio)
Beg. AUV $ (10/31/96)..................................... 8.15
End. AUV $................................................ 8.57
End. No. Qualified AUs.................................... 548,320
Series FM (Money Market Portfolio)
Beg. AUV $ (10/31/96)..................................... 5.59
End. AUV $................................................ 5.63
End. No. Qualified AUs.................................... 121,370
Yield..................................................... 3.95%
</TABLE>
- - -----------------------
AUV--Accumulated Unit Value
AUs--Accumulated Units
*These are the only Series which had units outstanding for the period ended
December 31, 1996
PERFORMANCE
Security First Life from time to time will advertise the yield and effective
yield on 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 Series invested in 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. 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 12 and
"Transaction Charges," page 13. 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 do 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.
9
<PAGE>
FINANCIAL INFORMATION
Financial statements of Security First Life are contained in the Statement
of Additional Information. The financial statements of the Separate Account
are not included in this Statement of Additional Information because, as of
the date hereof, the sale of Contracts had not commenced and, as a result, the
Separate Account had no assets and no liabilities attributable to the
Contracts.
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"). The outstanding voting common stock of SFG is owned by
London Insurance Group, Inc., a Canadian insurance service corporation and a
publicly traded subsidiary of the Trilon Financial Corporation of Toronto,
Canada. Security First Life is authorized to transact 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 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 Contract, 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 18.)
The Funds consist of (i) the Money Market Portfolio and Growth 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 Bond Series, T. Rowe Price Growth and Income
Series and Virtus U.S. Government Income Series of the Security First Trust;
(iv) the International Portfolio of the Scudder Variable Life Investment Fund
and (v) the Small Capitalization Portfolio of The Alger American Fund. The
shares of each Fund are purchased, without sales charge, for the corresponding
Series at the net asset value per share next for 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.
10
<PAGE>
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
prior 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.
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.
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 has a
number of series, three of which are available under the Contracts:
Virtus U.S. Government Income Series seeks to provide current income. The
Series pursues this objective by investing in a professionally managed,
diversified portfolio limited primarily to U.S. government securities.
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 Bond Series' assets that
may be invested in common and preferred stocks.
T. Rowe Price 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 Management, a subsidiary of SFG and an affiliate of Security First
Life and Security First Financial, Inc., provides investment advice and
management services to the three series of Security First Trust described
above. Under subadvisory agreements with Security Management, Price Associates
provides investment management services to the Bond Series and T. Rowe Price
Growth and Income Series and Virtus provides investment management services to
the Virtus U.S. Government Income Series.
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
11
<PAGE>
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.
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. 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 22.
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 and The Alger American Fund 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 the principal underwriter for the Contract. Security First Financial, Inc.,
is a Delaware corporation and a subsidiary of SFG.
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
Security First Life represents that the charges deducted under the Contract,
described below, are, in the aggregate, reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by
Security First Life.
Charges under the Contract may be assessed for the following: (i) premium
taxes; (ii) surrenders, part of which may be deemed to be a sales charge;
(iii) administration fees; (iv) contract maintenance charge; (v) certain
transactions; and (vi) assumption of mortality and expense risks with respect
to the Separate Account. These charges may not be changed under the Contract,
and Security First Life may profit from certain of these charges.
12
<PAGE>
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%
(3.50% in Nevada) of Purchase Payments or 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 they are
incurred. 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.
Up to 10% of the value of the Participant's Account in each of the Separate
Account and the General Account withdrawn in the first surrender in a calendar
year will not be subject to surrender charges ("Free Withdrawal Amount").
Amounts surrendered in excess of the Free Withdrawal Amount may be subject to
surrender charges, and each surrender will be subject to a transaction charge.
(See "Transaction Charges," page 13).
The amount credited to the Participant's Account with respect to each
Purchase Payment will be subject to a charge equal to the applicable
percentage of such amount at the time a full or partial surrender is made.
These charges amount to:
7% for Purchase Payments received in the calendar year of the surrender;
6% for Purchase Payments received in the calendar year before the
surrender;
5% for Purchase Payments received in the 2nd calendar year before the
surrender;
4% for Purchase Payments received in the 3rd calendar year before the
surrender;
3% for Purchase Payments received in the 4th calendar year before the
surrender;
0% for Purchase Payments received prior to the 4th calendar year before the
surrender.
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 by a factor derived from the above percentage charges, plus the
transaction 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 no event will surrender
charges imposed on Accumulation Units in a Participant's Account exceed an
amount equal to 9% of such Participant's Purchase Payments allocated to the
Separate Account. The effect of this varying schedule of percentage charges is
that amounts left in the Separate Account for longer periods of time are
subject to lower charges than amounts immediately surrendered.
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.
Surrender charges will be waived on a lump sum withdrawal if the Participant
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 prior to 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.
ADMINISTRATION FEES
An administration fee is deducted from the Owner's interest in the Separate
Account on a daily basis. Contract administration expenses include the cost of
policy issuance; salaries; rent; postage; telephone and travel expenses;
legal, administrative, actuarial and accounting fees; periodic reports; office
equipment; stationery; office space; and custodial expenses. These fees will
not exceed the cost of providing such administration services. There is no
necessary relationship between the amount of administrative charge imposed on
a given contract and the amount of expenses that may be attributable to that
Contract. Security First Life may
13
<PAGE>
voluntarily waive a portion of the administration fee. Until further notice,
Security First Life has determined to reduce its administration fee to .10%
per annum (.000274% deducted daily from the assets of the Separate Account).
This reduction in the administration fee is permanent for Certificates issued
prior to the termination or reduction of the waiver.
CONTRACT MAINTENANCE CHARGE
At the end of each Certificate year Security First Life may deduct a
contract maintenance charge. This fee will not exceed $27.50 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 $55. 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. Until further notice,
Security First Life will waive the deduction of contract maintenance charges,
and this waiver is permanent for Certificates issued prior to the termination
or change in this waiver.
TRANSACTION CHARGES
A $10 transaction charge will be deducted from the Participant's Account for
each conversion from a Series. Similarly, a $10 transaction charge will be
deducted from the Participant's Account upon annuitization of all or a portion
of the Participant's Account (see "Annuity Benefits," page 18). Similarly, in
the event of a 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. Conversion charges for conversions from
one series of the Separate Account to another Series of the Separate Account
are currently waived. This waiver is permanent for Certificates issued prior
to the termination or change in this waiver.
MORTALITY AND EXPENSE RISK CHARGES
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 20.) Further, 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 tables specified in the Contract are based. In addition, Security
First Life assumes the risk that the amount, if any, deducted for
administration fees and contract maintenance charges will be insufficient to
cover its actual costs for maintaining its Contracts. 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 these
risks, Security First Life will make a deduction of .003425% on a daily basis
(1.25% per year) from the value of the Separate Account assets funding the
Contract.
Distribution expenses for the Contract will be paid out of the general
assets and income of Security First Life. Such assets and income of Security
First Life include, among other things, the proceeds derived from mortality
and expense risk charges deducted from the Separate Account.
Security First Life may, in its discretion, voluntarily waive a portion of
the mortality and expense risk charges, which waiver may be terminated at any
time.
FREE LOOK PERIOD
The Contract provides for an initial "Free Look" period. The Participant has
the right to return the Contract within 20 days (or such longer period as
required by state law) after the Participant 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.
14
<PAGE>
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 contract
maintenance charge, transaction charges and the administration 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 SF 230) 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 21.) 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
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 which 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 retirement
Plans.
PURCHASE PAYMENTS
Purchase Payments may be made on an annual, semi-annual, quarterly, or
monthly basis, or at such intervals as may be agreed to by Security First
Life. The frequency of Purchase Payments may be changed if permitted by the
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 periodically sent to
the Participant.
TRANSFERS
Accumulation Units may be transferred among the Series of the Separate
Account or from the Separate Account to the General Account at any time. In
addition, Accumulation Units in the General Account may be transferred to the
Separate Account pursuant to reallocation elections described below or
pursuant to the following limitations: (i) transfers are limited to once per
Certificate year; (ii) unless otherwise permitted by Security First Life, the
total value transferred from the General Account may not exceed 20% of the
accumulated payment value of the Participant's interest in the General Account
and (iii) the amount transferred will be based upon accumulated payment value
and a proportional reduction will be made in the annuity value of the
Participant's interest in the General Account.
Transfer instructions may be communicated in writing or, if permitted by
Security First Life, by telephone. If telephone transfers 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 transferred at their respective values as next
computed after receipt of written or telephone instructions. Because
Accumulation Unit values are determined at the close of regular trading on the
New York Stock Exchange (currently 4:00 P.M. Eastern Time) on a Valuation
Date, transfer instructions received after that time will be effected as of
the next Valuation Date.
15
<PAGE>
Annuity Units may be transferred 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 transferred to the General
Account. However, amounts in the General Account that have not been applied to
a Fixed Annuity income option may be transferred to Annuity Units in one or
more Series of the Separate Account for a Variable Annuity payout. Transfers
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 transferred) must be transferred from any Series
of the Separate Account or from the General Account. The value of the
Accumulation and Annuity Units transferred will be calculated as of the close
of business on the date the transfer occurs.
DOLLAR COST AVERAGING
Security First Life offers a program for dollar cost averaging in which
Participants who have held their Contracts for a year or more and who have
Participant Accounts of $5,000 or more may participate. The program will
periodically transfer Accumulation Units from the Series invested in the Money
Market Portfolio of the Variable Insurance Products Fund to any of the other
Series Selected by the Participant. The program allows the Participant to
invest in non-money market Series over any period selected by the Participant
rather than investing in those Series all at once. Transfers may be made
monthly, quarterly, semi-annually, or annually in a minimum amount of $100,
and Security First Life reserves the right to limit the number of Series to
which transfers can be made (but there are not current limitations). A
Participant may terminate the program at any time on written notice to
Security First Life. There is no charge to participate in this program.
REALLOCATION ELECTION
One year after the Certificate Date and after the Participant's Account
amounts to $5,500 or more a Participant may elect in writing on a form
provided by Security First Life to systematically reallocate values invested
in Accumulation Units among the Series and in the General Account in order to
achieve an allocation ratio established by the Participant. Transfers will be
made annually on the third business day of the month in which the anniversary
of the Contract Date occurs. No transfer from the General Account shall exceed
20% of the Participant's interest invested in the General Account. Changes in
allocation ratios can be made once each Contract Year. Amounts transferred
from the General Account will be based on the accumulated payment value of the
Participant's interest in the General Account and a proportional reduction
will be made in the annuity value of the Participant's interest in the General
Account. There is no charge to participate in this program.
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 Code imposes
limits on the amounts, duration and repayment schedule for all such loans. If
the plan is subject to the requirements of Title 1 of the Employee Retirement
Income Security Act of 1974, eligibility for, and the terms and conditions of,
such loans may be further limited by the terms of the plan and will be
determined by the plan administrator or other designated plan official. 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. 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 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 to
the extent permitted by the Contract: (i) with respect to terms which apply to
Participants 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; 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.
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ASSIGNMENT
If permitted by the Plan and applicable law, the Contracts may be assigned
by the Participant, provided written notice of such assignment is received by
Security First Life. Even if valid, an assignment may constitute a taxable
event for the Participant. 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.
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 transfer.
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 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 regular trading on 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 administration fees and the
mortality and expense risk fees) 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 and applicable provisions of the Code, 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 21.) 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 next 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, unless the entire amount
allocated to such Series is being surrendered.
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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) trading on the New York Stock Exchange
is restricted by the SEC or such Exchange is closed for other than weekends or
holidays; (ii) the SEC has by order permitted such suspension; or (iii) an
emergency as determined by the SEC exists making disposal of portfolio
securities or valuation of assets of the Funds not reasonably practicable.
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.
Although care is taken to ensure the accuracy of allocations and transfers
to and within the Separate Account, the possibility of an error still exists.
Owners are asked to review their statements and confirmations of transactions
carefully and to promptly advise Security First Life of any discrepancy.
Allocations and transfers reflected in the statements will be considered final
at the end of 60 days from the date of the statement.
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 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 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
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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 the 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.
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 automatically applied. Changes in the optional form of Annuity
payment may be made at any time up to 31 days prior to the date on which
Annuity payments are to begin. Options 1 through 4 may be elected as either
Variable Annuities or Fixed Annuities, while Option 5 may be elected only as a
Fixed Annuity. The first 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
which 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 an individual. This option
offers the maximum level of monthly payments since there is no guarantee of a
minimum number of payments or of death benefits for Beneficiaries.
OPTION 2 -- LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
An Annuity payable monthly during the lifetime of an individual with a
guaranteed minimum number of monthly payments 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 death of the annuitant will stop when
Security First Life has paid out a total number of payments equal to the
minimum number of payments.
OPTION 4 -- JOINT AND LAST 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.
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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 3.50% 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.
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 transfers 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, and unless otherwise
provided in the Plan, the Contract will pay a death benefit to the Beneficiary
in accordance with the terms set forth below.
The Beneficiary may elect to receive the Participant's Account values as
either: (i) Annuity income under Annuity Income Options One, Two, or Five
described in Article 7 of the Contract, provided that an election of an
Annuity Income Option is subject to the following conditions; (a) payments
must begin within one year of the Participant's death (provided that under a
Qualified Contract the spouse of the Participant may delay commencement of
payments to the date on which the Participant would have attained age 70 1/2);
(b) the guaranteed period under Option Two or the designated period under
Option Five may not be longer than the Beneficiary's life expectancy under
applicable tables specified by the Internal Revenue Service; and (c) the
Annuity Value as of the date of the first Annuity income payment will be used
to determine the amount of the death benefit to be applied; or (ii) a lump sum
payout of the cash value, provided that this payout shall be made within five
(5) years of the date of death of the Participant.
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.
If the sole Beneficiary is the spouse of the Participant, the spouse may
elect to succeed to all rights of the Participant under this Contract. Except
as otherwise required by law or as required by the Plan, if there is more than
one Beneficiary living at the time of the Participant's death, each will share
in the proceeds of the death benefit equally, unless the Participant has
elected otherwise. If the Participant outlives all Beneficiaries, the death
benefit will be paid to the Participant's estate in a lump sum. No Beneficiary
shall have the right to assign, anticipate or commute any future payments
under any of the options, except as provided in the election or by law.
