File Nos. 33-
811-4092
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT ACT OF 1940
Amendment No.19 [X]
FIRST VARIABLE ANNUITY FUND E
(Exact Name of Registrant)
FIRST VARIABLE LIFE INSURANCE COMPANY
(Name of Depositor)
10 Post Office Square, 12th Floor
Boston, Massachusetts 02109
(Address of Depositor's Principal Executive Offices)
Depositor's telephone number including area code: (617)
457-6700
Name and Address of Agent for Service
Arnold R. Bergman
Vice President- Legal & Administration
First Variable Life Insurance Company
10 Post Office Square, 12th Floor
Boston, MA 02109
Copies to:
Lynn Stone, Esq.
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 6881
(203) 226-7866
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Calculation of Registration Fee under the Securities Act of 1933:
$500 - Registrant is registering an indefinite number of securities under
the Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
FIRST VARIABLE ANNUITY FUND E
CROSS REFERENCE SHEET
(Pursuant to Rule 495(a))
Item No. in Form N-4
PART A Location
Item 1. Cover Page Cover Page
Item 2. Definitions Definitions
Item 3. Synopsis or Highlights Highlights
Item 4. Condensed Financial Information Condensed Financial
Information
Item 5. General Description of Registrant, Depositor and Portfolio
Companies The Company; The Separate Account;
Investment Options
Item 6. Deductions Charges and Deductions
Item 7. General Description of Variable Annuity Contracts The
Contract
Item 8. Annuity Period Annuity Provisions
Item 9. Death Benefit Death Benefit Provisions, Annuity Provisions
Item 10. Purchases and Contract Value The Contract- Purchase
Payments; The Contract- Contract Value
Item 11. Redemption's Withdrawals; The Contract Application and
Issuance of a Contract
Item 12. Taxes Tax Considerations
Item 13. Legal Proceedings Legal Proceedings
Item 14. Table of Contents of Statement of Additional Information
Table of Contents of
Statement of the Additional Information
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distributor
Item 21. Calculation of Performance Data Yield Calculation for IMS
Prime Money Fund Sub-Account Performanace Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PART A
<PAGE>
PROSPECTUS DATED:
CAPITAL VARIABLE ANNUITY
FUNDED IN
FIRST VARIABLE ANNUITY FUND E
BY
FIRST VARIABLE LIFE INSURANCE COMPANY
Marketing and Executive Office: Variable Service Center:
10 Post Office Square P.O. Box 1317
Boston, MA 02109 Des Moines, IA 50305-1317
(800) 845 - 0689
This Prospectus describes the Capital Variable Annuity contract (the
"Contract"), an individual flexible payment deferred variable annuity contract
issued by First Variable Life Insurance Company (the "Company"). The Contract
provides for accumulation of Contract Values and payment of monthly annuity
payments on a fixed and variable basis. The Contract is designed for use by
individuals in tax-qualified retirement plans (a "Qualified Contract") or for
other long term savings and retirement purposes (a "Non-Qualified Contract").
Purchase Payments for a Contract may be allocated to the Company's segregated
investment account called First Variable Annuity Fund E (the "Separate
Account") or to the Company's Fixed Account. The Separate Account invests in
selected Portfolios of two mutual funds: Variable Investors Series Trust
("VIST") and Insurance Management Series ("IMS"). The Portfolios currently
available under a Contract are: VIST High Income Bond, VIST Multiple
Strategies, VIST Common Stock, VIST U.S. Government Bond, VIST Tilt Utility,
VIST World Equity, VIST Growth & Income, VIST Small Cap and IMS Prime Money
Fund. (See "Investment Options," p.__.) The Company reserves the right, under
certain circumstances, to delay the investment of initial Purchase Payments in
VIST Portfolios, but does not currently do so. (See "Application and Issuance
of a Contract," p.__.)
An investment in a Contract is not a deposit or obligation of, or guaranteed
or endorsed by, any bank, nor is a Contract federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
An investment in the Contract is subject to risk that may cause the value of
the Owner's investment to fluctuate, and when the Contract is surrendered, the
value may be higher or lower than the Purchase Payment.
This Prospectus contains information that an investor should know before
investing. A Statement of Additional Information about the Contract and the
Separate Account, which has the same date as this Prospectus, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information
can be found on page __ of this Prospectus. For a copy of the Statement of
Additional Information, which is available at no cost, write the Company at
its Variable Service Center or call the number shown above.
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. PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
PAGE
DEFINITIONS
HIGHLIGHTS
FEE TABLES AND EXAMPLES
THE COMPANY
THE SEPARATE ACCOUNT
INVESTMENT OPTIONS
Variable Investors Series Trust
Insurance Management Series
Fixed Account Option
Transfers Among Investment Options
General Requirements
Systematic Transfers - Dollar Cost Averaging
Telephone Requests
Restrictions on Transfers
Automatic Transfer of Small Accounts
Changes to Investment Options
CHARGES AND DEDUCTIONS
Administrative Charge
Annual Contract Maintenance Charge
Mortality and Expense Risk Charge
Optional Enhanced Death Benefit Charge
Premium Taxes
Transfer Fee
Withdrawal Charge
Withdrawal Charge Percentages
Partial Withdrawals
Free Withdrawal Amount
Waiver of Withdrawal Charge
Other Charges and Deductions
Fund Expenses
Income Taxes
Special Service Fees
Elimination or Reduction of Charges and Expenses
THE CONTRACT
Application and Issuance of a Contract
Free Look Right
Purchase Payments
General Requirements
Conversion to Accumulation Units
Automatic Investment Plan
Contract Value
Accumulation Unit Value
Fixed Account Value
Reports
C\ Ownership
Assignment
Change of Designations
Owner
Annuitant
Beneficiary
Restriction on Qualified Contracts
Minimum Value Requirements
Termination of Small Accounts
Transfer of Small Contract Value
DEATH BENEFIT PROVISIONS
Death of the Annuitant
Death of the Owner
Basic Death Benefit
Bonus Death Benefit
Optional Enhanced Death Benefit
Payment of Death Benefit
Owners Other than a Single Person
Beneficiaries Other than a Single Person
ANNUITY PROVISIONS
Annuity Date
Annuity Payments
Allocation
Amount
Annuitization Bonus
Variable Annuity Payments
Annuity Options
Option A. Life Annuity
Option B. Life Annuity with Periods Certain of 60, 120, 180 or 240
Months
Option C. Joint and Survivor Annuity
Option D. Joint and Contingent Annuity
Option E. Fixed Payments for a Period Certain
Misstatement of Age or Sex
<PAGE>
<PAGE>
WITHDRAWALS
Partial Withdrawals
Systematic Withdrawals
Tax Penalties and Restrictions
Texas Optional Retirement Program
Suspension of Payments or Transfers
PERFORMANCE INFORMATION
Performance Data
IMS Prime Money Fund Portfolio
Other Portfolios
TAX CONSIDERATIONS
General
Diversification
Multiple Contracts
Income Tax Withholding
Withdrawals from Non_Qualified Contracts
Qualified Plans
H.R. 10 Plans
403(b) Annuities
Individual Retirement Annuities
Corporate Pension and Profit-Sharing Plans
Section 457 Plans
Withdrawals from Qualified Contracts
Withdrawal Limitations on 403(b) Annuities
Contracts Owned by Other than Natural Persons
OTHER MATTERS
Distribution
Legal Proceedings
Transfers by Company
Voting Rights
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
DEFINITIONS
ACCOUNT - Fixed Account and/or one or more of the Sub_Accounts of the Separate
Account.
ACCUMULATION PERIOD - The period during which Purchase Payments may be made
prior to the Annuity Date.
ACCUMULATION UNIT - A unit of measure used to calculate the Contract Value of
a Sub_Account of the Separate Account prior to the Annuity Date.
ACCUMULATION UNIT VALUE or AUV - The value of an Accumulation Unit on a
Business Day.
AGE - The attained age of the Owner or Annuitant, as applicable, on the date
for which age is being determined.
ANNUITANT -The natural person on whose life Annuity Payments are based.
ANNUITY DATE -The date on which Annuity Payments begin.
ANNUITY PAYMENTS -The series of payments made after the Annuity Date under the
Annuity Option elected.
ANNUITY PERIOD -The period after the Annuity Date during which Annuity
Payments are made.
ANNUITY UNIT - A unit of measure used to calculate Variable Annuity Payments
after the Annuity Date.
BENEFICIARY -The person(s) or entity who will receive the death benefit.
BUSINESS DAY - Each day that the New York Stock Exchange is open for trading,
which is Monday through Friday, except for normal business holidays.
COMPANY - First Variable Life Insurance Company.
CONTRACT ANNIVERSARY - An anniversary of the Issue Date.
CONTRACT VALUE - The sum of the Owner's interest in the Sub_Accounts of the
Separate Account and in the Fixed Account.
CONTRACT YEAR - One year from the Issue Date and from each Contract
Anniversary.
DISTRIBUTOR - First Variable Capital Services, Inc., 10 Post Office Square,
Boston, MA 02109.
FIXED ACCOUNT - The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.
FIXED ACCOUNT VALUE - The Owner's interest in the Fixed Account during the
Accumulation Period.
FIXED ANNUITY PAYMENTS - A series of payments made during the Annuity Period
which are guaranteed as to dollar amount by the Company.
FUNDS - Variable Investors Series Trust and Insurance Management Series, each
of which is an open-end management investment company in which the Separate
Account invests.
INVESTMENT OPTION - The Fixed Account or any of the Sub-Accounts of the
Separate Account which can be selected by the Owner of a Contract.
ISSUE DATE - The date on which the first Contract Year begins.
NON_QUALIFIED CONTRACTS - Contracts which do not receive favorable tax
treatment under Sections 401, 403(b), 408, or 457 of the Internal Revenue
Code.
OWNER - The person, persons or entity entitled to all the ownership rights
under a Contract. The initial Owner is stated in the application for a
Contract, and may be later changed as the Contract provides.
PORTFOLIO - A Fund's separate and distinct class of shares that is available
as an underlying investment under a Contract.
PURCHASE PAYMENT - An amount paid to the Company to provide benefits under the
Contracts.