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Rights to the death benefit will pass as if the Participant outlived the
Beneficiary if: (i) the Beneficiary dies at the same time as the Participant;
or (ii) the Beneficiary dies within 15 days of the Participant's death and
prior to the date due proof of the Participant's death is received by Security
First Life. Due proof of death will be a certified death certificate, an
attending physician's statement, a decree of a court of competent jurisdiction
as to the finding of death, or such other documents as Security First Life
may, at its option, accept.
DEATH BENEFIT AFTER THE ANNUITY DATE
Unless otherwise provided in the Plan, 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 the 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 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, or the
requirements of Section 457 of the Code in the case of a Section 457 Plan, 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 Sections 401 and 403(b) plans and
IRAs, a distribution is includible in the year in which it is paid. In the
case of a 457 plan, 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 Sections 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 later of the calendar year in which
the employee attains age 70 1/2 or retires. Distributions under Sections 401,
403(b), 457 plans and IRAs 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 includable 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) if distribution is 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 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
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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
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 only to salary reduction contributions made after December 31, 1988 and
to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
effect rollovers or exchanges between Section 403(b) annuities.
Loans from annuity contracts are generally treated as taxable distributions
under the Code. There is an exception to this general rule for contracts
issued in connection with certain types of retirement plans, including section
403(b) contracts, provided that the conditions set forth in section 72(p) of
the Code and applicable regulations are met. Those conditions include limits
on the amounts of such loans, the term of loan and loan repayment schedule
requirements. Even if a loan meets such requirements when made, a subsequent
failure to satisfy them -- such as a failure to make repayment installments as
required -- could result in part or all of the loan proceeds being deemed to
be a distribution subject to current taxation and possible penalty tax. A tax
adviser should be consulted prior to requesting a loan from the Contract.
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, a
Section 403(a) annuity or an IRA. Distributions from a 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 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
distributions such as Annuity payments and full or partial surrenders (except
as noted below in connection with Section 401 and 403(b) plans). However,
recipients of distributions are allowed in some cases 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 the same as his or her social security number.
MULTIPLE CONTRACTS
Code Section 72(e)(11) provides that multiple deferred 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.
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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 Funds. Security First Life will mail to each Participant, at his 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 be 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 the value on the record date on that portion of the Participant's
Account then allocated to a Series for a Fund (or, after the Annuity Date, the
values maintained in that Series attributable to the Participant) by the net
asset value of a Fund share 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, 1997, 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
Net Investment Factor...................................................... 3
Annuity Payments........................................................... 3
Additional Federal Income Tax Information.................................. 6
Underwriters, Distribution of the Contracts................................ 7
Calculation of Performance Data............................................ 7
Voting Rights.............................................................. 9
Safekeeping of the Securities.............................................. 9
Servicing Agent............................................................ 10
Independent Auditors....................................................... 10
Legal Matters.............................................................. 10
State Regulation of Security First Life.................................... 10
Financial Statements....................................................... 10
</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.
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STATEMENT OF
ADDITIONAL INFORMATION
SECURITY FIRST LIFE SEPARATE ACCOUNT A
---------------------------------------------------------------
GROUP FLEXIBLE PAYMENT FIXED AND
VARIABLE ANNUITY CONTRACTS
---------------------------------------------------------------
SECURITY FIRST LIFE INSURANCE COMPANY
MAY 1, 1997
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus. A copy of the prospectus, dated May
1, 1997, may be obtained without charge by writing to Security First Life
Insurance Company, P.O. Box 92193, Los Angeles, California 90009 or by
telephoning (800)283-4536.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Insurance Company...................................................... 3
The Separate Account....................................................... 3
Net Investment Factor...................................................... 3
Annuity Payments........................................................... 3
Additional Federal Income Tax Information.................................. 5
Underwriters, Distribution of the Contracts................................ 6
Calculation of Performance Data............................................ 6
Voting Rights.............................................................. 8
Safekeeping of Securities.................................................. 8
Servicing Agent............................................................ 8
Independent Auditors....................................................... 8
Legal Matters.............................................................. 9
State Regulation of Security First Life.................................... 9
Financial Statements....................................................... 9
</TABLE>
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<PAGE>
THE INSURANCE COMPANY
Security First Life Insurance Company ("Security First Life"), a Delaware
corporation, is a wholly-owned subsidiary of Security First Group, Inc.
("SFG"). The common shares of SFG are held by London Insurance Group, Inc., a
Canadian insurance service corporation and publicly traded subsidiary of the
Trilon Financial Corporation of Toronto, Canada.
THE SEPARATE ACCOUNT
The Security First Life Separate Account A ("Separate Account") presently
funds the group variable annuity contracts issued by Security First Life on
Forms SF 224FL, SF 224R1, SF 226R1, SF 234, SF 236 and individual annuity
contracts on Form SF 135. These individual and group variable annuity
contracts are described in other prospectuses. The combination fixed and
variable contracts ("Contracts") described in this Statement of Additional
Information and related prospectus are distinct contracts from the above
described individual and group variable annuity contacts.
Amounts transferred to the Separate Account under the Contracts will be
invested in the securities of ten Funds: (i) the Money Market Portfolio and
Growth 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 Bond Series, T. Rowe Price
Growth and Income Series and Virtus U.S. Government Income Series of the
Security First Trust; (iv) the International Portfolio of the Scudder Variable
Life Investment Fund; and (v) the Small Capitalization Portfolio of The Alger
American Fund. The Separate Account is divided into a number of Series of
Accumulation and Annuity Units, which correspond respectively to these ten
funds.
NET INVESTMENT FACTOR
The Separate Account net investment factor is an index of the percentage
change (adjusted for distributions by the Funds and the deduction of the
mortality and expense risk fees and the administration fees) in the net asset
value of the Fund in which a particular Series is invested, since the
preceding Business Day. The Separate Account net investment factor for each
series of Accumulation Units is determined for any Business Day by dividing
(i) the net asset value of a share of the Fund which is represented by such
Fund at the close of the business on such day, plus the per share amount of
any distributions made by such fund on such day by (ii) the net asset value of
fund share determined as of the close of business on the preceding Business
Day and then subtracting from this result the mortality and expense risk fees
and the administration fees factor of .003699% for each calendar day between
the preceding Business Day and the end of the current Business Day.
ANNUITY PAYMENTS
The primary theory of a variable annuity having underlying assets chiefly
invested in a portfolio of common stocks is to provide Annuitants with Annuity
payments which will tend to remain level during a period when the economy is
relatively stable and to provide increased Annuity payments during periods of
economic growth and inflation. It is believed that the value of such Separate
Account investment will, over the long term, tend to reflect changes in the
general economic price level. Historically, the value of a diversified
portfolio of common stocks held for an extended period of time has tended to
rise during the periods of economic growth and inflation. However, there is no
exact correlation between the two. In some periods, the value of a common
stock portfolio has declined while the cost of living has increased.
The primary theory of a variable annuity having underlying assets chiefly
invested in fixed-income securities (such as the Bond Series) is to provide
Annuitants with annuity payments which will be higher in amount than those
provided by conventional Fixed Annuities. It should be recognized, however,
that a portfolio consisting of non-convertible fixed-income securities and
which is designed to obtain a high level of current yield involves market
risks that are not found in a fixed annuity and that differ from those found
in a variable annuity invested primarily in common and preferred stocks.
Certain securities (high yield bonds) in the portfolio will be very sensitive
to adverse economic changes and corporate developments. Adverse publicity and
investor perceptions,
3
<PAGE>
whether or not based on fundamental analysis, may decrease the values and
liquidity of high yield bonds, especially in a thin market. In addition,
periods of economic uncertainty and change may result in increased volatility
of both the market prices of high yield bonds and the fund's net asset value.
The market value of non-convertible fixed-income securities usually reflects
yields then generally available in securities of similar quality and type.
Based upon historical analysis, when interest rates decline, the market value
of a portfolio already invested at higher interest rates may be expected to
rise if such securities are not subject to call at the option of the issuer.
Conversely, when such interest rates increase, the market value of a portfolio
already invested at lower interest rates may be expected to decline. The Asset
Manager Portfolio, Bond Series and T. Rowe Price Growth and Income Series may,
pursuant to the investment policies, invest a significant portion of their
assets in long-term fixed-income securities. Because of this, Participants who
select one of these series as the basis for Annuity Payments should recognize
that Annuity Payments may decrease during periods when interest rates and
general prices are rising.
Participants should carefully consider which of the underlying series is best
suited to their long-term needs.
Basis of Variable Annuity Benefits
The Variable Annuity benefit rates used in determining Annuity Payments under
the Contract are based on actuarial assumptions, reflected in tables in the
Contract, as to the expected mortality and adjusted age and the form of Annuity
selected. The mortality basis for these tables is Security First Life's
Modified Select Annuity Mortality Table, projected to the year 2000 on
Projection Scale C, with interest at 4.25% for all functions involving life
contingencies and the portion of any period certain beyond 10 years, and 3.25%
for the first 10 years of any certain period. Adjusted age in those tables
means actual age to the nearest birthday at the time the first payment is due,
adjusted according to the following table:
<TABLE>
<CAPTION>
CALENDAR YEAR OF BIRTH ADJUSTED AGE IS
---------------------- ------------------
<S> <C>
Before 1916............................................ Actual Age
1916 - 1935............................................ Actual Age Minus 1
1936 - 1955............................................ Actual Age Minus 2
1956 - 1975............................................ Actual Age Minus 3
1976 - 1995............................................ Actual Age Minus 4
</TABLE>
Determination of Amount of Monthly Variable Annuity Payments for First Year
The Separate Account value used to establish the monthly Variable Annuity
Payment for the first year consists of the value of Accumulation Units of each
Series of the Separate Account credited to a Participant on the last day of the
second calendar week before the Annuity Date. The Contract contains tables
showing monthly payment factors and Annuity premium rates per $1,000 of
Separate Account value to be applied under Options 1 through 4.
At the beginning of the first payment year, an amount is transferred from the
Separate Account to Security First Life's General Account and level monthly
Annuity payments for the year are made out of the General Account. The amount
to be transferred is determined by multiplying the Annuity premium rate per
$1,000 set forth in the Contract tables by the number of thousands of dollars
of Separate Account Value credited to a Participant. The level monthly payment
for the first payment year is then determined by multiplying the amount
transferred (the "Annuity Premium") by the monthly payment factor in the same
table. In the event the Contract involved has Separate Account Accumulation
Units in more than one Series, the total monthly Annuity payment for the first
year is the sum of the monthly Annuity payments, determined in the same manner
as above, for each Series.
At the time the first year's monthly payments are determined, a number of
Annuity Units for each Separate Account Series is also established for the
Annuitant by dividing the monthly payment derived from that Series
4
<PAGE>
for the first year by the Separate Account Annuity Unit values for the Series
on the last Business Day of the second calendar week before the first Annuity
payment is due. The number of Annuity Units remains fixed during the Annuity
period unless Annuity Units are converted to another Series.
Determination of Amount of Monthly Variable Annuity Payments for Second and
Subsequent Years
As of each anniversary of the Annuity Date, Security First Life will
determine the amount of the monthly Variable Annuity Payments for the year
then beginning. Separate determinations will be made for each Separate Account
Series in which the Annuitant has Annuity Units, with the total Annuity
Payment being the sum of the payments derived from the Series. The amount of
monthly payments for any Separate Account series for any year after the first
will be determined by multiplying the number of Annuity Units for that Series
by the Annuity Unit value for that series for the Valuation Period in which
the first payment for the year is due. It will be Security First Life's
practice to mail Variable Annuity payments no later than seven days after the
last day of the Valuation Period upon which they are based and the monthly
anniversary thereof.
The objective of a Variable Annuity contract is to provide level payments
during periods when the economy is relatively stable and to reflect as
increased payments only the excess of investment results flowing from
inflation or an increase in productivity. The achievement of this objective
will depend, in part, upon the validity of the assumption that the net
investment return of the Separate Account equals the Assumed Investment Return
during periods of stable prices. Subsequent years' payments will be smaller
than, equal to or greater than the first year's payments depending on whether
the actual net investment return for the Separate Account is smaller than,
equal to or greater than the Assumed Investment Return.
Annuity Unit Values
The Separate Account annuity unit values for each Series was originally
established at $5 per unit. The value of an annuity unit for each Series for
any subsequent valuation period is determined by multiplying the value of an
annuity unit at the end of the preceding valuation period by the "Annuity
Change Factor" for the current valuation period. The Annuity Change Factor is
an adjusted measurement of the investment performance of the Series since the
end of the preceding valuation period. The Annuity Change Factor for any
valuation period is determined by dividing the value of an accumulation unit
at the end of the valuation period by the value of an accumulation unit at the
end of the immediately preceding valuation period and multiplying the result
by a neutralization factor.
Variable annuity payments for each year after the first reflect variations
in the investment performance of the Separate Account above and below an
assumed investment return. This assumed investment rate is included for
purposes of actuarial computations and does not relate to the actual
investment performance of the underlying Series. Therefore, the Assumed
Investment Return must be "neutralized" in computing the Annuity Change
Factor. The Interest Neutralization Factor is determined by dividing 1 by the
effective weekly equivalent of the assumed investment return previously
selected by the annuitant. For example, the Interest Neutralization Factor for
an assumed investment return of 4.25% is calculated as follows:
Interest Neutralization Factor: 1/[(1 + 0.0425)/1/52/] = 0.9991999
ADDITIONAL FEDERAL INCOME TAX INFORMATION
Security First Life is required to withhold federal income tax on any
Contract distributions to Participants (such as Annuity payments, lump sum
distributions or partial surrenders). However, except as noted below,
Participants are allowed in some cases to make an election not to have federal
income tax withheld. After such election is made with respect to Annuity
payments, an Annuitant may revoke the election at any time, and thereafter
commence withholding. In such a case, Security First Life will notify the
payee at least annually of his or her right to change such election.
5
<PAGE>
The withholding rate followed by Security First Life will be applied only
against the taxable portion of the Contract distributions. Federal tax will be
withheld from Annuity payments pursuant to the recipient's withholding
certificate. If no withholding certificate is filed with Security First Life,
federal tax will be withheld from Annuity payments on the basis that the payee
is married with three withholding exemptions. Federal tax on the taxable
portion of a partial or total surrender (i.e., non-periodic distribution)
generally will be withheld at a flat rate 10% rate. In the case of a plan
qualified under Sections 401(a) or 403(b) of the Code, if the balance to the
credit of a participant in a plan is distributed within one taxable year to
the recipient ("total distribution"), the amount of withholding will
approximate the federal income tax on a lump sum distribution. If a total
distribution is made from such a plan or a tax-sheltered annuity on account of
the Participant's death, the amount of withholding will reflect the exclusion
from federal income tax for employer-provided death benefits.
Security First Life will be 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 new 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 distributions
required by the minimum distributions 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 new 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 the same as his or her Social Security number. If the
payee elects not to have federal income tax withheld on an Annuity payment or
a non-periodic distribution and a correct TIN has not been provided, such
election is ineffective, and such payment will be subject to withholding as
noted above.
Obtaining Tax Advice
It should be recognized that the federal income tax information in the
prospectus and this Statement of Additional Information is not exhaustive and
is for information purposes only. The discussions do 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.
UNDERWRITERS, DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold as a continuous offering by individuals who are
appropriately licensed as insurance agents of Security First Life for the sale
of life insurance and variable annuity contracts in the state where the sale
is made. In addition, these individuals will be registered representatives of
the principal underwriter, Security First Financial, Inc., or of other broker-
dealers registered under the Securities Exchange Act of 1934 whose registered
representatives are authorized by applicable law to sell variable annuity
contracts issued by Security First Life. Commissions on sales of contracts
range from 0% to 7.5%. Agents are paid from the General Account of Security
First Life. Such commissions bear no direct relationship to any of the charges
under the Contracts. No direct underwriting commissions are paid to Security
First Financial, Inc.
CALCULATION OF PERFORMANCE DATA
a. Money Market Portfolio. The yield of the Money Market Portfolio of the
Separate Account for the seven day period ended December 31, 1996 was 3.95%.
This yield was computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance
of one accumulation unit of the Series at the beginning of a seven-day base
period, subtracting a hypothetical charge reflecting deductions from account
values, and dividing the difference by the value of the account at the
6
<PAGE>
beginning of the base period to obtain the base period return, and multiplying
the base period return by (365/7) with the resulting yield figure carried to a
least the nearest hundredth of one percent.
The effective yield of the Money Market Portfolio over the same period was
4.03%. This was computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance
of one accumulation unit of the Series at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from account values,
and dividing the difference by the value of the account at the beginning of
the base period to obtain the base period return, and then compounding the
base period return by adding 1, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result, according to the following
formula:
EFFECTIVE YIELD = (BASE PERIOD RETURN + 1)/365/7/ - 1.
b. Other Series. The average annual returns of the other Series of the
Separate Account are computed by finding the average annual compounded rates
of return over the specified periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1 + T)/n/ = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years in the period
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period (or fractional portion thereof)
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.
For periods occurring prior to commencement of operations of a Series of the
Separate Account, the performance computed will be derived from that of the
corresponding underlying Fund, adjusted for all Contract charges applicable to
the Separate Account. The inception date, if applicable, will be that of the
underlying Fund in such cases. Advertisements will always include total return
data for one, five and ten year periods (or since inception) but may include
other periods as well.
On the foregoing basis, the derived total return data for the Series other
than the Money Market Portfolio for periods ending December 31, 1996 are as
follows:
7
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
INCEPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS TO DATE
------ ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Growth Portfolio.................. 13.29% 14.36% 13.81% 13.80% 13.46%
(10/09/86)
Asset Manager Portfolio........... 13.19% 6.64% 9.91% N/A 10.34%
(09/06/89)
Index 500 Portfolio............... 21.31% 17.95% N/A N/A 15.73%
(08/27/92)
Bond Series....................... 1.53% 3.73% 4.89% 5.58% 7.45%
(08/01/79)
T. Rowe Price Growth and Income 20.16% 16.53% 13.98% 13.00% 14.04%
Series........................... (08/01/79)
Contrafund Portfolio.............. 19.81% N/A N/A N/A 28.84%
(01/03/95)
Small Capitalization Portfolio.... 2.87% 11.51% 9.67% N/A 18.86%
(09/21/88)
International Portfolio........... 13.38% 6.79% 9.70% N/A 8.58%
(05/01/87)
Virtus U.S. Government Income 2.26% 3.05% N/A N/A 2.73%
Series........................... (05/19/93)
</TABLE>
Certain expenses of the Index 500 Portfolio have been reimbursed by the
portfolio's investment adviser. Reimbursement of expenses to a series
increases average annual total returns, and repayment of such reimbursements
reduces these returns.
VOTING RIGHTS
Unless otherwise restricted by the Plan under which a Contract is issued,
each Participant will have the right to instruct Security First Life with
respect to voting the Fund shares which are the assets underlying the
Participant's interest in the Separate Account, at all regular and special
shareholder meetings. An Annuitant's voting power with respect to Fund shares
held by the Separate Account declines during the time the Annuitant is
receiving a Variable Annuity based on the investment performance of the
Separate Account, because amounts attributable to the Annuitant's interest are
being transferred annually to the General Account to provide the variable
payments.
SAFEKEEPING OF SECURITIES
All assets of the Separate Account are held in the custody of Security First
Life. Security First Life's principal offices are located at 11365 West
Olympic Boulevard, Los Angeles, CA 90064. The assets of each Separate Account
Series will be kept physically segregated by Security First Life and held
separate from the assets of any other firm, person or corporation. Additional
protection for the assets of the Separate Account is afforded by fidelity
bonds covering all of Security First Life's officers and employees.
SERVICING AGENT
An Administrative Services Agreement has been entered into between Security
First Life and SFG under which the latter has agreed to perform certain of the
administrative services relating to the Contracts and for the Separate
Account. SFG performs substantially all of the recordkeeping and
administrative services for the Separate Account.
INDEPENDENT AUDITORS
The consolidated financial statements of Security First Life Insurance
Company as of December 31, 1996, and 1995, and for each of the two years in
the period ended December 31, 1996, and the financial statements of Security
First Life Separate Account A as of December 31, 1996, and 1995, and for each
of the two years in the
8
<PAGE>
period ended December 31, 1996, which are included in the prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon, and are included in reliance
upon such reports given on their authority of such firm as experts in
accounting and auditing. Ernst & Young LLP is located at 515 South Flower
Street, Suite 1800, Los Angeles, California 90071.
LEGAL MATTERS
Legal matters concerning federal securities laws applicable to the issue and
sale of the Variable Annuity contracts have been passed upon by Routier and
Johnson, P.C., 1700 K Street, N.W., Washington, D.C. 20006.
STATE REGULATION OF SECURITY FIRST LIFE
Security First Life is subject to the laws of the State of Delaware
governing insurance companies and to regulation by the Delaware Commissioner
of Insurance. An annual statement, in a prescribed form, is filed with the
Commissioner on or before March 1 each year covering the operations of
Security First Life for the preceding year and its financial condition on
December 31 of such year. Security First Life's books and assets are subject
to review or examination by the Commissioner or his agents at all times, and a
full examination of its operations is usually conducted by the National
Association of Insurance Commissioners at least once in every three years.
Security First Life was last examined as of December 31, 1993. While Delaware
insurance law prescribes permissible investments for Security First Life, it
does not prescribe permissible investments for the Separate Account, nor does
it involve supervision of the investment management or policy of Security
First Life.
In addition, Security First Life is subject to the insurance laws and
regulations of other jurisdictions in which it is licensed to operate. State
insurance laws generally provide regulations for the licensing of insurers and
their agents, govern the financial affairs of insurers, require approval of
policy forms, impose reserve requirements and require filing of an annual
statement. Generally, the insurance departments of these other jurisdictions
apply the laws of Delaware in determining permissible investments for Security
First Life.
FINANCIAL STATEMENTS
The financial statements of Security First Life contained herein should be
considered only for the purposes of informing investors as to its ability to
carry out the contractual obligations as depositor under the Contracts as
described elsewhere herein and in the prospectus. The financial statements of
the Separate Account are also included in this Statement of Additional
Information.
9
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Security First Life Insurance Company
and Contract Owners
Security First Life Separate Account A
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Security First Life Separate Account A
(comprised of Series B, G, T, P, I, FA, FG, FI, FO, FM, SU, SV, AS, SI, FC and
FE) as of December 31, 1996, and the related statements of operations for the
year then ended and changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of the
Separate Account's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence with
the respective mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security First Life Separate
Account A (comprised of the above referenced Series) at December 31, 1996, the
results of their operations for the year then ended, and the changes in their
net assets for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Los Angeles, California
April 11, 1997
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments
Security First Trust - Bond Series (2,522,439 shares at
net asset value of $3.82 per share; cost $9,900,030) $9,625,339
Security First Trust - Growth and Income Series
(10,449,456 shares at net asset value of $13.18 per
share; cost $116,791,052) $137,726,498
T. Rowe Price Growth Stock Fund, Inc. (2,219,465 shares at
net asset value of $26.18 per share; cost $48,705,613) $58,105,586
T. Rowe Price Prime Reserve Fund, Inc. (2,520,315 shares
at net asset value of $1.00 per share; cost $2,520,315) $2,520,315
T. Rowe Price International Fund, Inc. (972,560 shares at
net asset value of $13.80 per share; cost $12,105,152) $13,421,331
Receivable from Security First Life Insurance Company for
purchases 8,236 146,633 44,930 495 38,761
Receivable from Mutual Funds 43,128
Other assets 207 36
----------- ------------ ----------- ---------- -----------
TOTAL ASSETS 9,633,575 137,916,259 58,150,723 2,520,810 13,460,128
</TABLE>
1
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance Company for
mortality and expense risk $ 9,912 $ 137,650 $ 48,065 $ 2,158 $ 10,870
Payable to Security First Life Insurance Company for
redemptions 1,063 6,568 18,890 160 1,135
Payable to Mutual Funds 8,236 187,705
Other liabilities 971 9,288 64
---------- ------------ ----------- ---------- -----------
TOTAL LIABILITIES 20,182 341,211 66,955 2,382 12,005
NET ASSETS
Cost to Investors
Series B Accumulation Units 9,888,084
Series G Accumulation Units 116,639,602
Series T Accumulation Units 48,683,795
Series P Accumulation Units 2,518,428
Series I Accumulation Units 12,131,944
Accumulated Undistributed Income (Loss)
Net unrealized appreciation (depreciation) (274,691) 20,935,446 9,399,973 1,316,179
---------- ------------ ----------- ---------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING UNITS OF CAPITAL $9,613,393 $137,575,048 $58,083,768 $2,518,428 $13,448,123
========== ============ =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 566,443 $ 8,157,311 $ 4,601,929 $ 121,876 $ 359,681
Other income (expense) (4,967) 71,186 14,103 332 1,256
----------- ------------ ----------- ------------ -----------
561,476 8,228,497 4,616,032 122,208 360,937
EXPENSES
Charges for mortality and expense risk 74,638 905,897 448,656 22,573 98,590
----------- ------------ ----------- ------------ -----------
Net Investment Income 486,838 7,322,600 4,167,376 99,635 262,347
REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) (53,594) 2,094,280 1,100,192 99,160
Unrealized appreciation (depreciation) of investments (280,479) 8,500,561 4,324,599 1,142,988
----------- ------------ ----------- ------------ -----------
Net investment gains (losses) (334,073) 10,594,841 5,424,791 1,242,148
----------- ------------ ----------- ------------ -----------
Increase in net assets resulting from operations $ 152,765 $ 17,917,441 $ 9,592,167 $ 99,635 $ 1,504,495
=========== ============ =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 486,838 $ 7,322,600 $ 4,167,376 $ 99,635 $ 262,347
Net realized investment gains (losses) (53,594) 2,094,280 1,100,192 99,160
Net unrealized investment appreciation
(depreciation) during the year (280,479) 8,500,561 4,324,599 1,142,988
----------- ------------ ----------- ------------ -----------
Increase in net assets resulting from operations 152,765 17,917,441 9,592,167 99,635 1,504,495
Increase (decrease) in net assets resulting from
capital unit transactions 2,936,243 49,078,301 4,958,300 (204,492) 3,609,567
----------- ------------ ----------- ------------ -----------
Total increase (decrease) 3,089,008 66,995,742 14,550,467 (104,857) 5,114,062