QUALIFIED CONTRACTS - Contracts issued under retirement plans which receive
favorable tax treatment under Sections 401, 403(b), 408, or 457 of the
Internal Revenue Code.
SEPARATE ACCOUNT - A separate investment account of the Company, designated as
First Variable Annuity Fund E, into which Purchase Payments or Contract Values
may be allocated.
SUB_ACCOUNT - A segment of the Separate Account which invests in a specified
Portfolio of one of the Funds.
VALUATION PERIOD - The period of time between the close of one Business Day
and the close of business for the next succeeding Business Day.
VARIABLE ACCOUNT VALUE - The Owner's interest in the Sub_Accounts of the
Separate Account during the Accumulation Period, which vary in amount with the
investment experience of each applicable Sub-Account.
VARIABLE ANNUITY PAYMENTS - A series of payments made during the Annuity
Period which vary in amount with the investment experience of each applicable
Sub_Account.
VARIABLE SERVICE CENTER - The Company's administrative service center for a
Contract is located at 1206 Mulberry Street, Des Moines, IA 50309.
WITHDRAWAL VALUE - The value of a Contract that is available during the
Accumulation Period upon withdrawal or surrender. The Withdrawal Value is
also used to determine Annuity Payments that begin during the first 2 Contract
Years. Withdrawal Value equals the Contract Value as of the date the Company
prices the transaction, less:
- any applicable taxes not previously deducted; less
- the Withdrawal Charge, if any; less
- the Annual Contract Maintenance Charge, if any; less
- the Optional Enhanced Death Benefit Charge, if any.
HIGHLIGHTS
The Capital Variable Annuity is an individual flexible payment deferred
variable annuity contract (the "Contract.") The Owner allocates Purchase
Payments among ten Investment Options under a Contract issued by First
Variable Life Insurance Company (the "Company.") Nine of these options are
Sub-Accounts of First Variable Annuity Fund E (the "Separate Account"), a
segregated investment account of the Company. Purchase Payments may also be
allocated to the Fixed Account of the Company.
Each Sub-Account invests exclusively in shares of a corresponding Portfolio of
a selected mutual fund (a "Fund.") The selected Funds are Variable Investors
Series Trust ("VIST") and Insurance Management Series ("IMS.") The Portfolios
currently available are: VIST Common Stock, VIST Growth & Income, VIST High
Income Bond, VIST Multiple Strategies, VIST Small Cap, VIST Tilt Utility, VIST
U.S. Government Bond Fund, VIST World Equity, and IMS Prime Money Fund (see
"Investment Options," p.__. ) Owners bear the investment risk for any amounts
allocated to a Sub-Account.
Owners have the right to return a Contract according to the terms of its
"free-look" right. The Company reserves the right to delay initial
investments of Purchase Payments in the VIST Portfolios in certain instances,
but it does not currently do so. (See "Application and Issuance of a
Contract," p.__.)
Purchase Payments and other Contract Value allocated to the Fixed Account are
guaranteed by the Company as to safety of principal and are credited a minimum
3% rate of interest on an annual basis. The Company, in its discretion, may
credit a higher current interest rate. New Purchase Payments allocated to the
Fixed Account, Contract Value to be transferred to Fixed Account, and
existing Contract Value allocated to the Fixed Account, may receive different
rates of current interest. (See "Fixed Account Option," p.__.)
There is a daily Administrative Charge which is equal to a percentage of the
daily net assets in each Sub-Account of the Separate Account for this class of
Contract. The annual rate for this charge is .15%. This charge compensates
the Company for costs associated with the administration of a Contract and the
Separate Account. (See "Charges and Deductions--Administrative Charge," p.__.)
There is an Annual Contract Maintenance Charge of $30 each Contract Year
during the Accumulation Period. However, if the Contract Value on a Contract
Anniversary is at least $100,000, then no charge is taken. (See "Charges and
Deductions--Annual Contract Maintenance Charge," p.__.)
There is a daily Mortality and Expense Risk Charge which is equal to a
percentage of the daily net assets in each Sub-Account of the Separate
Account for this class of Contract. The annual rate for this charge is 1.25%.
This charge compensates the Company for assuming the mortality and expense
risks under the Contracts. (See "Charges and Deductions--Mortality and Expense
Risk Charge," p.__.)
The Contract provides different forms of Death Benefits if the Owner dies
before the Annuity Date. (See "Death Benefit Provisions," p.__.) If an
Optional Enhanced Death Benefit is elected, there is a charge which is taken
on each Contract Anniversary during the Accumulation Period up to the earlier
of the Annuity Date or the Owner's 80th birthday. The charge is .35% of the
Contract Value on the Contract Anniversary. The charge is also taken on the
Annuity Date if the Annuity Date is other than a Contract Anniversary or at
the time of surrender if a Contract is surrendered during a Contract Year,
based on the Contract Value at that time. (See "Charges and Deductions --
Optional Enhanced Death Benefit Charge," p.__.)
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values. (See "Charges and Deductions--
Premium Taxes," p.__.)
Under certain circumstances, a $10 Transfer Fee may be assessed when an Owner
transfers Contract Values from one Sub_Account to another Sub_Account or to or
from the Fixed Account. (See "Charges and Deductions--Transfer Fee," p.__.)
A Withdrawal Charge of up to 7% of Purchase Payments may be deducted for a
withdrawal or surrender of all or a portion of the Contract Value. The
Withdrawal Charge will also apply if Contract Value is applied to an Annuity
Option within the first 2 Contract Years (See "Annuity Provisions'" p.__.) No
Withdrawal Charge will be taken on a partial withdrawal in any Contract Year
unless the amount withdrawn exceeds the annual Free Withdrawal Amount. The
annual Free Withdrawal Amount is equal to 15% of Purchase Payments. The
Withdrawal Charge will vary in amount, depending upon the year in which the
Purchase Payment being surrendered was made. (See "Charges and
Deductions--Withdrawal Charge," p.__.)
A ten percent (10%) federal income tax penalty may be applied to the income
portion of any distribution from a Non_Qualified Contract before the Owner
reaches age 59 1/2, with certain exceptions. Separate tax withdrawal penalties
and restrictions apply to a Qualified Contract. Special restrictions apply to
distribution from a 403(b) annuity. (See "Tax Considerations--Withdrawal from
Non-Qualified Contract," p.__, "Withdrawal from Qualified Contract," p.__,
and "Withdrawal Limitations on 403(b) Annuities," p.__.)
For a further discussion on the taxation of a Contract, see "Tax
Considerations" beginning on p.__, and "Tax Considerations--Diversification,"
p.__, for a discussion of owner control of the underlying investments in a
variable annuity contract.
VARIOUS CONTRACT RIGHTS, BENEFITS, AND INVESTMENT OPTIONS DESCRIBED IN THIS
PROSPECTUS MAY NOT BE AVAILABLE IN ALL JURISDICTIONS, OR MAY DIFFER BETWEEN
JURISDICTIONS TO MEET APPLICABLE LOCAL LAWS AND/OR REGULATIONS.
FEE TABLE AND EXAMPLES
The charges and deductions under a Contract are summarized in the following
table. This table is designed to help an Owner understand direct and indirect
costs for a Contract, but should be read only in conjunction with the detailed
descriptions in the "Charges and Deductions" section of this prospectus,
beginning on page __. The table assumes that the entire Contract Value is
invested in the Separate Account. Owners should read the accompanying
prospectuses of the Funds carefully for further information of the expenses
shown for each Portfolio. In addition to the expenses listed below, a charge
for premium taxes may be applicable.
OWNER TRANSACTION EXPENSES
7% , reducing by
(as a percentage of Purchase Payment)
No charge for first 12 transfers in a Contract Year prior to Annuity Date, and
$10 a transfer thereafter. No charge is imposed on the 1 permitted transfer
each year during the Annuity Period.
Annual Contract Maintenance Charge $30 per Contract Year if Contract
Value on a Contract Anniversary is less than $100,000.
.35% (as a percentage of Contract Value at the time the charge is
taken each Contract Year until earlier of Annuity Date or the Owner's 80th
birthday)
Optional Enhanced Death Benefit Charge
(see Note 3 below)
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average Variable Account Value)
1.25%
.15%
1.40%
<PAGE>
FUNDS' ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
IMS
Prime Money
Fund_
_______ _______ _______ _______ Bond
_______
.70% .55%
Other Operating Expenses - After Expense
.25%
Reimbursement (see Note 4 )
1.35%
1.20% 1.25% 1.20% 1.15% .85% 1.20%
.80%
EXAMPLES
An Owner would pay the following expenses on a $1,000 investment in a
Contract, assuming a 5% annual return on assets and allocation of 100% of
Purchase Payments to the Portfolio shown:
a) upon surrender at the end of each time period (or if the Contract
is annuitized during the first 2 Contract Years);
b) if the Contract is not surrendered; (or if the Contract is
annuitized after the first 2 Contract Years);
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
10 years
a)
b)
a)
b)
a)
b)
a)
b)
a)
b)
VIST Tilt Utility (See Note 5 below)........................................
a)
b)
a)
b)
a)
b)
a)
b)
NOTES ON FEE TABLE AND EXAMPLES
1. After the second Contract Year, the entire Contract Value may be
applied to an Annuity Option and no Withdrawal Charge will be taken. In each
Contract Year during the Accumulation Period, an Owner may request a "partial
withdrawal" of an amount of up to 15% of Purchase Payments without a
Withdrawal Charge. Amounts so withdrawn do not reduce the Purchase Payments
subject to a withdrawal charge. Subject to any conditions and fees the
Company may impose, an Owner may elect to have amounts systematically
withdrawn and paid in equal periodic installments. The Company reserves the
right to charge a fee for this service. Currently, however, there are no
charges for this service. (See "The Contract - Minimum Value Requirements,"
p.__ and "Withdrawals," p.__.) The 15% free withdrawal has not been factored
into the Examples above.
2. No Transfer Fee will be assessed for a transfer made in connection with
an approved systematic transfer program, such as dollar cost averaging, from
one Investment Option to other preselected Investment Options. (See "Charges
and Deductions-- Transfer Fee," p.__ and "Systematic Transfers - Dollar Cost
Averaging," p__.)