Net Assets at beginning of year 6,524,385 70,579,306 43,533,301 2,623,285 8,334,061
----------- ------------ ----------- ------------ -----------
Net Assets at end of year $ 9,613,393 $137,575,048 $58,083,768 $ 2,518,428 $13,448,123
=========== ============ =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 316,772 $ 1,514,725 $ 1,806,995 $ 119,938 $ 194,233
Net realized investment gains (losses) (36,046) 1,021,117 764,380 17,327
Net unrealized investment appreciation during the year 560,723 12,817,755 6,849,189 506,270
----------- ------------ ----------- ------------ -----------
Increase in net assets resulting from operations 841,449 15,353,597 9,420,564 119,938 717,830
Increase (decrease) in net assets resulting from
capital unit transactions 577,456 6,487,662 4,713,786 (98,627) 2,662,352
----------- ------------ ----------- ------------ -----------
Total increase 1,418,905 21,841,259 14,134,350 21,311 3,380,182
Net Assets at beginning of year 5,105,480 48,738,047 29,398,951 2,601,974 4,953,879
----------- ------------ ----------- ------------ -----------
Net Assets at end of year $ 6,524,385 $ 70,579,306 $43,533,301 $ 2,623,285 $ 8,334,061
=========== ============ =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1996
SCHEDULE I
<TABLE>
<CAPTION>
Unrealized
Carrying Appreciation
Name of Issue Shares Value (Depreciation) Cost
- - ------------------------------------------------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Security First Trust Bond Series - capital shares 2,522,439 $ 9,625,339 $ (274,691) $ 9,900,030
Security First Trust Growth and Income Series -
capital shares 10,449,456 $137,726,498 $20,935,446 $116,791,052
T. Rowe Price Growth Stock Fund, Inc. - capital
shares 2,219,465 $ 58,105,586 $ 9,399,973 $ 48,705,613
T. Rowe Price Prime Reserve Fund, Inc. - capital shares 2,520,315 $ 2,520,315 $ 2,520,315
T. Rowe Price International Stock Fund, Inc. -
capital shares 972,560 $ 13,421,331 $ 1,316,179 $ 12,105,152
</TABLE>
Note A The carrying value of the investments is the reported net asset value of
the investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
- - ----------------------------------------------- ----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments
Fidelity Investments - VIP Asset Manager
(5,407,112 shares at net asset value of $16.93
per share; cost $82,398,497) $91,542,442
Fidelity Investments - VIP Growth Portfolio
(3,620,363 shares at net asset value of $31.14
per share; cost $100,954,140) $112,738,113
Fidelity Investments - VIP Index 500 (352,569
shares at net asset value of $89.13 per
share; cost $27,786,069) $ 31,424,479
Fidelity Investments - VIP Overseas Portfolio
(558,623 shares at net asset value of $18.84
per share; cost $9,455,062) $10,524,466
Fidelity Investments - VIP Money Market Series
(17,192,778 shares at net asset value of $1.00
per share; cost $17,192,778) $ 17,192,778
Receivable from Security First Life Insurance
Company for purchases 121,964 207,355 138,152 5,693 182,166
Receivable from Mutual Funds 243,015
Other assets 12,642 72,055 51,649 28,129
----------- ------------ ----------- ----------- -----------
TOTAL ASSETS 91,677,048 113,017,523 31,614,280 10,558,288 17,617,959
</TABLE>
7
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life
Insurance Company for
mortality and expense risk $ 105,252 $ 124,805 $ 33,509 $ 11,093 $ 17,808
Payable to Security First Life
Insurance Company for redemptions 15,542 13,412 10,902 482 35,697
Payable to Mutual Funds 131,180 279,138 181,956 28,766
Other liabilities 7,338 17,846 7,939 231,985
----------- ------------ ----------- ----------- -----------
TOTAL LIABILITIES 259,312 435,201 234,306 40,341 285,490
NET ASSETS
Cost to Investors
Series FA Accumulation Units 82,273,791
Series FG Accumulation Units 100,798,349
Series FI Accumulation Units 27,741,564
Series FO Accumulation Units 9,448,543
Series FM Accumulation Units 17,332,469
Accumulated Undistributed Income
Net unrealized appreciation 9,143,945 11,783,973 3,638,410 1,069,404
----------- ------------ ----------- ----------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $91,417,736 $112,582,322 $31,379,974 $10,517,947 $17,332,469
=========== ============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 2,965,169 $ 3,436,248 $ 315,697 $ 128,217 $ 605,695
Other income 22,345 74,439 88,093 7,936 441
----------- ----------- ---------- -------- --------
2,987,514 3,510,687 403,790 136,153 606,136
EXPENSES
Charges for mortality and expense risk 694,704 844,001 184,777 91,509 130,974
----------- ----------- ---------- -------- --------
Net Investment Income 2,292,810 2,666,686 219,013 44,644 475,162
REALIZED AND UNREALIZED INVESTMENT GAINS
Realized investment gains 320,767 814,080 280,197 26,876
Unrealized investment appreciation during the year 5,114,840 5,048,213 2,889,708 819,437
----------- ----------- ---------- -------- --------
Net investment gains 5,435,607 5,862,293 3,169,905 846,313
----------- ----------- ---------- -------- --------
Increase in net assets resulting from operations $ 7,728,417 $ 8,528,979 $3,388,918 $890,957 $475,162
=========== =========== ========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 2,292,810 $ 2,666,686 $ 219,013 $ 44,644 $ 475,162
Net realized investment gains 320,767 814,080 280,197 26,876
Net unrealized investment appreciation
during the year 5,114,840 5,048,213 2,889,708 819,437
----------- ------------ ----------- -----------
Increase in net assets resulting from operations 7,728,417 8,528,979 3,388,918 890,957 475,162
Increase in net assets resulting from capital unit
transactions 39,808,589 59,753,701 21,470,058 4,778,724 8,469,934
----------- ------------ ----------- ----------- -----------
Total increase 47,537,006 68,282,680 24,858,976 5,669,681 8,945,096
Net Assets at beginning of year 43,880,730 44,299,642 6,520,998 4,848,266 8,387,373
----------- ------------ ----------- ----------- -----------
Net Assets at end of year $91,417,736 $112,582,322 $31,379,974 $10,517,947 $17,332,469
=========== ============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income (loss) $ 158,705 $ (137,817) $ 5,529 $ (22,807) $ 237,284
Net realized investment gains 64,929 93,864 36,253 6,514
Net unrealized investment appreciation
during the year 5,020,534 6,383,879 741,445 294,152
----------- ----------- ---------- ---------- ----------
Increase in net assets resulting from operations 5,244,168 6,339,926 783,227 277,859 237,284
Increase in net assets resulting from capital unit
transactions 13,466,719 24,403,159 4,791,886 2,585,161 4,276,144
----------- ----------- ---------- ---------- ----------
Total increase 18,710,887 30,743,085 5,575,113 2,863,020 4,513,428
Net Assets at beginning of year 25,169,843 13,556,557 945,885 1,985,246 3,873,945
----------- ----------- ---------- ---------- ----------
Net Assets at end of year $43,880,730 $44,299,642 $6,520,998 $4,848,266 $8,387,373
=========== =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SCHEDULE I
Carrying
Value Unrealized Cost
Name of Issue Shares (Note A) Appreciation (Note B)
- - --------------------------------------------------------------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fidelity Investments VIP Asset Manager - capital shares 5,407,112 $ 91,542,442 $ 9,143,945 $ 82,398,497
Fidelity Investments VIP Growth Portfolio - capital shares 3,620,363 $112,738,113 $11,783,973 $100,954,140
Fidelity Investments VIP Index 500 - capital shares 352,569 $ 31,424,479 $ 3,638,410 $ 27,786,069
Fidelity Investments Overseas Portfolio - capital shares 558,623 $ 10,524,466 $ 1,069,404 $ 9,455,062
Fidelity Investments VIP Money Market Fund - capital shares 17,192,778 $17,192,778 $ 17,192,778
</TABLE>
Note A The carrying value of the investments is the reported net asset value of
the investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
------------- ------------ ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Security First Trust - U.S. Government
Income Series (3,668,091 shares at net
asset value of $5.14 per share; cost
$18,765,072) $18,858,548
Security First Trust - Equity Series
(4,390,585 shares at net asset value of
$6.45 per share; cost $25,929,160) $28,309,435
Alger American Small Capitalization
Portfolio (498,003 shares at net asset
value of $40.91 per share; cost $20,377,148) $20,373,295
Scudder International Fund (154,138 shares at
net asset value of $13.25 per share; cost
$1,910,731) $2,042,335
Fidelity Investments - VIP Contra Fund
(1,816,726 shares at net asset value of
$16.56 per share; cost $26,529,894) $30,084,981
Fidelity Investments - VIP Equity Income
Portfolio (277,041 shares at net asset
value of $21.03 per share; cost $5,377,528) $5,826,163
Receivable from Security First Life Insurance
Company for purchases 8,187 12,939 59,561 5,418 105,755 173
Other assets 28,474 48,412 54,907 25,856 51,091
----------- ----------- ----------- ---------- ----------- ----------
TOTAL ASSETS 18,895,209 28,370,786 20,487,763 2,047,753 30,216,592 5,877,427
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance
Company for mortality and expense risk $ 19,998 $ 29,464 $ 22,494 $ 2,198 $ 33,220 $ 6,547
Payable to Security First Life Insurance
Company for redemptions 2,190 9,930 4,175 355 5,870 1,693
Payable to Mutual Funds 36,640 55,130 110,089 5,393 126,767 40,407
Other liabilities 805 289
------------ ----------- ------------ ----------- ------------ ------------
TOTAL LIABILITIES 58,828 95,329 136,758 8,235 165,857 48,647
NET ASSETS
Cost to investors
Series SU Accumulation Units 18,742,905
Series SV Accumulation Units 25,895,182
Series AS Accumulation Units 20,354,858
Series SI Accumulation Units 1,907,914
Series FC Accumulation Units 26,495,648
Series FE Accumulation Units 5,380,145
Accumulated undistributed income (loss)
Net unrealized appreciation (depreciation) 93,476 2,380,275 (3,853) 131,604 3,555,087 448,635
----------- ------------ ----------- ----------- ----------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $18,836,381 $28,275,457 $20,351,005 $ 2,039,518 $30,050,735 $ 5,828,780
=========== ============ =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
----------- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 779,578 $ 2,241,509 $ 40,591 $ 11,510 $ 66,761 $ 47,103
Other income (loss) 9,365 24,201 (10,321) 608 51,958 18,126
--------- ---------- -------- -------- ---------- --------
788,943 2,265,710 30,270 12,118 118,719 65,229
EXPENSES
Charges for mortality and expense risk 162,104 234,234 153,504 12,475 206,662 40,772
--------- ---------- -------- -------- ---------- --------
Net investment income (loss) 626,839 2,031,476 (123,234) (357) (87,943) 24,457
REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES)
Net realized investment gains 4,734 136,458 31,846 12,881 20,969 28,195
Unrealized investment appreciation (depreciation) (154,056) 1,247,963 88,899 121,032 3,462,652 402,870
--------- ---------- -------- -------- ---------- --------
Net investment gains (losses) (149,322) 1,384,421 120,745 133,913 3,483,621 431,065
--------- ---------- -------- -------- ---------- --------
Increase (decrease) in net assets
resulting from operations $ 477,517 $3,415,897 $ (2,489) $133,556 $3,395,678 $455,522
========= ========== ======== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
------------ ----------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (loss) $ 626,839 $ 2,031,476 $ (123,234) $ (357) $ (87,943) $ 24,457
Net realized investment gains 4,734 136,458 31,846 12,881 20,969 28,195
Net unrealized investment appreciation
(depreciation) during the year (154,056) 1,247,963 88,899 121,032 3,462,652 402,870
----------- ----------- ----------- ---------- ----------- ----------
Increase (decrease) in net assets
resulting from operations 477,517 3,415,897 (2,489) 133,556 3,395,678 455,522
Increase in net assets resulting from
capital unit transactions 9,107,385 11,774,074 15,547,005 1,523,514 20,780,230 4,568,738
----------- ----------- ----------- ---------- ----------- ----------
Total increase 9,584,902 15,189,971 15,544,516 1,657,070 24,175,908 5,024,260
Net Assets at beginning of year 9,251,479 13,085,486 4,806,489 382,448 5,874,827 804,520
----------- ----------- ----------- ---------- ----------- ----------
Net Assets at end of year $18,836,381 $28,275,457 $20,351,005 $2,039,518 $30,050,735 $5,828,780
=========== =========== =========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series SU Series SV Series AS/(1)/ Series SI/(1)/ Series FC/(1)/ Series FE/(1)/
---------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (loss) $ 281,296 $ 359,590 $ 4,899 $ (1,000) $ 82,558 $ 3,603
Net realized investment
gains (losses) (29,574) 13,023 26,373 304 26,862 452
Net unrealized investment
appreciation (depreciation)
during the year 436,539 1,352,775 (92,752) 10,571 92,436 45,765
---------- ----------- ---------- -------- ---------- ---------
Increase (decrease) in net
assets resulting from
operations 688,261 1,725,388 (61,480) 9,875 201,856 49,820
Increase in net assets
resulting from capital unit
transactions 4,043,705 6,807,136 4,867,969 372,573 5,672,971 754,700
---------- ----------- ---------- -------- ---------- ---------
Total increase 4,731,966 8,532,524 4,806,489 382,448 5,874,827 804,520
Net Assets at beginning of
year 4,519,513 4,552,962
---------- ----------- ---------- -------- ---------- ---------
Net Assets at end of year $9,251,479 $13,085,486 $4,806,489 $382,448 $5,874,827 $ 804,520
========== =========== ========== ======== ========== =========
</TABLE>
/(1)/ Series FC commenced operations May 16, 1995; Series AS and SI on May 22,
1995; and Series FE on May 25, 1995.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1996
SCHEDULE I
<TABLE>
<CAPTION>
Carrying Unrealized
Value Appreciation Cost
Name of Issue Shares (Note A) (Depreciation) (Note B)
- - ---------------------------------------------------------------------- --------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Security First Trust U. S. Government Series - capital shares 3,668,091 $18,858,548 $ 93,476 $18,765,072
Security First Trust Equity Series - capital shares 4,390,585 $28,309,435 $2,380,275 $25,929,160
Alger American Small Capitalization Portfolio - capital shares 498,003 $20,373,295 $ (3,853) $20,377,148
Scudder International Portfolio - capital shares 154,138 $ 2,042,335 $ 131,604 $ 1,910,731
Fidelity Investments VIP Contra Fund - capital shares 1,816,726 $30,084,981 $3,555,087 $26,529,894
Fidelity Investments VIP Equity Income Portfolio - capital shares 277,041 $ 5,826,163 $ 448,635 $ 5,377,528
</TABLE>
Note A The carrying value of the investments is the reported net asset value of
the investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 -- BASIS OF PRESENTATION
Security First Life Separate Account A (Separate Account) was established on May
29, 1980, as a separate account of Security First Life Insurance Company
(Security Life), the sponsor company, and is registered under the Investment
Company Act of 1940 as a unit investment trust. The Separate Account is
designed to provide annuity benefits pursuant to certain variable annuity
contracts (the Contracts) issued by Security Life.
In accordance with the terms of the Contracts, all payments allocated to the
Separate Account by the contract owners must be allocated to purchase shares of
any or all of four series of Security First Trust (the Trust), a Massachusetts
business trust, and twelve mutual funds (investment companies). The series of
the Trust are Bond Series, Growth and Income Series, Equity Series, and U.S.
Government Income Series and the mutual funds are T. Rowe Price Growth Stock
Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe Price International
Stock Fund, Inc., Alger American Small Capitalization Portfolio, Scudder
International Fund, and Fidelity Investments: VIP Asset Manager, VIP Growth
Portfolio, VIP Index 500, VIP Overseas Portfolio, VIP Contra Fund, VIP Equity
Income Portfolio and VIP Money Market Fund. The Trust and the investment
companies are registered as diversified, open-end management investment
companies under the Investment Company Act of 1940. The Separate Account is
correspondingly divided into sixteen series of Accumulation Units, Series B, G,
SU, SV, T, P, I, AS, SI, FA, FG, FI, FO, FC, FE and FM, relating to investments
in each of the investment companies, respectively.
All series of the Trust receive administrative services for a fee from Security
First Investment Management Corporation (Security Management). Security First
Financial, Inc. (Security Financial) is the principal underwriter for the
Contracts. Security Life, Security Management, and Security Financial are
wholly-owned subsidiaries of Security First Group, Inc. Investment advice is
provided to the Security First Trust Bond Series and Growth and Income Series by
T. Rowe Price Associates, Inc. and to the Security First Trust Equity and U. S.
Government Income Series by Virtus Capital Management.
19
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- BASIS OF PRESENTATION (CONTINUED)
The Separate Account and each series therein are administered and accounted for
as part of the business of Security Life, but the investment income and capital
gains and losses of each Separate Account series are identified with the assets
held for that series in accordance with the terms of the Contracts, without
regard to investment income and capital gains and losses arising out of any
other business Security Life may conduct.
The Separate Account incurs no liability for remuneration to directors, advisory
boards, officers or such other persons who may from time to time perform
services for the Separate Account.
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from these estimates.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS -- Investments are carried at fair value, which is
determined by multiplying the investment company's shares owned by the Separate
Account by the reported net asset value per share of each respective investment
company. Realized investment gains and losses are determined on the first-in,
first-out cost basis.
EXPENSES AND CHARGES -- The Separate Account accrues charges incurred for the
mortality and expense risk assumed by Security Life. The charges are calculated
daily by multiplying the value of the assets of the Separate Account by the
daily mortality and expense risk rate. Security Life has the option of calling
for payment of such charges at any time. The following table illustrates the
rates for the respective contracts:
<TABLE>
<CAPTION>
Contract Type Annual Rate Daily Rate
- - ------------------------------------------- ------------ ----------
<S> <C> <C>
SF 234; SF 89; SF 224FL;
SF 236FL; SF 1700 Contracts .89% .0000244
SF 135R; SF 135R2V; SF 226RI Contracts 1.25% .0000342
SF 135R2S Contracts 1.15% .0000315
SF 230; SF 224R1 contracts 1.35% .0000370
</TABLE>
The following charges are deducted from a contract holder's account by Security
Life as a capital transaction by reducing the separate account units held, and
such charges are not an expense of the Separate Account. An administration
charge (contract
20
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
charge) is deducted from each contract and paid to Security Life at the end of
each contract year prior to the annuity date, and when the entire contract value
is withdrawn on any date other than a contract anniversary. In the event that a
participant withdraws all or a portion of the participant's account, a
contingent deferred sales charge (CDSC) may be applied to the amount of the
contract value withdrawn to cover certain expenses relating to the sale of
contracts. The following table illustrates contract charges and CDSC with
respect to the various types of contracts:
<TABLE>
<CAPTION>
Maximum Contract
Contract Type Charge Per Year CDSC
- - ------------------ --------------- -------------------------------------
<S> <C> <C>
SF 236FL $12.00 Based on elapsed time since premium
received. Disappears on or before 6th
anniversary.
SF 224FL $40.00 Based on elapsed time since premium
received. Disappears on or before 6th
anniversary.
SF 1700 $42.50 Based on elapsed time since premium
received. Disappears on or before 6th
anniversary.
SF 224R1, SF 230 * Based on elapsed time since premium
received. Disappears on or before 5th
anniversary.
GROUP FORM
226RI $41.50 Seven percent of premium received.
Disappears on or before 6th
anniversary.
ALL OTHER GROUP $19.50 Five percent of premium received.
Disappears on or before 6th
anniversary.
SF 135R2V ** NONE
SF 135R2S, SF 135R2C ** Based on elapsed time since premium
received. Disappears after 7th year.
</TABLE>
* $55 (Currently being waived).
** 15% annually of average account value (currently being waived).
In addition, transaction charges of $10 are incurred for each surrender or
annuitization. Upon conversion of either accumulation or annuity units from one
series to another, a
21
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$10 conversion charge is incurred. The amount deducted for contract charges and
CDSC was $513,405 for the year ended December 31, 1996, and $273,809 for the
year ended December 31, 1995.
INCOME RECOGNITION AND REINVESTMENT -- Income is recognized as declared payable
by the investment companies. All distributions received are reinvested in the
investment companies.
NOTE 3 -- FEDERAL INCOME TAXES
The operations of the Separate Account form a part of, and are taxed with, the
operations of Security Life, which is taxed as a "life insurance company" under
the Internal Revenue Code, and as such, Security Life is liable for income
taxes, if any, which become payable with respect to the Separate Account's
operations.
Separate accounts are generally required to meet certain diversification
requirements for their assets. However, separate accounts which solely provide
benefits for "pension plan contracts" are exempt from the diversification
requirements. Pension plan contracts include: (i) tax qualified plans; (ii)
employee annuities; (iii) plans for employees of life insurance companies; (iv)
tax sheltered annuities of exempt organizations; (v) individual retirement
accounts or annuities, and (vi) deferred compensation plans of certain
governmental or tax-exempt organizations. The Contracts issued by Security Life
are offered in connection with both pension plan contracts and non-qualified
contracts, therefore the Separate Account is subject to the diversification
requirements. Management believes that the Separate Account has met the
diversification requirements.
NOTE 4 -- CAPITAL TRANSACTIONS
Additions and deductions to Units of Capital consisting of the effect of capital
unit transactions were as follows:
<TABLE>
<CAPTION>
ADDITIONS TO CAPITAL DEDUCTIONS FROM CAPITAL
$ UNITS $ UNITS
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
SF 135R; SF 226RI CONTRACTS
- - ----------------------------
SERIES B ACCUMULATION UNITS 1,457,968 173,008 288,184 34,370
</TABLE>
22
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- CAPITAL TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
ADDITIONS TO CAPITAL DEDUCTIONS FROM CAPITAL
$ UNITS $ UNITS
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
SERIES G ACCUMULATION UNITS 14,597,742 1,163,010 1,544,237 124,761
SERIES FA ACCUMULATION UNITS 15,083,889 2,386,263 4,817,387 761,858
SERIES FG ACCUMULATION UNITS 25,437,990 3,316,801 3,090,860 403,159
SERIES FI ACCUMULATION UNITS 14,245,149 1,834,275 1,074,884 134,904
SERIES FO ACCUMULATION UNITS 1,140,778 176,902 169,596 26,298
SERIES FM ACCUMULATION UNITS 26,932,483 4,853,215 20,523,960 3,697,741
SERIES SU ACCUMULATION UNITS 2,374,207 434,190 109,775 20,040
SERIES AS ACCUMULATION UNITS 16,999,648 2,501,793 1,452,643 213,708
SERIES SI ACCUMULATION UNITS 1,670,305 266,302 146,791 23,697
SERIES FC ACCUMULATION UNITS 21,801,795 3,201,615 1,021,565 149,159
SERIES FE ACCUMULATION UNITS 4,806,768 746,267 238,030 36,019
SERIES SV ACCUMULATION UNITS 1,544,460 285,804 20,817 3,618
SF 234; SF 224FL; SF 236FL; SF 1700 CONTRACTS
- - -------------------------------------------------
SERIES B ACCUMULATION UNITS 931,484 51,367 1,065,392 59,149
SERIES G ACCUMULATION UNITS 13,106,032 341,108 7,100,392 185,366
SERIES T ACCUMULATION UNITS 11,430,218 348,446 6,471,918 196,812
SERIES P ACCUMULATION UNITS 653,049 49,155 857,541 64,727
SERIES I ACCUMULATION UNITS 5,543,290 691,905 1,933,723 240,937
SERIES FA ACCUMULATION UNITS 4,879,721 801,224 2,064,517 336,514
SERIES FG ACCUMULATION UNITS 11,230,260 1,527,712 2,716,606 362,785
SERIES FI ACCUMULATION UNITS 4,604,737 613,367 791,378 103,660
SERIES FM ACCUMULATION UNITS 1,759,008 317,763 1,732,158 312,636
SF 135R2S
- - -------------------------------------------------
SERIES SU ACCUMULATION UNITS 7,593,093 1,416,303 750,140 139,104
SERIES SV ACCUMULATION UNITS 11,598,037 1,831,596 1,347,606 210,583
SERIES FM ACCUMULATION UNITS 10,241,054 1,826,561 9,046,976 1,610,850
SERIES FG ACCUMULATION UNITS 8,059,593 1,075,155 808,401 107,079
SERIES FO ACCUMULATION UNITS 4,116,962 747,815 309,420 56,136
SF 224R1; SF 230
- - -------------------------------------------------
SERIES B ACCUMULATION UNITS 1,957,058 257,080 56,691 28,429
SERIES G ACCUMULATION UNITS 30,537,423 2,308,139 518,267 127,912
SERIES FA ACCUMULATION UNITS 27,219,472 4,255,909 492,589 165,276
SERIES FG ACCUMULATION UNITS 22,127,890 2,858,154 486,165 114,979
SERIES FI ACCUMULATION UNITS 4,650,004 583,863 163,570 35,543
SERIES FM ACCUMULATION UNITS 862,152 131,031 21,669 9,661
</TABLE>
23
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- CAPITAL TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
ADDITIONS TO CAPITAL DEDUCTIONS FROM CAPITAL
$ UNITS $ UNITS
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
SF 135R; SF 226RI CONTRACTS
- - --------------------------------
SERIES B ACCUMULATION UNITS 434,597 54,077 110,016 13,561
SERIES G ACCUMULATION UNITS 4,305,620 420,939 881,557 89,611
SERIES FA ACCUMULATION UNITS 14,071,749 2,554,939 4,044,605 724,251
SERIES FG ACCUMULATION UNITS 14,711,150 2,249,747 1,345,976 204,887
SERIES FI ACCUMULATION UNITS 3,146,381 487,693 135,735 21,838
SERIES FO ACCUMULATION UNITS 505,089 87,729 336,120 58,663
SERIES FM ACCUMULATION UNITS 4,916,221 921,317 1,605,571 302,600
SERIES SU ACCUMULATION UNITS 105,370 19,715
SERIES AS ACCUMULATION UNITS 4,947,271 746,279 79,302 11,979
SERIES SI ACCUMULATION UNITS 376,043 66,110 3,470 605
SERIES FC ACCUMULATION UNITS 5,777,070 950,446 104,099 16,764
SERIES FE ACCUMULATION UNITS 760,961 132,235 6,261 1,114
SF 234; SF 224FL; SF 236FL; SF 1700 CONTRACTS
---------------------------------------------
SERIES B ACCUMULATION UNITS 833,258 48,874 580,383 33,929
SERIES G ACCUMULATION UNITS 9,125,759 294,937 6,062,160 196,489
SERIES T ACCUMULATION UNITS 9,366,192 347,286 4,652,406 171,305
SERIES P ACCUMULATION UNITS 634,124 50,176 732,751 57,732
SERIES I ACCUMULATION UNITS 4,605,139 660,163 1,942,787 276,598
SERIES FA ACCUMULATION UNITS 5,110,732 961,908 1,671,157 311,571
SERIES FG ACCUMULATION UNITS 6,918,341 1,058,309 692,639 106,251
SERIES FI ACCUMULATION UNITS 1,988,299 318,789 207,059 32,436
SERIES FM ACCUMULATION UNITS 1,745,516 329,755 1,217,457 229,906
SF 135R2S
- - --------------------------------
SERIES SU ACCUMULATION UNITS 4,886,186 942,800 947,851 188,764
SERIES SV ACCUMULATION UNITS 7,552,784 1,366,412 745,648 142,445
SERIES FM ACCUMULATION UNITS 511,763 95,847 74,328 14,079
SERIES FG ACCUMULATION UNITS 5,215,983 786,021 403,700 61,003
SERIES FO ACCUMULATION UNITS 2,521,718 501,641 105,526 21,247
</TABLE>
24
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- UNITS OF CAPITAL
The following are the units outstanding and corresponding unit values as of
December 31, 1996:
<TABLE>
<CAPTION>
UNITS
DESCRIPTION OUTSTANDING UNIT VALUE
- - -------------------------------- ----------- ----------
<S> <C> <C>
SF 135R; SF 226 RI CONTRACTS
- - --------------------------------
SERIES B ACCUMULATION UNITS 309,366 $ 8.68
SERIES G ACCUMULATION UNITS 2,143,643 13.77
SERIES FA ACCUMULATION UNITS 7,492,590 6.81
SERIES FG ACCUMULATION UNITS 6,733,435 8.08
SERIES FI ACCUMULATION UNITS 2,309,743 8.54
SERIES FO ACCUMULATION UNITS 370,006 6.86
SERIES FM ACCUMULATION UNITS 1,898,863 5.62
SERIES SU ACCUMULATION UNITS 433,865 5.56
SERIES AS ACCUMULATION UNITS 3,022,385 6.73
SERIES SI ACCUMULATION UNITS 308,110 6.62
SERIES FC ACCUMULATION UNITS 3,986,138 7.54
SERIES FE ACCUMULATION UNITS 841,369 6.93
SERIES SV ACCUMULATION UNITS 282,186 5.59
SF 234; SF 224FL; SF 236FL; SF 1700 CONTRACTS
---------------------------------------------
SERIES B ACCUMULATION UNITS 269,726 18.60
SERIES G ACCUMULATION UNITS 1,795,933 42.57
SERIES T ACCUMULATION UNITS 1,581,897 36.72
SERIES P ACCUMULATION UNITS 186,679 13.49
SERIES I ACCUMULATION UNITS 1,569,196 8.57
SERIES FA ACCUMULATION UNITS 1,940,307 6.58
SERIES FG ACCUMULATION UNITS 2,551,369 7.77
SERIES FI ACCUMULATION UNITS 834,905 8.32
SERIES FM ACCUMULATION UNITS 671,516 5.66
SF 224R1; SF 230
- - --------------------------------
SERIES B ACCUMULATION UNITS 228,651 8.37
SERIES G ACCUMULATION UNITS 2,180,227 14.50
SERIES FA ACCUMULATION UNITS 4,090,633 6.74
SERIES FG ACCUMULATION UNITS 2,743,175 8.05
SERIES FI ACCUMULATION UNITS 548,320 8.57
SERIES FM ACCUMULATION UNITS 121,370 5.63
</TABLE>
25
<PAGE>
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- UNITS OF CAPITAL (CONTINUED)
<TABLE>
<CAPTION>
UNITS
DESCRIPTION OUTSTANDING UNIT VALUE
- - -------------------------------- ----------- ----------
<S> <C> <C>
SF 135R2S
- - --------------------------------
SERIES SU ACCUMULATION UNITS 2,969,871 $5.53
SERIES SV ACCUMULATION UNITS 3,807,608 7.01
SERIES FM ACCUMULATION UNITS 356,076 5.67
SERIES FG ACCUMULATION UNITS 2,052,512 7.93
SERIES FO ACCUMULATION UNITS 1,359,629 5.87
</TABLE>
NOTE 6 -- ACQUISITION OF SEPARATE ACCOUNT
As a result of certain agreements entered into between Security Life and
Fidelity Standard Life Insurance Company (Fidelity Standard), Security Life
assumptively reinsured certain annuity business from Fidelity Standard. These
agreements were effective October 31, 1996. The reinsurance between Security
Life and Fidelity Standard included variable annuity contracts (SF 224R1
Contracts) which became part of the Separate Account. This transaction had no
effect on unit values or number of units outstanding with respect to the SF224R1
contracts. Previously issued financial statements for the Separate Account and
Fidelity Standard Life Separate Account were not effected by this transaction.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Security First Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security
First Life Insurance Company and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, stockholder's equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Security
First Life Insurance Company and subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, Security
First Life Insurance Company and subsidiaries made certain accounting changes
in 1994.