3. If an Optional Enhanced Death Benefit is elected by the Owner at time
of application for a Contract, the Company deducts an annual charge on each
Contract Anniversary during the Accumulation Period until the earlier of the
Annuity Date or the date the Owner attains Age 80. Also, the charge is taken
if the Annuity Date is other than a Contract Anniversary or if a Contract is
surrendered during a Contract Year, based on the Contract Value at that time.
(See "Charges and Deductions - Optional Enhanced Death Benefit Charge," p.__.)
4. First Variable Advisory Services Corp. has agreed through April 1, 199_
to reimburse Variable Investors Series Trust Fund for all operating expenses
(exclusive of management fees) in excess of .50% of a Portfolio's average net
assets (.25% in the case of the U.S. Government Bond Portfolio).
5. Prior to April 1, 1994, the VIST Tilt Utility Portfolio was known as
the "Equity Income Portfolio" and had different investment objectives and
policies.
THE COMPANY
First Variable Life Insurance Company (the "Company") is a stock life
insurance company which was organized under the laws of the State of Arkansas
in 1968. The Company is principally engaged in the annuity business. The
Company is licensed in 49 states, the District of Columbia and the U.S. Virgin
Islands. The Company is a wholly_owned subsidiary of Irish Life of North
America, Inc. ("ILoNA") which in turn is beneficially owned by Irish Life plc
("Irish Life"). ILoNA also owns Interstate Assurance Company ("Interstate") of
Des Moines, IA. Irish Life was formed in 1939 through a consolidation of a
number of Irish and British Life offices transacting business in Ireland. In
terms of assets, Irish Life controls over 50% of the Irish domestic life
insurance market. As Ireland's leading institutional investor, it owns in
excess of 10% of the leading Irish publicly traded stocks. Irish Life, through
its international subsidiaries, conducts business in Ireland, the United
Kingdom, the United States and France. As of the end of 1995, the Irish Life
consolidated group had in excess of $__ billion in assets. ILoNA is a Delaware
corporation, incorporated as Carrig International, Inc. in 1986, which is the
holding company for Interstate and the Company.
The Company has an A- (Excellent) rating from A.M. Best, an independent firm
that analyzes insurance carriers. This rating is assigned to companies that
have a strong ability to meet obligations to policyholders over a long period
of time. The Company also has an AA- rating from Standard and Poor's and an
AA rating from Duff & Phelps Credit Rating Co. on claims paying ability. The
financial strength of the Company may be relevant with respect of the
Company's ability to satisfy its Fixed Account obligations under the
Contracts.
<PAGE>
THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Arkansas insurance law on December 4,
1979. This account has been designated First Variable Annuity Fund E (the
"Separate Account"). The Company has registered the Separate Account with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended.
The assets of the Separate Account are the property of the Company. However,
the assets of the Separate Account, equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Contract, credited to or charged against the Separate Account without regard
to other income, gains or losses of the Company. The Company's obligations
arising under a Contract are general obligations.
The Separate Account meets the definition of a "separate account" under the
federal securities laws.
The Separate Account is divided into Sub_Accounts, with the assets of each
Sub_Account invested in one Portfolio of a selected Fund. Owners bear the
complete investment risk for Purchase Payments and Contract Value allocated or
transferred to a Sub_Account. Contract Values fluctuate in accordance with the
investment performance of the Sub_Account(s), and reflect the imposition of
fees and charges assessed under a Contract.
INVESTMENT OPTIONS
Owners of a Contract may allocate Purchase Payments and Contract Value to one
or more Sub-Accounts of the Separate Account and to the Fixed Account. Each
Sub-Account invests exclusively in a Portfolio of a selected Fund. A brief
summary of the Funds and the investment objectives of the currently available
Portfolios is set forth below. More comprehensive information, including a
discussion of potential risks, is found in the current prospectuses for the
Funds which are included with this prospectus. The prospectuses for the Funds
may describe other portfolios that are not available under a Contract. THERE
IS NO ASSURANCE THAT THE AVAILABLE PORTFOLIOS WILL ACHIEVE THEIR STATED
OBJECTIVES. Investors should read this prospectus and the prospectuses for
the Funds carefully before investing. Prospectuses for the Funds may be
obtained by contacting the Variable Service Center.
VARIABLE INVESTORS SERIES TRUST
Variable Investors Series Trust ("VIST") is an open-end management investment
company that was formed as a series trust to provide funding options for
variable life insurance and variable annuity contracts. Effective April 1,
1994, VIST retained First Variable Advisory Services Corp. ("FVAS") to manage
its assets. FVAS is a wholly-owned subsidiary of the Company and retains the
services of sub_advisers under agreements to manage the assets of the VIST
Portfolios. The sub-advisers for the VIST Portfolios currently available
under a Contract are: Federated Investment Counseling with respect to VIST
High Income Bond; Value Line, Inc. with respect to VIST Multiple Strategies
and VIST Common Stock; Strong Capital Management, Inc. with respect to VIST
U.S. Government Bond; State Street Bank and Trust Company with respect to VIST
Tilt Utility; Keystone Investment Management Company with respect to VIST
World Equity Portfolio; Warburg, Pincus Counsellors, Inc. with respect to VIST
Growth & Income; and Pilgrim Baxter & Associates, Ltd. with respect to VIST
Small Cap. From ___ to April 1, 1994, INVESCO Capital Management, Inc. was the
investment adviser of VIST and managed its assets.
Each Portfolio has a distinct investment objective and policy. The investment
objectives of the Portfolios available under a Contract are:
VIST U.S. Government Bond. The investment objective of this Portfolio is to
seek current income and preservation of capital through investment primarily
in securities issued or guaranteed as to principal and interest by the U.S.
Government or by its agencies, authorities, or instrumentality's.
VIST High Income Bond. The investment objective of this Portfolio is to
obtain as high a level of current income as is believed to be consistent with
prudent investment management. As a secondary objective, the Portfolio seeks
capital appreciation when consistent with its primary objective. The
Portfolio seeks to achieve its investment objectives by investing primarily in
fixed-income securities rated lower than A. Many of the high yield securities
in which the Portfolio may invest are commonly referred to as "junk bonds."
For special risks involved with investing in such securities (including among
others, risk of default and illiquidity) see "Investment Objectives and
Policies of the Portfolios - High Income Bond Portfolio" in the VIST
prospectus.
VIST Tilt Utility. The investment objective of this Portfolio is to seek
capital appreciation and current income by investing in a diversified
portfolio of common stock and income securities issued by companies engaged in
the utilities industry ("Utility Securities"). Under normal market conditions,
at least 80% of the Portfolio's assets will be invested in Utility Securities.
The Portfolio is intended to achieve investment returns that are higher than
the Standard & Poor's Utilities Index with equivalent risk, diversification
and price volatility. Prior to April 1, 1994, the Tilt Utility Portfolio was
known as the Equity Income Portfolio and had different investment objectives,
policies and restrictions.
VIST World Equity. The investment objective of this Portfolio is to maximize
long_term total return by investing primarily in common stocks, and securities
convertible into common stocks, traded in securities markets located in
countries around the world, including the United States. See "Foreign
Investments" under "Policies and Techniques Applicable to all Portfolios" in
the VIST prospectus for a discussion of the risks involved in investing in
foreign securities.
VIST Common Stock. The investment objective of this Portfolio is capital
growth which it seeks to achieve through a policy of investing primarily in a
diversified portfolio of common stocks and securities convertible into or
exchangeable for common stock. The secondary objective is current income when
consistent with its primary objective.
VIST Multiple Strategies. The investment objective of this Portfolio is to
seek as high a level of total return over an extended period of time as is
considered consistent with prudent investment risk by investing in equity
securities, bonds, and money market instruments in varying proportions.
VIST Growth & Income. The investment objective of this Portfolio is to
provide current income and growth of capital. The Portfolio seeks to achieve
its objectives by investing in equity securities, fixed income securities and
money market instruments. The portion of the Portfolio invested at any given
time in each of these asset classes will vary depending on market conditions,
and there may be extended periods when the Portfolio is primarily invested in
one of them. In addition, the amount of income derived from the Portfolio will
fluctuate depending on the composition of the Portfolio's holdings and will
tend to be lower when a higher portion of the Portfolio is invested in equity
securities. The Portfolio may also purchase without limitation
dollar-denominated American Depository Receipts ("ADRs"). ADRs are issued by
domestic banks and evidence ownership of underlying foreign securities.
VIST Small Cap. The investment objective of this Portfolio is to seek capital
appreciation. The Portfolio will invest, under normal conditions, at least 65%
of its total assets in securities of companies with market capitalization or
annual revenues under $1 billion at the time of purchase.
INSURANCE MANAGEMENT SERIES
Insurance Management Series ("IMS") is an open-end investment management
company that was formed as a series trust to provide funding options for
variable life insurance and variable annuity contracts. Pursuant to an
investment advisory contract with IMS, investment decisions for IMS are made
by Federated Advisers, an affiliate of Federated Investment Counseling.
Federated Securities Corp. is the principal distributor for shares of IMS
Prime Money Fund Portfolio.
IMS Prime Money Fund. The investment objective of the Portfolio is to provide
current income consistent with stability of principal and liquidity. The Fund
pursues its investment objective by investing exclusively in a portfolio of
money market instruments maturing in 397 days or less. An investment in the
IMS Prime Money Fund Portfolio is neither insured nor guaranteed by the U.S.
Government.
FIXED ACCOUNT OPTION
This Prospectus is generally intended to describe the Contract and Separate
Account. Because of certain exemptive and exclusionary provisions, interests
in the Fixed Account are not registered under the Securities Act of 1933 and
the Fixed Account is not registered as an investment company under the
Investment Company Act of 1940, as amended. Accordingly, neither the Fixed
Account nor any interests therein are generally subject to the provisions of
these Acts, and the Company has been advised that the staff of the Securities
and Exchange Commission has not reviewed the disclosures in the Prospectus
relating to the Fixed Account.
The Company guarantees that it will credit interest to Contract Value in the
Fixed Account at a minimum rate of 3% per year. Additional amounts of
current interest may be credited by the Company in its sole discretion. The
initial current interest rate will be guaranteed for at least one year. New
Purchase Payments allocated to the Fixed Account may receive a different
current interest rate than the current interest rate credited to amounts
transferred from the Separate Account. Contract Value existing in the Fixed
Account may receive a different current interest rate than the current
interest rate(s) credited on new Purchase Payment allocations and transfers
from the Separate Account to the Fixed Account. The Company determines
current interest rates in advance, and credits interest daily to Fixed Account
value.