February 7, 1997 /s/ Ernst & Young LLP
F-1
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed maturities....................................... $2,251,951 $2,178,985
Policy and mortgage loans.............................. 22,378 18,798
Short-term investments................................. 24,607 7,024
Other investments...................................... 2,754 5,440
---------- ----------
2,301,690 2,210,247
CASH AND CASH EQUIVALENTS................................ 11,472 7,990
ACCRUED INVESTMENT INCOME................................ 32,797 30,459
DEFERRED POLICY ACQUISITION COSTS........................ 103,950 56,515
OTHER ASSETS
Property under capital lease........................... 10,100 10,680
Assets held in separate accounts....................... 594,249 340,287
Receivable from sale of subsidiary..................... 22,295
Other.................................................. 4,063 4,318
---------- ----------
630,707 355,285
---------- ----------
$3,080,616 $2,660,496
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholder liabilities............................... $2,222,128 $2,047,818
Obligation under capital lease......................... 15,720 15,966
Notes payable to parent................................ 35,000 35,000
Note payable........................................... 1,000
Federal income taxes................................... 31,296 35,052
Liabilities related to separate accounts............... 594,249 340,287
Other.................................................. 7,687 5,293
---------- ----------
2,906,080 2,480,416
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Preferred stock, $1 par value Authorized, issued and
outstanding--200,000 shares........................... 200 200
Common stock, $200 par value Authorized--15,000 shares
Issued and outstanding--11,000 shares................. 2,200 2,200
Additional paid-in capital............................. 48,147 48,147
Net unrealized investment gains........................ 16,949 38,972
Retained earnings...................................... 107,040 90,561
---------- ----------
174,536 180,080
---------- ----------
$3,080,616 $2,660,496
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Net investment income........................... $164,115 $158,174 $146,101
Annuity product income.......................... 10,006 14,815 6,121
Net realized investment gains (losses).......... (2,179) 1,347 (1,735)
Gain on sale of subsidiary...................... 3,879
Other........................................... 709 701 709
-------- -------- --------
TOTAL REVENUES................................ 176,530 175,037 151,196
BENEFITS AND EXPENSES
Interest credited to policyholders.............. 106,347 103,959 102,776
Benefits in excess of policyholder liabilities.. 4,960 5,738 4,119
Amortization of deferred policy acquisition
costs.......................................... 13,542 15,505 5,612
Operating expenses.............................. 25,721 28,201 23,543
-------- -------- --------
TOTAL BENEFITS AND EXPENSES................... 150,570 153,403 136,050
-------- -------- --------
25,960 21,634 15,146
Income tax expense
Current......................................... 3,596 3,044 1,776
Deferred........................................ 5,885 3,105 3,388
-------- -------- --------
9,481 6,149 5,164
-------- -------- --------
NET INCOME.................................... $ 16,479 $ 15,485 $ 9,982
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET
ADDITIONAL UNREALIZED TOTAL
PREFERRED COMMON PAID-IN INVESTMENT RETAINED STOCKHOLDER'S
STOCK STOCK CAPITAL GAINS (LOSSES) EARNINGS EQUITY
--------- ------ ---------- -------------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1994................... $200 $2,200 $48,147 $ (43) $ 65,094 $115,598
Net income............ 9,982 9,982
Cumulative effect of
change in accounting
principle at
January 1............ 28,618 28,618
Net unrealized
investment losses.... (50,136) (50,136)
---- ------ ------- ------- -------- --------
Balance at December 31,
1994................... 200 2,200 48,147 (21,561) 75,076 104,062
Net income............ 15,485 15,485
Net unrealized
investment gains..... 60,533 60,533
---- ------ ------- ------- -------- --------
Balance at December 31,
1995................... 200 2,200 48,147 38,972 90,561 180,080
Net income............ 16,479 16,479
Net unrealized
investment losses.... (22,023) (22,023)
---- ------ ------- ------- -------- --------
Balance at December 31,
1996................... $200 $2,200 $48,147 $16,949 $107,040 $174,536
==== ====== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1996 1995 1994
----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................. $ 16,479 $ 15,485 $ 9,982
Adjustments to reconcile net income to
net cash provided by operations:
Net realized investment losses
(gains)............................... 2,179 (1,347) 3,014
Depreciation and amortization.......... 1,772 1,391 2,281
Accretion of discount and amortization
of premium on investments............. 1,988 1,059 (2,423)
Gain on sale of subsidiary............. (3,879)
Changes in operating assets and
liabilities:
Accrued investment income............. (2,338) (3,441) (648)
Deferred policy acquisition costs..... (24,655) (15,676) (4,915)
Other assets.......................... (19,008) 2,194 4,560
Other liabilities..................... 9,889 673 (9,050)
----------- --------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES................ (17,573) 338 2,801
INVESTING ACTIVITIES
Fixed maturity securities
Purchases.............................. (1,065,166) (636,371) (1,033,097)
Sales and maturities................... 934,171 439,897 860,239
Net sale (purchase) of other
investments............................ (314) 801 3,277
Net sale (purchase) of short-term
investments............................ (17,583) 19,191 (26,215)
Repayment (issuance) of loans, net...... (3,580) (2,558) 5,792
Purchase of equipment................... (320) (388) (896)
----------- --------- -----------
NET CASH USED IN INVESTING
ACTIVITIES.......................... (152,792) (179,428) (190,900)
FINANCING ACTIVITIES
Receipts credited to policyholder
accounts............................... 693,095 565,698 468,898
Amounts returned to policyholders....... (518,002) (390,760) (326,691)
Issuance of note payable to parent...... 10,000
Repayment of note payable............... (1,000) (1,000) (1,000)
Reduction of capital lease obligation... (246) (217) (192)
----------- --------- -----------
NET CASH PROVIDED BY FINANCING ACTIV-
ITIES............................... 173,847 173,721 151,015
----------- --------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................... 3,482 (5,369) (37,084)
Cash and cash equivalents at beginning of
year..................................... 7,990 13,359 50,443
----------- --------- -----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................ $ 11,472 $ 7,990 $ 13,359
=========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--Security First Life Insurance Company (Security First
Life) and subsidiaries (collectively, the Company) is a wholly-owned
subsidiary of Security First Group, Inc. (SFG). SFG has been a wholly-owned
subsidiary of London Insurance Group, Inc. (LIG) since May 1994. The Company
sells a broad range of fixed and variable annuity contracts.
The Company's consolidated financial statements are prepared in conformity
with generally accepted accounting principles (GAAP) which differ in some
respects from statutory accounting practices prescribed or permitted by
regulatory authorities (statutory basis) and include the accounts of its
wholly-owned subsidiary, Security First Life Insurance Company of Arizona
(SFL-Arizona). Prior to December 31, 1996, the financial statements also
included the accounts of Fidelity Standard Life Insurance Company (Fidelity
Standard Life), which was sold as of that date. (See Note 9.) All significant
intercompany transactions and accounts are eliminated in consolidation.
INVESTMENTS--Investments are reported on the following bases:
Fixed Maturities--at fair value, which differs from the amortized cost of
such investments. Unrealized gains and losses on these investments (net of
related adjustments for deferred policy acquisition costs and applicable
deferred income taxes) are credited or charged to stockholder's equity and,
accordingly, have no effect on net income.
For those fixed maturities which are mortgage-backed, the Company
recognizes income using a constant effective yield based on anticipated
prepayments and the estimated economic life of the securities. When actual
prepayments differ significantly from anticipated prepayments, the
effective yield is recalculated to reflect actual payments to date and
anticipated future payments. The net investment in the security is adjusted
to the amount that would have existed had the new effective yield been
applied since the acquisition of the security. Such adjustment is included
in net investment income.
The Company classifies its fixed maturities as available-for-sale. The
Company does not maintain a trading portfolio.
Policy and mortgage loans--at unpaid balances.
Short-term investments--at cost, which approximates fair value.
Other investments--at fair value.
Realized gains and losses on disposal of investments are determined on a
specific identification basis.
CASH AND CASH EQUIVALENTS--Cash equivalents consist of investments in money
market funds. The carrying amount of cash equivalents approximates fair value.
DEFERRED POLICY ACQUISITION COSTS--As of January 1, 1995, the Company
adopted the account value deposit method of reporting for two-tier annuities
(those annuities that have a different interest credited rate for
annuitization as compared to withdrawal). The Company had previously adopted
this method for single-tier annuities. Under this method, commissions and
other costs of acquiring annuities that vary with and are primarily related to
the acquisition of such business are included in deferred policy acquisition
costs. Prior to that date, certain commission costs for two-tier annuities
were reported as a component of policyholder liabilities. As a result of this
change, deferred policy acquisition costs and policyholder liabilities
increased by $38,590,000 on January 1, 1995 with no effect on stockholder's
equity. Additionally, the presentation of certain revenue and expense items in
the consolidated statement of income for the year ended December 31, 1995 has
been effected by this change with no significant impact on net income.
F-6
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred policy acquisition costs are being amortized in proportion to the
present value of estimated future gross margins which includes the impact of
realized investment gains and losses.
POLICYHOLDER LIABILITIES--As indicated previously, the Company adopted the
account value deposit method for reporting on two-tier annuities as of January
1, 1995. Under this method, the policyholder liabilities for two-tier
annuities are the lower tier account values. Policyholder liabilities for the
Company's single-tier fixed annuity products are the account values.
The fair value of policyholder liabilities is estimated assuming all
policyholders surrender their policies. The carrying amounts and estimated
fair values are as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING AMOUNT ESTIMATED FAIR VALUE
--------------- --------------------
<S> <C> <C>
December 31, 1996................... $2,222,128 $2,147,777
December 31, 1995................... 2,047,818 1,976,079
</TABLE>
NOTES PAYABLE--Notes payable are carried at their unpaid balances which
approximate fair value because the interest rates on these notes approximate
market rates.
INCOME TAXES--The Company files consolidated federal income tax returns with
SFG. Income taxes are provided on the basis as if the companies filed
separately.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Such differences are related principally to the deferral of policy
acquisition costs, the valuation of fixed maturities and the provision for
policyholder liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
SEPARATE ACCOUNTS--The assets held in separate accounts represent funds that
are separately administered by the Company pursuant to variable annuity
contracts. The liabilities related to separate accounts consist of
policyholder liabilities for variable annuities. The separate account assets
and liabilities are reported at fair value. The Company receives a fee for
administrative services provided to the separate accounts. Investment risks
associated with fair value changes are borne by the contract holders.
ANNUITY REVENUES AND BENEFITS--Annuity product income represents fees earned
from policyholders of annuity contracts, including surrender charges,
annuitization charges and administration fees. Benefits in excess of
policyholder liabilities consists of the difference between the policyholder
account values annuitized during the period and the related policyholder
liability balances.
ESTIMATES--Certain amounts reported in the accompanying consolidated
financial statements are based on management's best estimates and judgments.
Actual results could differ from those estimates.
RECLASSIFICATIONS--Certain reclassifications of prior-year amounts have been
made to conform with current-year classifications.
NOTE 2--STATUTORY CAPITAL AND RESTRICTIONS
Security First Life and its subsidiaries are required to file annual
statements with various state insurance regulatory authorities on a statutory
basis.
F-7
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The statutory-basis capital and surplus at December 31, 1996, 1995 and 1994,
and statutory-basis net income for those years are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL NET
AND SURPLUS INCOME
----------- -------
<S> <C> <C>
DECEMBER 31, 1996
Security First Life Insurance Company.................. $107,501* $13,449*
Security First Life Insurance Company of Arizona....... 13,823* 1,187*
DECEMBER 31, 1995
Security First Life Insurance Company.................. $100,027 $ 3,161
Fidelity Standard Life Insurance Company............... 15,573 831
Security First Life Insurance Company of Arizona....... 12,715 612
DECEMBER 31, 1994
Security First Life Insurance Company.................. $ 99,272 $ 1,758
Fidelity Standard Life Insurance Company............... 14,894 409
Security First Life Insurance Company of Arizona....... 12,118 1,246
</TABLE>
- - --------
* These unaudited amounts are preliminary and subject to change upon
completion of the statutory annual statements.