TRANSFERS AMONG INVESTMENT OPTIONS
During the Accumulation Period, an Owner may transfer Contract Value among
Investment Options up to 12 times each Contract Year without a Transfer Fee.
After that, a Transfer Fee of $10 is deducted for each transfer. The automatic
transfer of Contract Value under the Dollar Cost Averaging program described
below is not taken into account in determining any transfer fee. (See "Charges
and Deductions-- Transfer Fee," p.__.)
Prior to the Annuity Date, Contract Value to be transferred from the Fixed
Account to other Investment Options in any Contract Year may not exceed:
- 25% of the Fixed Account Value on the Issue Date for transfers during the
first Contract Year; or
- for transfers after the first Contract Year, the greater of 25% of Fixed
Account Value on the immediately preceding Contract Anniversary or 100% of
the Fixed Account Value transferred to other Investment Options during the
immediately preceding Contract Year.
During the Annuity Period, the Owner may make a transfer once each Contract
Year: (i) from one or more Sub_Accounts to other Sub-Accounts; or (ii) to the
Fixed Account. No transfers will be permitted from the Fixed Account to the
Separate Account. Amounts transferred from a Sub_Account to the Fixed Account
are subject to certain procedures set out in the Contract.
General Requirements. All transfers are subject to the following:
-
- If applicable, the Transfer Fee will be deducted from Contract Value
remaining in the Sub-Account or Fixed Account from which the transfer is
made. However, if the entire interest in a Sub-Account or the Fixed Account
is being transferred, the transfer fee will be deducted from the amount which
is transferred.
- The minimum amount which may be transferred is the lesser of (a) $1,000; or
(ii) the Owner's entire interest in the applicable Sub-Account or Fixed
Account.
- Any transfer instruction must clearly specify the amount which is to be
transferred and the Accounts which are to be affected.
- The Company reserves the right at any time and without prior notice to any
party to modify, suspend or terminate the transfer privileges including, but
not limited to, the description in "Suspension of Payments or Transfers" on
p.__.
Systematic Transfers - Dollar Cost Averaging. The Company permits systematic
transfers, such as a dollar cost averaging program, that an Owner may elect by
written request. Through systematic transfers, amounts are transferred each
month or quarter from a selected Investment Option to other pre-selected
Investment Options. The dollar cost averaging program permits transfers from
the IMS Prime Money Fund Sub_Account or the Fixed Account to other
Sub_Account(s) on a regularly scheduled basis. Through use of systematic
transfers, instead of transfers of the total Contract Value at one particular
time, an Owner may be less susceptible to the impact of market fluctuations.
The minimum amount which may be transferred is $250. The Company may require a
minimum amount of Contract Value before permitting systematic transfers. The
Company requires a minimum amount of Contract Value to be in an Investment
Option before a "dollar cost averaging" program may begin. The amount
required for dollar cost averaging from the Prime Money Fund Sub-Account or
from the Fixed Account, as applicable, is $6,000.
All systematic transfers are made on the same day of each month or quarter (or
the next Business Day if the same day of the month or quarter is not a
Business Day). If the Owner is participating in the dollar cost averaging
program, the transfers are not taken into account in determining the Transfer
Fee. Under certain circumstances, the Company may impose restrictions on an
Owner's ability to participate in the dollar cost averaging program and
limitations on the amounts that can be transferred from the Fixed Account to
any Sub-Accounts under a systematic transfer program. An Owner participating
in the dollar cost averaging program may not participate in the systematic
withdrawal program. (See "Withdrawals--Systematic Withdrawals," p.__.)
Telephone Requests. Prior to the Annuity Date, an Owner may elect to make
transfers by telephone. If there are Joint Owners, unless the Company is
informed to the contrary, instructions will be accepted from either one of the
Joint Owners. The Company will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. If it does not, the
Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company tape records all telephone instructions.
Restrictions on Transfers. Programmed or other frequent requests to transfer
Investment Options by, or on behalf of, an Owner may have a detrimental effect
on the Fund share values held in the Separate Account. The Company may
therefore limit the number of permitted transfers in any Contract Year, or
refuse to honor any transfer request for an Owner or a group of Owners if it
is informed that the purchase or redemption of shares of one or more of the
Portfolios is to be restricted because of excessive trading, or if a specific
transfer or group of transfers is deemed to have a detrimental effect on AUV
or Portfolio share prices.
The Company may also at any time suspend or cancel its acceptance of third
party authorizations on behalf of an Owner; or restrict the Investment
Options that will be available for such transfers. Notice will be provided
to the third party in advance of the restrictions. The restrictions will not
be imposed, however, if the Company is given satisfactory evidence that: (a)
the third party has been appointed by the Owner to act on the Owner's behalf
for all financial affairs; or (b) the third party has been appointed by a
court of competent jurisdiction to act on the Owner's behalf.
Automatic Transfer of Small Accounts. The Company reserves the right to the
extent permitted by law, or any business Day to transfer Contract Value from
any Investment Option if less than $250, to the Investment Option with the
then highest Contract Value. (See "The Contract--Minimum Value Requirements,"
p.__.)
CHANGES TO INVESTMENT OPTIONS
New Sub-Accounts may be established and additional Portfolios or mutual funds
may be made available by the Company when, in its sole discretion, it
determines that conditions so warrant. Any new Sub-Accounts may be made
available to existing Owners on a basis to be determined by the Company. Each
additional Sub-Account will purchase shares in a Portfolio of a Fund, or in
another mutual fund or investment vehicle.
The Company does not guarantee that continued purchase of Portfolio shares
will remain appropriate in view of the purposes of the Separate Account. If
shares of a Portfolio are no longer available for investment by the Separate
Account or, if in the judgment of the Company, further investment in the
shares should become inappropriate in view of the purpose of the Contracts,
the Company may limit further purchase of the shares of a Portfolio, or may
substitute shares of another Portfolio, or mutual fund or other investment
option for shares already purchased or to be purchased in the future. No
substitution of securities may take place without prior approval of the
Securities and Exchange Commission and under the requirements it may impose.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Contract Value and the Separate
Account. These are:
ADMINISTRATIVE CHARGE
The Company deducts on each Business Day, both prior to and during the Annuity
Period, an Administrative Charge which is equal to a percentage of the daily
net assets in each Sub-Account of the Separate Account for this class of
Contract. The annual rate for this charge is .15%. This charge, together with
the Annual Contract Maintenance Charge (see below), compensates the Company
for costs associated with the administration of a Contract and the Separate
Account. The Company does not intend to profit from this charge.
ANNUAL CONTRACT MAINTENANCE CHARGE
During the Accumulation Period, the Company deducts an Annual Contract
Maintenance Charge of $30 from the Contract Value on each Contract
Anniversary. However, if the Contract Value on a Contract Anniversary is at
least $100,000, then no Annual Contract Maintenance Charge will be deducted.
If a total withdrawal is made on other than a Contract Anniversary, and the
Contract Value at the time is less than $100,000 the Annual Contract
Maintenance Charge will be deducted.
This charge is to reimburse the Company for its administrative expenses. This
charge is deducted by subtracting values from the Fixed Account and/or
canceling Accumulation Units from each applicable Sub_Account in the ratio
that the value of each Account bears to the total Contract Value. If the
Annuity Date is not a Contract Anniversary, the Annual Contract Maintenance
Charge will be deducted on the Annuity Date. After the Annuity Date, no Annual
Contract Maintenance Charge is taken. The Company does not intend to profit
from this charge.
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts on each Business Day, both prior to and during the Annuity
Period, a Mortality and Expense Risk Charge which is equal to a percentage of
the daily net assets in each Sub-Account of the Separate Account for this
class of Contract. The annual rate for this charge is 1.25%. The mortality
risks assumed by the Company arise from its contractual obligation to make
annuity payments after the Annuity Date for the life of the Annuitant and to
waive the Withdrawal Charge in the event of the death of the Owner. The
Company also bears a mortality risk with respect to the death benefit. The
expense risk assumed by the Company is that all actual expenses involved in
administering the Contracts, including Contract maintenance costs,
administrative costs, mailing costs, data processing costs, legal fees,
accounting fees, filing fees and the costs of other services may exceed the
amount recovered from the Annual Contract Maintenance Charge and the
Administrative Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge. If the actual costs
for distribution of the Contract exceed the amount realized by the Company
from the Withdrawal Charge, the deficiency will be met from the Company's
general assets which may include amounts, if any, derived from the Mortality
and Expense Risk Charge. The Mortality and Expense Risk Charge is guaranteed
by the Company and cannot be increased.
OPTIONAL ENHANCED DEATH BENEFIT CHARGE
An Owner may elect an enhanced death benefit at the time of application for a
Contract. The enhanced death benefit guarantees that upon death of the Owner
the death benefit payable under the Contract will be at least equal to the sum
of Purchase Payments less Withdrawals, (including applicable charges)
accumulated at an annual rate of 4.5% up to a maximum amount equal to twice
the sum of Purchase Payments less Withdrawals. The enhanced death benefit
ends on the earliest of: (a) the date of the Owner's death; (b) the Owner's
80th birthday; or (c) the Annuity Date. The enhanced death benefit may also
end if a new owner is designated. If this option is elected, the Company
deducts an Enhanced Death Benefit Charge on each Contract Anniversary prior to
earlier of the Annuity Date or the Owner's 80th birthday based on the Contract
Value on the Contract Anniversary. The charge is also deducted on the Annuity
Date if the Annuity Date is on a date other than a Contract Anniversary, at
the time of surrender, or if the Contract is surrendered based on the Contract
Value at that time. The Enhanced Death Benefit Charge is equal to .35% of the
Contract Value at the time the charge is taken. The charge is assessed
pro-rata among the Investment Options under a Contract, and will result in the
cancellation of Accumulation Units credited to a Contract and reduction in
Fixed Account Value. (See "Death of the Owner," p.__.)
PREMIUM TAXES
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Value. The Company currently intends to
deduct premium taxes when incurred. Some states assess premium taxes at the
time Purchase Payments are made; others assess premium taxes at the time
annuity payments begin. Premium taxes generally range from 0% to 2.5%.
TRANSFER FEE
An Owner may transfer all or part of the Contract Value among Investment
Options without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year prior to the Annuity Date. After
the Annuity Date, the Owner may make 1 transfer among the Sub-Accounts each
Contract Year from the Sub-Accounts to the Fixed Account without a transfer
fee. If more than 12 transfers have been made in a Contract Year prior to the
Annuity Date, the Company will deduct a transfer fee of $10 per transfer. If
the Owner is participating in the dollar cost averaging program providing for
the automatic transfer of funds from the Prime Money Fund Sub_Account or the
Fixed Account to any other Sub_Account(s), such transfers are not taken into
account in determining any transfer fee. (See "Systematic Transfers - Dollar
Cost Averaging," p.__.) The charge is taken pro-rata from Contract Value in
each Investment Option prior to a transfer and, with respect to Sub-Accounts,
will result in the cancellation of Accumulation Units credited to a Contract.
WITHDRAWAL CHARGE
The Company incurs expenses in connection with the promotion, sale and
distribution of the Contract. To recover these expenses, the Company imposes
a Withdrawal Charge on the withdrawal or surrender of Contract Value before
the Annuity Date (see "Withdrawals," p.__ .) The Withdrawal Charge is also
imposed on the Annuity Date if the Annuity Date is within the first 2
Contract Years. (See "Annuity Provisions--Annuity Date," p.__.) To the
extent that the Withdrawal Charge is insufficient to cover the actual cost of
distribution, the Company may use any of its corporate assets, including
potential profit which may arise from the Mortality and Expense Risk Charge,
to provide for any difference.
The Withdrawal Charge is determined by applying the Withdrawal Charge
percentages shown below to the Purchase Payments deemed withdrawn,
surrendered, or applied to an Annuity Option. The charge will vary depending
on the number of years that have elapsed since the date a Purchase Payment was
received by the Company. Purchase Payments are deemed withdrawn in the order
in which they are made. The amount deducted from the Contract Value will be
determined by subtracting values from the Fixed Account and/or canceling
Accumulation Units from each applicable Sub_Account in the ratio that the
value of each Account bears to the total Contract Value, unless another method
is requested and the Company approves the request.
Withdrawal Charge Percentages. The Withdrawal Charge percentages are:
Full Years Since Purchase Payment 0 1 2 3 4 5
6 7 +
Withdrawal Charge Percentage 7% 6% 5% 4% 3% 2%
1% 0%
Partial Withdrawals. Prior to the Annuity Date, an Owner may make a partial
withdrawal each Contract Year of the Withdrawal Value provided that the
minimum Withdrawal Value after a partial withdrawal is $1,000. A partial
withdrawal must be for at least $1, The Withdrawal Charge on a partial
withdrawal is deducted from the remaining Contract Value, if sufficient;
otherwise it is deducted from the amount withdrawn. Unless the Owner requests
otherwise, partial withdrawals will ordinarily result in the cancellation of
Accumulation Units from each Sub-Account and a reduction in Fixed Account
Value in the ratio that each Sub-Account and the Fixed Account bears to the
total Contract Value (See "Withdrawals," p.__).
Withdrawal requests that would result in a remaining Withdrawal Value of less
than $1,000 may be deemed a surrender and termination of the Contract (See
"Minimum Value Requirements - Termination of Small Accounts," p.__).
Free Withdrawal Amount. No Withdrawal Charge will be taken on a partial
withdrawal unless the amount withdrawn or surrendered exceeds the Free
Withdrawal Amount. In any Contract Year, the annual Free Withdrawal Amount
for partial withdrawals is equal to 15% of Purchase Payments. These 15%
withdrawals do not reduce Purchase Payments for purposes of computing the
Withdrawal Charge. The Withdrawal Charge will apply to the amount withdrawn
or surrendered in any Contract Year that exceeds 15% of Purchase Payments. The
unused portion of the Free Withdrawal Amount for one Contract Year will not
carry-over to the next Contract Year. The Free Withdrawal Amount is not
available on withdrawal requests that fail to meet the minimum remaining
Contract Value requirement for a partial withdrawal. (See "Minimum Value
Requirements - Termination of Small Accounts," p.__).
- Waiver of Withdrawal Charge. Subject to state availability, the Company
will waive the Withdrawal Charge:
If any death benefits are paid; or
If the Contract Value is applied after the first 2 Contract Years
to an Annuity Option (See " Annuity Provisions," p.__); or
If the Owner or Owner's spouse is first diagnosed with a terminal
illness. The Company may require evidence of such illness, including an
examination by a licensed physician of the Company's choice. Or,
After the first Contract Year if the Owner or the Owner's spouse is
confined for 90 consecutive days in a qualifying nursing home.
To qualify for a waiver of charges based on confinement in a qualifying
nursing home, the Owner or the Owner's spouse, as the case may be, must never
have been confined in a qualifying nursing home on or before the date the
application for the Contract was signed.
Owners should review their Contracts carefully for a complete description of
the terminal illness and nursing home waiver of charges requirements.
OTHER CHARGES AND EXPENSES
Fund Expenses. There are other deductions from, and expenses paid out of, the
assets of the Portfolios of a Fund which are described in the accompanying
prospectuses for the Funds.
Income Taxes. While the Company is not currently reducing Contract Value for
federal income taxes of the Separate Account, the Company reserves the right
to do so if it determines, in its sole discretion, that it will incur a tax as
a result of the operation of the Separate Account. The Company will deduct for
any income taxes incurred by it as a result of the operation of the Separate
Account whether or not there was a Company reserve for taxes and whether or
not it was sufficient.
The Company will deduct any withholding taxes required by applicable law when
amounts are distributed from a Contract. (See "Tax Status--Income Tax
Withholding," p.__.)
Special Service Fees. The Company may charge Owners for special services, such
as additional reports, Systematic Withdrawals, Dollar Cost Averaging and
minimum distributions. As of the date of this Prospectus, it does not charge
for these special services.
Elimination or Reduction of Charges and Expenses. The charges and expenses on
a Contract may be reduced or eliminated, in whole or in part, when
sales of Contracts are made to individuals or to a group of
individuals in a manner that results in savings of sales or
administration expenses. Any reduction will be determined by the
Company after examination of relevant factors such as:
-
- the size and type of group to which sales are to be made because expenses
for a larger group are generally less than for a smaller group since large
numbers of Contracts may be implemented and administered with fewer
contacts;
- the total amount of Purchase Payments to be received because expenses are
likely to be less on larger Purchase Payments than on smaller ones;
- any prior or existing relationship with the Company because of the
likelihood of implementing the Contract with fewer contacts; and
- other circumstances, of which the Company is not presently aware, which
could result in reduced expenses.
-
Charges may also be eliminated when a Contract is issued to an officer,
director, employee or agent of the Company or any of its affiliates. In no
event will reductions or elimination of the charges be permitted where
reductions or elimination will be unfairly discriminatory to any person.
THE CONTRACT
APPLICATION AND ISSUANCE OF A CONTRACT
An application must be completed and submitted to the Company to purchase a
Contract, together with the minimum required initial Purchase Payment. (See
"Purchase Payments - General Requirements," p.__.) A Contract ordinarily will
be issued in respect of Owners and Annuitants up to Age 85. Investors in
Qualified Contracts for Owners and Annuitants beyond Age 70 1/2 should
consult with qualified tax advisers on the impact of minimum distribution
requirements under their existing retirement plans. Any required annual
minimum distribution amount should be withdrawn from an existing retirement
plan before amounts are transferred to purchase a Qualified Contract. (See
"Tax Considerations - Withdrawals from Qualified Contracts," p.__.)
The Owner, Annuitant, and Beneficiary of a Contract are initially designated
in the application and subject to the Company's underwriting rules. If the
Application for a Contract is in good order, the Company will apply the
Purchase Payment within 2 business days of receipt: (a) to the Separate
Account and credit the Contract with Accumulation Units; and/or (b) to the
Fixed Account and credit the Contract with dollars. If the Application for a
Contract is not in good order, the Company will attempt to get it in good
order or the Company will return the Application and the Purchase Payment
within 5 business days. The Company will not retain a Purchase Payment for
more than 5 business days while processing an incomplete Application unless it
has been authorized by the purchaser. The Company may decline any
application.
Free Look Right. An Owner has the right to review a Contract during an initial
inspection period specified in the Contract and, if dissatisfied, to return it
to the Company or to the agent through whom it was purchased. When the
Contract is returned to the Company during the permitted period, it will be
voided as if it had never been in force. The Company will ordinarily refund
the Contract Value (which may be greater or less than the Purchase Payments
received) on a Contract returned during the permitted period, unless a
different amount is required. The "free look" period is at least 10 days, and
may be greater depending on state requirements.
Delayed Investment Start Date. Purchase Payments are generally allocated to
the Sub-Accounts or to the Fixed Account as selected by the Owner. In certain
instances, however, the Company reserves the right to allocate Purchase
Payments to the Prime Money Fund Sub-Account for a period of up to 5 days
beyond a "free look" inspection period before they will be invested (together
with any investment gain) in any other Sub-Account(s) designated by the Owner.
If the Company elects to delay such initial investments in Sub-Accounts, the
delay would apply where a Contract is issued: (a) in a state which requires
that Purchase Payments less withdrawals be refunded upon the exercise of (i) a
"free look" right or (ii) an inspection right following a "replacement" of an
existing life insurance or annuity contract; or (b) as an Individual
Retirement Annuity (or as the initial investment of an Individual Retirement
Account).
On the date of this Prospectus, the Company does not delay investment start
dates and, should it elect to do so, it will so advise prospective investors
in a Contract.
PURCHASE PAYMENTS
General Requirements. The initial Purchase Payment is due on the Issue Date.
Unless the Owner participates in the automatic investment plan described
below, the minimum initial Purchase Payment is $5,000 for Non-Qualified
Contracts and $2,000 for Qualified Contracts. For all Contracts, the maximum
amount of cumulative Purchase Payments is $1,000,000 and the minimum amount
for each subsequent Purchase Payment is $200, unless an automatic investment
plan is in effect. The Company reserves the right to decline any Purchase
Payment.