Security First Life and Fidelity Standard Life are incorporated and
domiciled in Delaware. SFL-Arizona is incorporated and domiciled in Arizona.
The payment of dividends is subject to statutory limitations which are based
on each company's statutory-basis net income and surplus levels. At December
31, 1996, the maximum amount of dividends Security First Life could pay SFG
without prior approval from state insurance regulatory authorities is
$12,132,000.
NOTE 3--INVESTMENTS
The Company adopted Statement of Financial Accounting Standards No. 115
(SFAS No. 115), Accounting for Certain Investments in Debt and Equity
Securities, as of January 1, 1994. In accordance with SFAS No. 115, prior
period financial statements were not restated to reflect the change in
accounting principle. The cumulative effect as of January 1, 1994 of adopting
SFAS No. 115 was an increase in stockholder's equity of $28,618,000--net of
related adjustments for deferred policy acquisition costs of $62,166,000 which
was recorded as an adjustment to policyholder liabilities and deferred income
taxes of $14,743,000--to reflect the net unrealized gains on securities
previously carried at amortized cost. There was no effect on net income as a
result of the adoption of SFAS No. 115.
Unrealized investment gains reported in the accompanying financial
statements are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1996 1995
------- --------
<S> <C> <C>
Unrealized investment gains................................ $48,552 $104,593
Less: Adjustment for deferred policy acquisition costs..... 22,942 45,736
Deferred income taxes.................................... 8,661 19,885
------- --------
Net unrealized investment gains........................ $16,949 $ 38,972
======= ========
</TABLE>
The Company reports realized gains (losses) on investment transactions net
of any adjustment to the amortization of deferred policy acquisition costs
when such amortization is accelerated or decelerated as a result of the
realization of gains or losses other than as originally anticipated on the
sale of investments associated with
F-8
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
annuity products. Net realized investment gains (losses) reported in the
accompanying financial statements are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Fixed maturities
Gross gains................................... $ 8,923 $ 6,181 $ 7,174
Gross losses.................................. (8,075) (4,621) (6,328)
------- ------- -------
848 1,560 846
Losses on other investments..................... (3,027) (213) (2,281)
Accelerated amortization of deferred policy
acquisition costs.............................. (300)
------- ------- -------
Net realized investment gains (losses)...... $(2,179) $ 1,347 $(1,735)
======= ======= =======
</TABLE>
Proceeds from sales of fixed maturities are $911,529,000 and $441,790,000 in
1996 and 1995, respectively.
The amortized cost and fair value of fixed maturities as of December 31,
1996 and 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies..... $ 115,250 $ 7,165 $ (494) $ 121,921
Debt securities issued by
foreign governments........... 35,960 1,335 (308) 36,987
Corporate securities........... 1,106,617 38,203 (10,094) 1,134,726
Mortgage-backed securities..... 945,534 20,188 (7,405) 958,317
---------- -------- -------- ----------
$2,203,361 $ 66,891 $(18,301) $2,251,951
========== ======== ======== ==========
DECEMBER 31, 1995
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies..... $ 131,672 $ 12,467 $ (153) $ 143,986
Debt securities issued by
foreign governments........... 16,779 1,687 18,466
Corporate securities........... 896,766 64,723 (5,194) 956,295
Mortgage-backed securities..... 1,029,090 33,049 (1,901) 1,060,238
---------- -------- -------- ----------
$2,074,307 $111,926 $ (7,248) $2,178,985
========== ======== ======== ==========
</TABLE>
The amortized cost and fair value of fixed maturities by contractual
maturity at December 31, 1996, are summarized below. Actual maturities will
differ from contractual maturities because certain borrowers have the right to
call or prepay obligations.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less............................... $ 923 $ 955
Due after one year through five years................. 234,687 242,136
Due after five years through ten years................ 608,014 620,501
Due after ten years................................... 414,203 430,042
Mortgage-backed securities............................ 945,534 958,317
---------- ----------
$2,203,361 $2,251,951
========== ==========
</TABLE>
F-9
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has recorded valuation reserves for other-than-temporary
impairment in the value of investments of $6,900,000 and $4,250,000 at
December 31, 1996 and 1995, respectively.
Concentrations of credit risk with respect to fixed maturities are limited
due to the large number of issues owned and their dispersion across many
different industries and geographic areas. Accordingly, at December 31, 1996,
the Company had no significant concentration of credit risk.
The fair values for fixed maturities are primarily based on values obtained
from independent pricing services.
The carrying amount of mortgage loans ($945,000 at December 31, 1996 and
1995) and policy loans ($21,433,000 and $17,853,000 at December 31, 1996 and
1995, respectively) approximates fair value because the interest rates on
these loans approximate market rates.
The Company places its temporary cash investments with high-credit quality
financial institutions and, by corporate policy, limits the amount of credit
exposure to any one financial institution.
At December 31, 1996, investment securities having an amortized cost of
$10,566,000 were on deposit with various states in accordance with state
insurance department requirements.
Investment income by major category of investment is summarized as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities............................... $165,997 $159,266 $148,303
Policy and mortgage loans...................... 1,283 1,229 1,518
Short-term investments......................... 1,718 1,943 114
Other investments.............................. 553 894 406
Cash and cash equivalents...................... 486 388 783
-------- -------- --------
170,037 163,720 151,124
Investment expenses............................ (5,922) (5,546) (5,023)
-------- -------- --------
Net investment income...................... $164,115 $158,174 $146,101
======== ======== ========
</TABLE>
The Company has no significant amounts of non-income producing investments.
NOTE 4--NOTES PAYABLE
Notes payable consist of the following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
5% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval.................. $25,000 $25,000
8% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval.................. 10,000 10,000
8% Note due to The Capitol Life Insurance Company, interest
payable quarterly, principal payment of $1,000,000 paid on
December 31, 1996........................................... 1,000
------- -------
$35,000 $36,000
======= =======
</TABLE>
F-10
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Security First Life has a $15,000,000 bank revolving credit line which bears
interest at a floating rate based on London Interbank Offered Rates. There
were no borrowings outstanding under this revolving credit line at December
31, 1996 and 1995. The $25,000,000 and $10,000,000 surplus notes payable to
SFG are pledged, along with the common and preferred stock of Security First
Life, as collateral for SFG's bank revolving credit line.
There are no principal payments due on the notes payable during the next
five years.
Interest paid by the Company totaled $2,133,000 in 1996, $2,225,000 in 1995
and $1,799,000 in 1994.
NOTE 5--INCOME TAXES
The liability for federal income taxes includes deferred taxes of
$30,496,000 and $35,875,000 at December 31, 1996 and 1995, respectively.
Significant components of these deferred taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs....................... $ 41,153 $ 32,937
Fixed maturities........................................ 7,124 19,980
Other assets............................................ 1,794
-------- --------
Total deferred tax liabilities........................ 50,071 52,917
Deferred tax assets:
Policyholder liabilities................................ 12,856 13,384
Other liabilities....................................... 6,503 3,388
Other, net.............................................. 216 270
-------- --------
Total deferred tax assets............................. 19,575 17,042
-------- --------
Net deferred tax liabilities.......................... $ 30,496 $ 35,875
======== ========
</TABLE>
Income taxes paid by the Company were $1,972,000 in 1996, $3,248,000 in 1995
and $2,000,000 in 1994.
The following is a reconciliation of the federal income tax at statutory
rates of 34% with the income tax provision as shown in the accompanying
financial statements (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Federal income tax at 34%.................................. $ 8,826 $ 7,356
Dividends received deduction............................... (259) (317)
True up of prior year taxes................................ 924 (875)
Other...................................................... (10) (15)
------- -------
Provision for income tax expense....................... $ 9,481 $ 6,149
======= =======
</TABLE>
F-11
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--CAPITAL LEASE
Security First Life has a lease for office space that expires in 2014. This
lease is treated as a capital lease for financial reporting purposes.
The Company subleases space on an annual basis to SFG to use as its home
office. Related income offset against the lease costs was $1,656,000,
$1,663,000 and $1,649,000 for the years ended December 31, 1996, 1995 and
1994, respectively. Future payments under the lease are as follows (in
thousands):
<TABLE>
<S> <C>
1997............................................................... $ 2,166
1998............................................................... 2,166
1999............................................................... 2,166
2000............................................................... 2,166
2001............................................................... 2,166
Thereafter......................................................... 26,885
--------
Total minimum rental payments.................................. 37,715
Amount representing interest.................................. (21,995)
--------
Present value of minimum rental payments......................... $ 15,720
========
</TABLE>
The property under capital lease is net of accumulated amortization of
$7,297,000 in 1996 and $6,717,000 in 1995. Lease amortization expense was
$580,000 in 1996 and 1995.
NOTE 7--COMMITMENTS
The Company has forward contracts with commitments to purchase mortgage-
backed securities with total par values of $17,500,000 at December 31, 1996.
The Company uses these contracts to hedge the interest rate risk on future
investments that match policyholder liabilities, primarily related to
guaranteed-rate products. Gains or losses realized on such contracts are
included in the carrying value of the underlying anticipated investment. The
Company is subject to the risk that the counterparties to such contracts would
fail to deliver the securities to the Company on settlement date, if the
Company were to hold the contract on that date. The Company's current cash
balances and expected future cash flows are sufficient to settle the
commitments under these forward contracts.
NOTE 8--RELATED PARTY TRANSACTIONS
The Company has marketing and administrative agreements with SFG under which
SFG provides all of the Company's marketing and policyholder administration
services. Amounts incurred under these agreements were $52,102,000,
$38,954,000, and $31,183,000 for 1996, 1995 and 1994, respectively. A
substantial portion of these amounts are commissions and are deferred as
acquisition costs.
The Company has management agreements with SFG under which the latter
provides certain personnel, administrative services and office space. Amounts
incurred under these agreements were $4,308,000 in 1996, 1995 and 1994.
The Company has investment advisory agreements with Security First
Investment Management Corporation, a subsidiary of SFG. Fees of $5,360,000,
$4,756,000, and $4,508,000 were paid in 1996, 1995 and 1994, respectively,
pursuant to these agreements.
F-12
<PAGE>
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--OTHER SIGNIFICANT EVENTS
Effective December 31, 1996, the Company sold all of the common stock of its
former subsidiary, Fidelity Standard Life. As a result of this transaction,
the Company recognized a gain in 1996 of $3,879,000. As of December 31, 1996,
the accompanying balance sheet includes receivables of $22,295,000 related to
this sale. These receivables were settled in January 1997.
Prior to the sale of Fidelity Standard Life, the Company assumed all of the
policyholder liabilities through several reinsurance agreements. No gain or
loss was recognized on this transaction.
F-13
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements contained herein
(1) Security First Life Separate Account A
None--The sale of Contract had not commenced and, as a result, the
Separate Account had no assets and no liabilities attributable
to the Contracts as of the date of this filing.
(2) Security First Life Insurance Company
Part B--Depositor's financial statements with notes
(b) Exhibits--herewith
[(1) Corporate Secretary's Certification of Resolution of Board of
Directors of the Depositor authorizing the establishment of the
Registrant *]
[(3) Distribution Agreement between the Registrant and the Principal
Underwriter *]
[(4) Form of Group Flexible Payment Variable Annuity Contract *]
[(5) Form of Application for Group Flexible Payment Variable Annuity
Contract *]
[(6) Copies of the certificate of Incorporation and the By-Laws of the
Depositor *]
[(9) Opinion and Consent of Counsel *]
(10) Consent of Independent Auditors--herewith
(15) Organizational Chart of Depositor and Affiliates
[(16) Powers of Attorney *]
(27) Financial Data Schedule--herewith
- - --------
[* Previously filed by EDGAR with Form N-4 Registration Statement.]
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The officers and directors of Security First Life Insurance Company are
listed below. Their principal business address is 11365 West Olympic
Boulevard, Los Angeles, California 90064.
<TABLE>
<CAPTION>
NAME POSITION AND OFFICES WITH DEPOSITOR
---- -----------------------------------
<C> <S>
Melvin M. Hawkrigg[R. Brock Armstrong] Chairman of the Board and Director
Frank E. Farella Director
Frederic J. Tomczyk[Melvin M. Hawkrigg] Director
General P.X. Kelley Director
Robert G. Mepham Director, President and Chief
Executive Officer
Richard C. Pearson Director, Senior Vice
President, General Counsel
and Secretary
Howard H. Kayton Executive Vice President and
Chief Actuary
Robert D. Badun Senior Vice President,
Investments
</TABLE>
NOTE TO EDGAR VERSION: Deleted language is indicated by brackets, not
strike-throughs.
II-1
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION AND OFFICES WITH DEPOSITOR
---- ----------------
<C> <S>
Jane F. Eagle Senior Vice
President,
Finance
Peter R. Jones Senior Vice
President,
Public Services
Cheryl M. MacGregor Senior Vice
President,
Administration
Alex H. Masson Senior Vice
President,
Information
Systems
[Michael R. McCoy Senior Vice
President,
Banking]
Robert L. Pina Senior Vice
President, Human
Resources
George R. Bateman Vice President,
Public Employees
Services
James C. Turner Vice President,
Taxation
George J. Olah Treasurer
Cheryl J. Finney Assistant Vice
President and
Assistant
Secretary
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OF
REGISTRANT
The Registrant is a Separate Account of Security First Life Insurance
Company ("depositor"). For a complete listing and diagram of all persons
directly or indirectly controlled by or under common control with the
depositor, see Exhibit 15.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of February[December] 28[31], 1997[5], there were 24[no owners] of the
Contracts which are the subject of this registration statement.
ITEM 28. INDEMNIFICATION
None.
ITEM 29. PRINCIPAL UNDERWRITERS
Security First Financial, Inc. is the principal underwriter for Security
First Life Separate Account A.
The following are the directors and officers of Security First Financial,
Inc. Their principal business address is 11365 West Olympic Boulevard, Los
Angeles, California 90064.