Conversion to Accumulation Units. Purchase Payments allocated to the
Sub-Account(s) of the Separate Account are converted into Accumulation Units.
This is done by dividing each Purchase Payment allocated to a Sub-Account by
the value of an Accumulation Unit of that Sub-Account as of the Valuation
Period during which the Purchase Payment is allocated to the Sub-Account.
Initial Purchase Payments are converted into Accumulation Units when a
Contract is issued.
Automatic Investment Plan. An Owner may elect to make Purchase Payments to a
Contract by pre-authorized transfers from a checking account. The checking
account must be with a bank that is a member of the Automated Clearing House
(ACH). Purchase Payments under this method may be allocated to a Sub-Account,
but not to the Fixed Account (see "Investment Options," p.__.) If an
automatic investment plan is elected, the Company will lower its Purchase
Payment requirements as follows:
-
- For a Non-Qualified Contract, the initial Purchase Payment may be as low as
$1,000 if the applicant furnishes bank draft instructions for subsequent
Purchase Payments of at least $100 each.
- For a Qualified Contract, the initial Purchase Payment may be as low as
$500 if the applicant furnishes bank draft instructions for subsequent
Purchase Payments of at least $100 each.
-
The Company may further reduce the minimum Purchase Payment requirement on
automatic investment plans for a Contract issued under certain group sponsored
arrangements. Participation in the automatic investment plan may be suspended
or terminated if there are insufficient funds in the checking account to cover
any payment.
CONTRACT VALUE
The Contract Value on any Business Day is the sum of the Owner's interest in
the Sub_Accounts of the Separate Account and in the Fixed Account. The Owner's
interest in a Sub_Account is determined by multiplying the number of that
Sub-Account's Accumulation Units credited to a Contract by the Accumulation
Unit Value, or "AUV," for the Sub_Account.
Accumulation Unit Value. The AUV for each Sub_Account was set initially at
$10. AUVs for each Valuation Period fluctuate to reflect the performance of
the Sub-Accounts. The AUV for a Sub-Account on any Business Day is priced by
the Company as follows:
-
- The Accumulation Unit Value of the Sub-Account is based on the net asset
value per share of the underlying Portfolio.
- Any applicable charge (or credit) for federal and state taxes attributable
to the Sub-Account is subtracted (or added).
- The cumulative unpaid Mortality and Expense Risk Charge, and the
cumulative unpaid Administrative Expense Charge is subtracted.
- The result is divided by the total number of Accumulation Units held in
the Sub-Account, before the purchase or redemption of any Accumulation Units
on the current Business Day.
-
The AUV for one Sub-Account may differ from the AUV of a different
Sub-Account.
Reports. The Company will provide the Owner with reports on Contract Value at
least annually. Additional reports may be requested by the Owner. The
Company reserves the right to impose a charge for the cost of providing any
additional reports, but does not currently do so.
OWNERSHIP
The Owner has all rights and may receive all benefits under the Contract.
Prior to the Annuity Date, the Owner is the person designated in the
Application, unless changed. Upon the death of the Owner, the Beneficiary
will become the Owner of the Contract.
Assignment. The Owner may, at any time during his or her lifetime, assign his
or her rights under the Contract. The Company will not be bound by any
assignment until written notice is received by the Company. The Company is not
responsible for the validity of any assignment. The Company will not be liable
as to any payment or other settlement made by the Company before receipt of
the assignment. Assignment of a Non-Qualified Contract may be considered a
distribution subject to federal income taxes including, with certain
exceptions, a 10% penalty tax before age 59 1/2. Owners of Qualified
Contracts should consult a competent tax adviser as to any mandatory
restrictions on assignment in their retirement plans and the impact of income
taxes on permitted assignments. (See "Tax Considerations," p.__.)
CHANGE OF DESIGNATIONS
A request to change the designated Owner, Annuitant, or Beneficiary must be
made in writing and received by the Company at the Variable Service Center.
The change will become effective as of the date the written request is signed.
A new designation will not apply to any payment made or action taken by the
Company prior to the time it records the change.
A permitted change of a designation will automatically revoke any prior
designation of the same type (e.g., a change of Owner revokes a prior change
of Owner; a change of Annuitant revokes a prior change of Annuitant; a change
of Beneficiary revokes a prior change of Beneficiary).
Owner. The Owner may change the Owner at any time prior to the Annuity Date.
Annuitant. A new Annuitant may be designated by the Owner prior to the
Annuity Date, but not if the Contract is owned by a non-natural person. The
Owner may automatically become the Annuitant if a new Annuitant is not
designated within 30 days of the death of the Annuitant prior to the Annuity
Date. (See "Death of Annuitant," p.__.)
Beneficiary. Subject to the rights of any irrevocable Beneficiary(ies), the
Owner may change the primary Beneficiary(ies) or contingent Beneficiary(ies).
Restrictions on Qualified Contracts. Any Qualified Contract may have
restrictions on changes of Owner, Annuitant or Beneficiary. An Owner should
consult a competent tax adviser as to the tax consequences which may result.
MINIMUM VALUE REQUIREMENTS
Termination of Small Accounts. A withdrawal request that would cause the
remaining Withdrawal Value to be less than $1,000 may be deemed a surrender of
the Contract by the Company. The Company reserves the right to terminate the
Contract. In such event, the Company will pay the Withdrawal Value to the
Owner
The Company also reserves the right to terminate a Contract if the Withdrawal
Value on any Business Day falls below $1,000 and no Purchase Payments were
received by the Company during the preceding 2 years (including the current
Contract Year.) Prior to terminating small accounts for failure to pay
Purchase Payments during the preceding 2 years, the Company will provide
Owners with 30 day notice, and an opportunity to make an additional Purchase
Payment to increase the Contract Value above the minimum amount during this
period.
Payments resulting from the termination of a Contract may be considered a
taxable distribution and may be subject, with certain exceptions, to a 10%
penalty tax for distributions before age 59 1/2. (See "Tax Considerations,"
page___. )
Transfer of Small Contract Value. The Company reserves the right, to the
extent permitted by law, to transfer the amount of Contract Value then held in
a particular Investment Option if less than $250, to the Investment Option
under a Contract that has the highest Contract Value.
DEATH BENEFIT PROVISIONS
DEATH OF THE ANNUITANT
Upon the death of the Annuitant prior to the Annuity Date, the Owner may
designate a new Annuitant. If no designation is made within 30 days of the
death of the Annuitant, the Owner will become the Annuitant. However, if the
Owner is a non_natural person, then the death of the Annuitant will be treated
as the death of the Owner and a new Annuitant may not be designated. (See
"Death of the Owner," below.)
Upon the death of the Annuitant after the Annuity Date, the Death Benefit, if
any, will be as specified in the Annuity Option elected and will be paid at
least as rapidly as under the method in effect prior to the Owner's death.
(See "Annuity Provisions -Annuity Options," p.__.)
DEATH OF THE OWNER
The Contract provides for a Death Benefit to be paid to the Beneficiary upon
the death of an Owner prior to the Annuity Date. The Death Benefit is:
the Basic Death Benefit; or
if greater and if no withdrawals of Contract Value have been taken
during the Owner's lifetime, the Bonus Death Benefit; or
if greater, the Enhanced Death Benefit.
Upon the death of an Owner on or after the Annuity Date, any remaining
payments under the Contract will be distributed at least as rapidly as under
the method of distribution being used as of the date of the Owner's death.
Basic Death Benefit. The Basic Death Benefit is the greater of:
- Purchase Payments less the sum of any reductions in Contract Value
attributable to partial withdrawals during the Owner's lifetime (including
applicable charges); or
- the Contract Value.
Bonus Death Benefit. The Bonus Death Benefit is the greater of:
the Basic Death Benefit on the date of the Owner's death; or
the Step Up Amount in effect on the date of the Owner's death
A Step Up Amount is determined at the start of each Bonus Period while a
Contract is in force. The first Bonus Period begins on the Issue Date and
ends on the earlier of the seventh Contract Anniversary or the day on which
the Owner attains Age 80. Each succeeding Bonus Period is for the next 7
Contract Years or, if earlier, until the Owner attains Age 80.
The Step Up Amount at the start of the first Bonus Period is the initial
Purchase Payment. The Step Up Amount at the start of each succeeding Bonus
Period is the greater of:
- The Step Up Amount at the end of the preceding Bonus Period; or
- The Contract Value at the end of the preceding Bonus Period.
The Step Up Amount during any Bonus Period is increased by the amount of
Purchase Payments received by the Company during that Bonus Period.
The Step Up Amount on and after the day the Owner attains Age 80 is zero.
Unless the Company consents otherwise, the Bonus Death Benefit will end if the
Owner is changed.
Optional Enhanced Death Benefit. The Owner may elect an Enhanced Death
Benefit at the time a Contract is purchased. The Enhanced Death Benefit, up to
the Owner's 80th birthday, is an amount equal to:
- Purchase Payments, less the sum of any reductions in Contract Value
attributable to partial withdrawals during the Owner's lifetime (including
applicable charges); and
- interest accumulated at an annual rate of 4.5%
-
up to a maximum amount equal to two (2) times the sum of Purchase Payments.
The Enhanced Death Benefit on and after the day the Owner attains Age 80 is
zero. Unless the Company consents otherwise, the Enhanced Death Benefit will
end if the Owner is changed.
If the Enhanced Death Benefit is elected by the Owner, the Company deducts an
Enhanced Death Benefit Charge on each Contract Anniversary prior to the
Annuity Date or the Owner's 80th birthday, if earlier. The charge is also
deducted if the Annuity Date is on a date other than a Contract Anniversary or
if the Contract is surrendered, based on the Contract Value at that time. The
Enhanced Death Benefit Charge is equal to .35% of the Contract Value at the
time the charge is taken. (See "Charges and Deductions - Optional Enhanced
Death Benefit Charge," p.__.)
If the Owner is a non-natural person, the Annuitant will be considered the
Owner for purposes of determining the Basic Death Benefit, the Bonus Death
Benefit and the Enhanced Death Benefit.
Owners should refer to their Contract for the applicable Death Benefit
provisions.