<TABLE>
<CAPTION>
NAME POSITION WITH UNDERWRITER
- - ---- -------------------------
<S> <C>
Robert Grant Me-
pham Director and Chairman of the Board
Richard Carl
Pearson Director, President, General Counsel and Secretary
Jane Frances Ea-
gle Director, Senior Vice President, Finance and Treasurer
Howard H. Kayton Senior Vice President and Chief Actuary
James Cyrus
Turner Vice President, Taxation and Assistant Secretary
Cheryl J. Finney Assistant General Counsel and Assistant Secretary
</TABLE>
<TABLE>
<CAPTION>
NET
UNDERWRITING COMPENSATION ON
NAME OF PRINCIPAL DISCOUNT AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS * ANNUITIZATION COMMISSION COMPENSATION
----------------- ------------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
Security First Financial,
Inc. None None None None
</TABLE>
- - --------
* Fee paid by Security First Life Insurance Company for serving as
underwriter.
NOTE TO EDGAR VERSION: Deleted language is indicated by brackets, not
strike-throughs.
II-2
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Security First Financial, Inc., underwriter for the registrant, is located
at 11365 West Olympic Boulevard, Los Angeles, California 90064. It maintains
those accounts and records required to be maintained by it pursuant to Section
31(a) of the Investment Company Act and the rules promulgated thereunder.
Security First Life Insurance Company, the depositor for the registrant, is
located at 11365 West Olympic Boulevard, Los Angeles, California 90064. It
maintains those accounts and records required to be maintained by it pursuant
to Section 31(a) of the Investment Company Act and the rules promulgated
thereunder and as custodian for the Registrant.
Security First Group, Inc. is located at 11365 West Olympic Boulevard, Los
Angeles, California 90064. It performs substantially all of the recordkeeping
and administrative services in connection with the Registrant.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant makes the following undertakings:
[a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
are never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;]
[b) to include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a postcard or similar
written communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional Information;]
[c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.]
Security First Life represents that the charges deducted under the
Contracts described herein this registration statement are, in the
aggregate, reasonable in relation to the services rendered, the expenses
expected to be incurred and the risks assumed by Security First Life.
403(b) Undertaking:
The Registrant hereby represents that any contract offered by the prospectus
and which is issued pursuant to Section 403(b) of the Internal Revenue Code of
1986, as amended, is issued by the Registrant in reliance upon, and in
compliance with, the Securities and Exchange Commission's industry-wide no-
action letter to the American Council of Life Insurance (publicly available
November 28, 1988) which permits withdrawal restrictions to the extent
necessary to comply with IRC Section 403(b)(11).
NOTE TO EDGAR VERSION: Deleted language is indicated by brackets, not
strike-throughs.
II-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of the Securities
Act Rule 485(b) for effectiveness of this Registration Statement and has duly
caused this amended Registration Statement to be signed on its behalf in the
City of Los Angeles and State of California on this 30th day of April 1997.
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(Registrant)
By SECURITY FIRST LIFE INSURANCE COMPANY
(Sponsor)
By /s/ Robert G. Mepham
--------------------------------
Robert G. Mepham, President
As required by the Securities Act of 1933, this Post-Effective amendment to its
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- - --------- ----- ----
/s/ Robert G. Mepham President, Director April 30, 1997
- - ------------------------
Robert G. Mepham
/s/ Jane F. Eagle Principal Financial and April 30, 1997
- - ------------------------ Accounting Officer
Jane F. Eagle
Melvin M. Hawkrigg* Chairman, Director April 30, 1997
- - ------------------------
Melvin M. Hawkrigg
Director April 30, 1997
- - ------------------------
Frederic J. Tomczyk
Paul X. Kelley* Director April 30, 1997
- - ------------------------
Paul X. Kelley
II-4
<PAGE>
Signature Title Date
- - --------- ----- ----
Frank E. Farella* Director April 30, 1997
- - ------------------------
Frank E. Farella
/s/ Richard C. Pearson Director April 30, 1997
- - ------------------------
Richard C. Pearson
/s/ Richard C. Pearson April 30, 1997
- - ------------------------
*(Richard C. Pearson as
Attorney-in-Fact for each
of the persons indicated)
II-5
<PAGE>
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports on Security First Life Insurance Company and
Subsidiaries dated February 7, 1997 and Security First Life Separate Account A
dated April 11, 1997 in the Registration Statement (Form N-4) and related
Prospectus of Security First LIfe Separate Account A.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Los Angeles, California
April 28, 1997
<PAGE>
EXHIBIT 15
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------
Trilon Financial Corporation
(Canada)
------------------------------
------------------------------
London Insurance Group, Inc.
(Canada)
-----------------------------
------------------------------ ------------------------------
London Life Security First Group, Inc.
Insurance Company 95-394785
(Canada) (Canada)
----------------------------- -------------------------------
- - -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Security First Security First Security First Security First Security First Security First Security First Security First
Insurance Agency, Group of Financial, Life Insurance Investment Insurance Management Real Estate,
(Nevada) Ohio, Inc. Inc. Company Management Agency, Inc. Corporation Inc.
88-0272002 34-1737227 95-2869421 DE 61050 Corporation (Massachusetts) 95-4087137 95-4087153
- - --------------- -------------- -------------- 54-0696644 95-2844896 95-3476150 -------------- -------------
------------- ------------ -------------
--------------------
Security First Life
Insurance
Company
of Arizona
AZ 8901D
86-0676035
-------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> FM
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 17,192,778
<INVESTMENTS-AT-VALUE> 17,192,778
<RECEIVABLES> 425,181
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,617,959
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 285,490
<TOTAL-LIABILITIES> 285,490
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,047,825
<SHARES-COMMON-PRIOR> 1,550,143
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17,332,469
<DIVIDEND-INCOME> 605,695
<INTEREST-INCOME> 0
<OTHER-INCOME> 441
<EXPENSES-NET> 130,974
<NET-INVESTMENT-INCOME> 475,162
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 475,162
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,128,570
<NUMBER-OF-SHARES-REDEEMED> 5,630,888
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,945,096
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 130,974
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> FG
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 100,954,140
<INVESTMENTS-AT-VALUE> 112,738,113
<RECEIVABLES> 207,355
<ASSETS-OTHER> 72,055
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 113,017,523
<PAYABLE-FOR-SECURITIES> 279,138
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 156,063
<TOTAL-LIABILITIES> 435,201
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 14,080,491
<SHARES-COMMON-PRIOR> 6,290,671
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,783,973
<NET-ASSETS> 112,582,322
<DIVIDEND-INCOME> 3,436,248
<INTEREST-INCOME> 0
<OTHER-INCOME> 74,439
<EXPENSES-NET> 844,001
<NET-INVESTMENT-INCOME> 2,666,686
<REALIZED-GAINS-CURRENT> 814,080
<APPREC-INCREASE-CURRENT> 5,048,213
<NET-CHANGE-FROM-OPS> 8,528,979
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,777,822
<NUMBER-OF-SHARES-REDEEMED> 988,002
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 68,282,680
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 844,001
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> FA
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 82,398,497
<INVESTMENTS-AT-VALUE> 91,542,442
<RECEIVABLES> 121,964
<ASSETS-OTHER> 12,642
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 91,677,048
<PAYABLE-FOR-SECURITIES> 131,180
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 128,132
<TOTAL-LIABILITIES> 259,312
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 13,523,530
<SHARES-COMMON-PRIOR> 7,343,782
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,143,945
<NET-ASSETS> 91,417,736
<DIVIDEND-INCOME> 2,965,169
<INTEREST-INCOME> 0
<OTHER-INCOME> 22,345
<EXPENSES-NET> 694,704
<NET-INVESTMENT-INCOME> 2,292,810
<REALIZED-GAINS-CURRENT> 320,767
<APPREC-INCREASE-CURRENT> 5,114,840
<NET-CHANGE-FROM-OPS> 7,728,417
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,443,396
<NUMBER-OF-SHARES-REDEEMED> 1,263,648
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,728,417
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 694,704
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> FC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 26,529,894
<INVESTMENTS-AT-VALUE> 30,084,981
<RECEIVABLES> 105,755
<ASSETS-OTHER> 25,856
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,216,592
<PAYABLE-FOR-SECURITIES> 126,767
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,090
<TOTAL-LIABILITIES> 165,857
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,986,138
<SHARES-COMMON-PRIOR> 933,682
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,555,087
<NET-ASSETS> 30,050,735
<DIVIDEND-INCOME> 66,761
<INTEREST-INCOME> 0
<OTHER-INCOME> 51,958
<EXPENSES-NET> 206,662
<NET-INVESTMENT-INCOME> (87,943)
<REALIZED-GAINS-CURRENT> 20,969
<APPREC-INCREASE-CURRENT> 3,462,652
<NET-CHANGE-FROM-OPS> 3,395,678
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,201,615
<NUMBER-OF-SHARES-REDEEMED> 149,159
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,874,827
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 206,662
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> FI
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 27,786,069
<INVESTMENTS-AT-VALUE> 31,424,479
<RECEIVABLES> 138,152
<ASSETS-OTHER> 51,649
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,614,280
<PAYABLE-FOR-SECURITIES> 181,956
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 52,350
<TOTAL-LIABILITIES> 234,306
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,692,968
<SHARES-COMMON-PRIOR> 935,570
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,638,410
<NET-ASSETS> 31,379,974
<DIVIDEND-INCOME> 315,697
<INTEREST-INCOME> 0
<OTHER-INCOME> 88,093
<EXPENSES-NET> 184,777
<NET-INVESTMENT-INCOME> 219,013
<REALIZED-GAINS-CURRENT> 280,197
<APPREC-INCREASE-CURRENT> 2,889,708
<NET-CHANGE-FROM-OPS> 3,388,918
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,031,505
<NUMBER-OF-SHARES-REDEEMED> 274,107
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,858,976
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 184,777
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 9,900,030
<INVESTMENTS-AT-VALUE> 9,625,339
<RECEIVABLES> 8,236
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,633,575
<PAYABLE-FOR-SECURITIES> 8,236
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,946
<TOTAL-LIABILITIES> 20,182
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 807,743
<SHARES-COMMON-PRIOR> 448,236
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (274,691)
<NET-ASSETS> 9,613,393
<DIVIDEND-INCOME> 566,443
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 79,605
<NET-INVESTMENT-INCOME> 486,838
<REALIZED-GAINS-CURRENT> (53,594)
<APPREC-INCREASE-CURRENT> (280,479)
<NET-CHANGE-FROM-OPS> 152,765
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 481,455
<NUMBER-OF-SHARES-REDEEMED> 121,948
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,089,008
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 79,605
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> G
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 116,791,052
<INVESTMENTS-AT-VALUE> 137,726,498
<RECEIVABLES> 189,761
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 137,916,259
<PAYABLE-FOR-SECURITIES> 187,705
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 153,506
<TOTAL-LIABILITIES> 341,211
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 6,119,803
<SHARES-COMMON-PRIOR> 2,745,585
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,935,446
<NET-ASSETS> 137,575,048
<DIVIDEND-INCOME> 8,157,311
<INTEREST-INCOME> 0
<OTHER-INCOME> 71,186
<EXPENSES-NET> 905,897
<NET-INVESTMENT-INCOME> 7,322,600
<REALIZED-GAINS-CURRENT> 2,094,280
<APPREC-INCREASE-CURRENT> 8,500,561
<NET-CHANGE-FROM-OPS> 17,917,441
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,812,257
<NUMBER-OF-SHARES-REDEEMED> 438,039
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 66,995,742
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 905,897
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> SI
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,910,731
<INVESTMENTS-AT-VALUE> 2,042,335
<RECEIVABLES> 5,418
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,047,753
<PAYABLE-FOR-SECURITIES> 5,393
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,842
<TOTAL-LIABILITIES> 8,235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 308,110
<SHARES-COMMON-PRIOR> 65,505
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 131,604
<NET-ASSETS> 2,039,518
<DIVIDEND-INCOME> 11,510
<INTEREST-INCOME> 0
<OTHER-INCOME> 608
<EXPENSES-NET> 12,475
<NET-INVESTMENT-INCOME> (357)
<REALIZED-GAINS-CURRENT> 12,881
<APPREC-INCREASE-CURRENT> 121,032
<NET-CHANGE-FROM-OPS> 133,556
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 266,302
<NUMBER-OF-SHARES-REDEEMED> 23,697
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,657,070
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,475
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> AS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 20,377,148
<INVESTMENTS-AT-VALUE> 20,373,295
<RECEIVABLES> 59,561
<ASSETS-OTHER> 54,907
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,487,763
<PAYABLE-FOR-SECURITIES> 110,089
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,669
<TOTAL-LIABILITIES> 136,758
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,022,385
<SHARES-COMMON-PRIOR> 734,300
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,853)
<NET-ASSETS> 20,351,005
<DIVIDEND-INCOME> 40,591
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 163,825
<NET-INVESTMENT-INCOME> (123,234)
<REALIZED-GAINS-CURRENT> 31,846
<APPREC-INCREASE-CURRENT> 88,899
<NET-CHANGE-FROM-OPS> (2,489)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,501,793
<NUMBER-OF-SHARES-REDEEMED> 213,708
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15,544,516
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 163,825
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> SU
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 18,765,072
<INVESTMENTS-AT-VALUE> 18,858,548
<RECEIVABLES> 8,187
<ASSETS-OTHER> 28,474
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,895,209
<PAYABLE-FOR-SECURITIES> 36,640
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,188
<TOTAL-LIABILITIES> 58,828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,403,736
<SHARES-COMMON-PRIOR> 1,712,387
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,476
<NET-ASSETS> 18,836,381
<DIVIDEND-INCOME> 779,578
<INTEREST-INCOME> 0
<OTHER-INCOME> 9,365
<EXPENSES-NET> 162,104
<NET-INVESTMENT-INCOME> 626,839
<REALIZED-GAINS-CURRENT> 4,734
<APPREC-INCREASE-CURRENT> (154,056)
<NET-CHANGE-FROM-OPS> 477,517
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,850,493
<NUMBER-OF-SHARES-REDEEMED> 159,144
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,584,902
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 162,104
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