PAYMENT OF DEATH BENEFIT
The Death Benefit will be determined by the Company and paid as of the
Valuation Date next following the date it receives due proof of death and any
applicable election for a payment method, if an election was not previously
made by the Owner. In the event of the death of an Owner prior to the Annuity
Date, a Beneficiary may elect to have the Death Benefit paid under one of the
following options: (a) as a single lump sum payment; (b) payment of the
entire Death Benefit within five years of the date of the Owner's Death or (c)
payment of the Death Benefit under an Annuity Option over the lifetime of the
Beneficiary or over a period not extending beyond the life expectancy of the
Beneficiary with payments commencing within one year of the date of the
Owner's death. Any portion of the Death Benefit not applied under option (c)
within one year of the date of the Owner's death, must be distributed within
five years of the date of such death.
A spousal Beneficiary may elect one of the above options or elect to continue
a Contract in his or her name at the then current Contract Value in lieu of
receiving any Death Benefit. Payment to the Beneficiary other than in a lump
sum, may only be elected during the 60 day period beginning with the date of
receipt of proof of death.
OWNERS OTHER THAN A SINGLE PERSON
If there are Joint Owners, any reference to the death of the Owner shall mean
the first death of an Owner. Any Joint Owner must be the spouse of the other
Owner. Upon the death of either Owner, the surviving spouse will be the
primary Beneficiary. Any other Beneficiary designated in the Application or as
subsequently changed will be treated as a contingent Beneficiary unless
otherwise indicated in writing to the Company.
If the Owner is a non-natural person, then for purposes of the Death Benefit
the Annuitant shall be treated as the Owner and the death of the Annuitant
shall be treated as the death of the Owner.
BENEFICIARY
Unless the Owner provides otherwise, the Death Benefit will be paid in equal
shares to the survivor(s) as follows: (a) to the primary Beneficiaries who
survive the Owner or Annuitant's death, as applicable; or if there are none,
(b) to the contingent Beneficiaries who survive the Owner or Annuitant's death
as applicable; or if there are none, (c) to the estate of the Owner.
ANNUITY PROVISIONS
ANNUITY DATE
The Owner selects an Annuity Date at the time of application, and may later
change it by written request at least 30 days prior to the existing Annuity
Date. If the Annuity Date selected is less than 2 Contract Years from the
Issue Date, a Withdrawal Charge will be deducted from Contract Value before
the first annuity payment is made. (See "Charges and Deductions --Withdrawal
Charge," p.__.) If the selected Annuity Date occurs when the Annuitant is at
an advanced age, such as over Age 85, it is possible that the Contract will
not be considered an annuity for federal tax purposes. Investors in a
Qualified Contract should select an Annuity Date that is consistent with the
requirements of their retirement plans (See "Tax Considerations - Withdrawals
from Qualified Contracts," p.__.) A qualified tax advisor should be consulted
for further information.
ANNUITY PAYMENTS
Allocation. The Owner may elect, no later than seven (7) calendar days prior
to the Annuity Date, to receive Fixed Annuity Payments, Variable Annuity
Payments or a combination of Fixed Annuity Payments and Variable Annuity
Payments. The Annuitant is the payee, unless a different payee is selected by
the Owner by written request to the Company at its Variable Service Center at
least 30 days prior to the Annuity Date. If all of the Contract Value on the
seventh calendar day before the Annuity Date is allocated to the Fixed
Account, Fixed Annuity Payments will be made. If all of the Contract Value on
that date is allocated to the Separate Account, Variable Annuity Payments will
be made. If the Contract Value on that date is allocated to both the Fixed
Account and the Separate Account, a combination of Fixed Annuity Payments and
Variable Annuity Payments will be made to reflect the allocation between the
Accounts.
Amount. The total dollar amount of each payment is the sum of the Variable
Annuity Payment and the Fixed Annuity Payment. The Company reserves the right
to pay Annuity Payments in one sum when the remaining payments are less than
$2,000 or other minimum amount established by the Company from time to time,
or when the Annuity Option elected would result in periodic payments of less
than $100.
Annuitization Bonus. Subject to state availability, the Company intends to
increase the Contract Value on the Annuity Date by an "Annuitization Bonus" if
Contract Value is applied to an Annuity Option. The increase in Contract
Value will be calculated by the Company with respect to Contract Value as of
the immediately preceding Business Day. The increase in Contract Value will
be allocated pro-rata to the Investment Options to which Contract Value is
then allocated, and will be deemed "income" on a Contract for federal income
tax purposes. (See "Tax Considerations," p. __.)
The "Annuitization Bonus" for a Contract will be determined by the Company at
the time of issuance of a Contract, but may be modified, reduced or eliminated
for Contracts subsequently issued. On the date of this prospectus, the
Annuitization Bonus is 3% of Contract Value.
Variable Annuity Payments. The actual dollar amount of Variable Annuity
Payments is dependent upon (a) the Contract Value (plus any Annuitization
Bonus) on the Annuity Date, (b) the annuity table and the assumed interest
rate specified in the Contract for the Annuity Option selected, and (c) the
investment performance of the Sub_Account selected.
The annuity tables contained in the Contract for Variable Annuity Payments are
based on a 3% assumed investment rate. If the actual net investment rate
exceeds 3%, Variable Annuity Payments will increase. Conversely, if the actual
rate is less than 3 %, Variable Annuity Payments will decrease.
Variable Annuity Payments will initially reflect the investment performance of
the Separate Account in accordance with the allocation of the Contract Value
to the Sub_Account(s) on the Annuity Date. After the Annuity Date, allocations
may be changed among Sub-Account Investment Options once each Contract Year.
(See "Transfers Among Investment Options," p. __.)
<PAGE>
ANNUITY OPTIONS
The Annuity Option is elected by the Owner and may be changed by written
request at least 30 days prior to the Annuity Date. If no Annuity Option
election is in effect at least 30 days before the Annuity Date, Annuity
Payments will be made under Option B. Life Annuity with a Period Certain of
120 Months, as described below.
The Annuity Payments payable under the Contract may be made under one of the
following options or any other option acceptable to the Company:
Option A. Life Annuity. An annuity payable monthly during the lifetime of the
Annuitant. Annuity Payments cease at the death of the Annuitant.
Option B. Life Annuity with Periods Certain of 60, 120, 180 or 240 Months.
An annuity payable monthly during the lifetime of the Annuitant and in any
event for 60, 120, 180 or 240 months certain as selected.
Option C. Joint and Survivor Annuity. An annuity payable monthly during the
joint lifetime of the Annuitant and a designated second person. At the death
of either, Annuity Payments will continue to be made to the survivor. The
survivor's Annuity Payments will be equal to 100%, 75%, 662/3% or 50% of the
amount payable during the joint lifetime, as chosen.
Option D. Joint and Contingent Annuity. An annuity payable monthly during the
lifetime of the Annuitant and continuing during the lifetime of a designated
second person after the Annuitant's death. The second person's Annuity
Payments will be equal to 100%, 75%, 662/3% or 50% of the amount payable, as
chosen.
Option E. Fixed Payments for a Period Certain. An annuity payable monthly for
a fixed amount for any specified period (at least 5 years but not exceeding 30
years), as chosen.
Annuity Options A, B, C & D are available for Fixed Annuity Payments, Variable
Annuity Payments or a combination of both. Annuity Option E is available for
Fixed Annuity Payments only.
If the Annuitant dies during a period certain (Annuity Options B or E), the
remaining Annuity Payments will be made to the Beneficiary. The Beneficiary
may elect to receive the commuted value of the remaining Annuity Payments in a
single sum instead. The Company will determine the commuted value by
discounting the remaining Annuity Payments at its then current interest rate
used for commutation.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of the Annuitant has been misstated, the Company may change
the annuity benefits to those which the Contract Value would have provided
had the correct Age and sex been stated. If the misstatement is discovered
after the Annuity Date: (a) the Company will add interest to any overpayments
at the rate of 6% per year, compounded annually and deduct the amount against
remaining annuity payments; and (b) the Company will add interest to any
underpayments at the rate of 6% per year, compounded annually, and pay the
amount in a single sum with the next Annuity Payment.
WITHDRAWALS
The Owner may make a written request to the Company to surrender the Contract
or to make a partial withdrawal of Contract Value before the Annuity Date.
Contract Value available upon surrender or withdrawal will be reduced by any
applicable: (a) Withdrawal Charge; (b) taxes not previously deducted; (b)
Annual Contract Maintenance Charge; and (d) Optional Enhanced Death Benefit
Charge. (See "Charges and Deductions," p.__.) Partial withdrawals and
surrenders will ordinarily result in the cancellation of Accumulation Units
from each applicable Sub_Account of the Separate Account or a reduction in the
Fixed Account Value in the ratio that the Sub_Account Value and/or the Fixed
Account Value bears to the total Contract Value. The Owner may request in
writing in advance if a different method of cancellation of units and
reduction of Fixed Account Value is desired. The Company will pay the amount
of any withdrawal within 7 days of receipt of a request in good order, unless
the "Suspension of Payments or Transfers" provision is in effect. (see
"Suspension of Payments or Transfers," p.__.)
<PAGE>
PARTIAL WITHDRAWALS
Each partial withdrawal must be for an amount which is not less than $1,000.
If a partial withdrawal request is made which would reduce the remaining
Withdrawal Value below $1,000, the Company may deem the Contract surrendered.
In such event, the Contract will terminate and the Company will pay an Owner
the Withdrawal Value of a Contract. (See "The Contract --Minimum Value
Requirements," p.__.)
SYSTEMATIC WITHDRAWALS
Subject to any conditions and fees the Company may impose, an Owner may elect
to take partial withdrawals under a systematic withdrawal program. The
Company does not currently charge for systematic withdrawals.
Under the program, systematic withdrawals are made on the same day (or next
Business Day) of each month or quarter. Owners must be 5912 or older to
participate. Systematic withdrawals are taken pro_rata from the Investment
Options of a Contract and are transferred automatically to an Owner's bank
account, provided the account is maintained at a bank that is a member of the
Automated Clearing House (ACH). Systematic withdrawals are not allowed
simultaneously with the dollar cost averaging program. (See "Systematic
Transfers -Dollar Cost Averaging," p.__.)
The Company reserves the right to modify, suspend or eliminate the program at
any time.
TAX PENALTIES AND RESTRICTIONS
Certain tax withdrawal penalties and restrictions may apply to withdrawals
from a Contract. The withdrawal penalties and restrictions differ between a
Non-Qualified Contract and a Qualified Contract. (See "Tax Considerations,"
p.__.) Special restrictions apply to a Qualified Contract issued as a 403(b)
annuity. (See "Tax Considerations - Withdrawal Limitations on 403(b)
Annuities," p.__.)
Owners should consult their own tax counsel or other tax adviser before
requesting any withdrawals.
TEXAS OPTIONAL RETIREMENT PROGRAM
A Contract issued to a participant in the Texas Optional Retirement Program
("ORP") will contain an ORP endorsement that will amend the Contract to
provide: (a) if for any reason a second year of ORP participation is not
begun, the total amount of the State of Texas' first_year contribution will be
returned to the appropriate institute of higher education upon its request;
and (b) no benefits will be payable, through surrender of the Contract or
otherwise, until the participant dies, accepts retirement, terminates
employment in all Texas institutions of higher education or attains the age of
7012. The value of the Contract may, however, be transferred to other
contracts or carriers during the period of ORP participation. A participant in
the ORP is required to obtain a certificate of termination from the
participant's employer before the value of a Contract can be withdrawn.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Company reserves the right to suspend or postpone payments for withdrawals
or transfers from the Sub-Accounts for any period when:
- the New York Stock Exchange is closed;
- trading on the New York Stock Exchange is restricted;
- an emergency exists as a result of which disposal of securities held in the
Separate Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Separate Account's net assets; or
- during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners.
The Company also reserves the right to defer payment for a withdrawal or
transfer from the Fixed Account for the period permitted by law but not for
more than six months after written election is received by the Company.
<PAGE>
PERFORMANCE INFORMATION
IMS PRIME MONEY FUND PORTFOLIO
From time to time, the IMS Prime Money Fund Sub_Account of the Separate
Account may advertise its "yield" and "effective yield." Both yield figures
are based on historical earnings of the IMS Prime Money Fund Portfolio and are
not intended to indicate future performance. The "yield" of the IMS Prime
Money Fund Sub_Account refers to the income generated by Contract Values in
the IMS Prime Money Fund Sub_Account over a seven_day period (which period
will be stated in the advertisement). This income is "annualized." That is,
the amount of income generated by the investment during that week is assumed
to be generated each week over a 52_week period and is shown as a percentage
of the Contract Values in the PIMS rime Money Fund Sub_Account. The "effective
yield" is calculated similarly. However, when annualized, the income earned by
Contract Values is assumed to be reinvested. This results in the "effective
yield" being slightly higher than the "yield" because of the compounding
effect of the assumed reinvestment. The yield figure will reflect the
deduction of any asset_based charges and any applicable Annual Contract
Maintenance Charge, but will not reflect the deduction of any Withdrawal
Charge. The deduction of any Withdrawal Charge would reduce any percentage
increase or make greater any percentage decrease.
OTHER PORTFOLIOS
From time to time, the Company may advertise performance data for the various
other Portfolios under the Contract. Such data will show the percentage change
in the value of an Accumulation Unit based on the performance of an investment
medium over a period of time, usually a calendar year, determined by dividing
the increase (decrease) in value for that Unit by the Accumulation Unit value
at the beginning of the period. This percentage figure will reflect the
deduction of any asset_based charges and any applicable Annual Contract
Maintenance Charges under the Contracts, but will not reflect the deduction of
any Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of any applicable Annual Contract Maintenance Charges
and Withdrawal Charges, as well as any asset_based charges.
The Company may make available yield information with respect to some of the
Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Annual Contract Maintenance Charge as well as any
asset_based charges.
The Company may also show historical AUVs in certain advertisements containing
illustrations. These illustrations will be based on actual AUVs. In addition,
the Company may distribute sales literature which compares the percentage
change in share values of any of the Portfolios against established market
indices such as the Standard & Poor's 500 Composite Stock Price Index, the Dow
Jones Industrial Average or other management investment companies which have
investment objectives similar to the Portfolio being compared. The Standard &
Poor's Composite 500 Stock Price Index is an unmanaged, unweighted average of
500 stocks, the majority of which are listed on the New York Stock Exchange.
The Dow Jones Industrial Average is an unmanaged, weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange. Both
the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average
assume quarterly reinvestment of dividends.
The Company may publish the ratings and other information assigned it by one
or more independent rating services in advertisements and reports to an Owner.
Further, the Company may publish charts and other information concerning
dollar cost averaging, tax-deference and other investment methods.
The Company may also distribute sales literature which compares the
performance of the AUVs of a Contract with the unit values of variable
annuities issued through the separate accounts of other insurance companies.
Such information will be derived from the Lipper Variable Insurance Products
Performance Analysis Service, Morningstar or from the VARDS Report.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment companies.
The rankings compiled by Lipper may or may not reflect the deduction of
asset_based insurance charges. The Company's sales literature utilizing these
rankings will indicate whether or not such charges have been deducted. Where
the charges have not been deducted, the sales literature will indicate that if
the charges had been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Miami and published by Financial
Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset_based insurance charges.
Morningstar rates a variable annuity sub-account against its peers with
similar investment objectives. Morningstar does not rate any sub-account that
has less than three years of performance data.
TAX CONSIDERATIONS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE
POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF
THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT A CONTRACT MAY NOT BE
TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is
not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total withdrawal
(total surrender), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non_Qualified Contracts, this cost
basis is generally the Purchase Payments, while for Qualified Contracts there
may be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by
the ratio that the cost basis of the Contract (adjusted for any period certain
or refund feature) bears to the expected return under the Contract. The
exclusion amount for payments based on a variable annuity option is determined
by dividing the cost basis of the Contract (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
be paid. Payments received after the investment in the Contract has been
recovered (i.e. when the total of the excludable amounts equals the investment
in the Contract) are fully taxable. The taxable portion is taxed at ordinary
income tax rates. For certain types of Qualified Plans there may be no cost
basis in the Contract within the meaning of Section 72 of the Code. Owners,
Annuitants and Beneficiaries under a Contract should seek competent financial
advice about the tax consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification
of the Contract as an annuity contract would result in imposition of federal
income tax to the Owner with respect to earnings allocable to the Contract
prior to the receipt of payments under the Contract.
The Company intends that all Portfolios of a Fund underlying a Contract will
be managed by the Fund or its investment adviser to comply with the
diversification requirements set forth in Section 817(h) of the Code and
Treas. Reg. 1.817-5 promulgated thereunder.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be
contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments
under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owners
being retroactively determined to be the owners of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u), the investment earnings on premiums for Contracts will be
taxed currently to the Owner if the Owner is a non-natural person, e.g., a
corporation, or certain other entities. Such Contracts generally will not be
treated as annuities for federal income tax purposes. However, this treatment
is not applied to Contracts held by a trust or other entity as an agent for a
natural person or to Contracts held by a tax-qualified retirement plan
described in sections 401, 403(a), 403(b), 408, or 457 of the Code.
Purchasers should consult their own tax counsel or other tax adviser before
purchasing a contract to be owned by a non-natural person.
MULTIPLE CONTRACTS
The Code provides that multiple non_qualified 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 including more rapid taxation of the distributed amounts from
such combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non_qualified annuity contract in any calendar year.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at
the rate of 10% from non_ periodic payments. However, the Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for federal income tax. The 20% withholding
requirement generally does not apply to: (a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary or distributions for a specified period of 10 years or
morem distributions which are required minimum distributions; or (c) the
portion of the distributions not includible in gross income (i.e. return of
after-tax contributions). Participants should consult their own tax counsel
or other tax adviser regarding withholding requirements.
WITHDRAWALS FROM NON_QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 5912; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life
(or life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
QUALIFIED PLANS
A Contract offered by this Prospectus is designed to be suitable for use under
various types of Qualified Plans. Taxation of participants in each Qualified
Plan varies with the type of plan and terms and conditions of each specific
plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of a Contract issued pursuant to the
plan. Various tax penalties may apply to contributions in excess of specified
limits, and the limitations under a plan may be less than the which may limit
the amount permitted to be contributed some retirement plans are subject to
distribution and other requirements that are not incorporated into the
Company's administrative procedures. Contract Owners, participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contract comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which a Contract may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications
depending on individual facts and circumstances. Each purchaser should obtain
competent tax advice prior to purchasing a Contract issued under a Qualified
Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans
are not transferable except upon surrender or annuitization. Various penalty
and excise taxes may apply to contributions or distributions made in violation
of applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts", below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. A Contract sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non_qualified deferred compensation plans.
HR. 10 Plans. Section 401 of the Code permits self_employed individuals to
establish Qualified Plans for themselves and their employees, commonly
referred to as "H.R. 10" or "Keogh" plans. Contributions made to the Plan for
the benefit of the employees will not be included in the gross income of the
employees until distributed from the Plan. The tax consequences to
participants may vary depending upon the particular plan design. However, the
Code places limitations and restrictions on all Plans including on such items
as: amount of allowable contributions; form, manner and timing of
distributions; transferability of benefits; vesting and nonforfeitability of
interests; nondiscrimination in eligibility and participation; and the tax
treatment of distributions, withdrawals and surrenders. (See "Tax Treatment of
Withdrawals--Qualified Contracts" below.) Purchasers of Contracts for use with
an H.R. 10 Plan should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
403(b) Annuities. Section 403(b) of the Code permits the purchase of "403(b)"
or "tax_sheltered annuities" by public schools and certain charitable,
educational and scientific organizations described in Section 501(c)(3) of the
Code. These qualifying employers may make contributions to a Contract for the
benefit of their employees. Such contributions are not includible in the gross
income of the employees until the employees receive distributions from the
Contracts. The amount of contributions to the tax_sheltered annuity is limited
to certain maximums imposed by the Code. Furthermore, the Code sets forth
additional restrictions governing such items as transferability,
distributions, nondiscrimination and withdrawals. (See "Tax Treatment of
Withdrawals--Qualified Contracts" and "Tax Sheltered Annuities--Withdrawal
Limitations" below.) Any employee should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
Individual Retirement Annuities. Section 408(b) of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" ("IRA"). Under applicable limitations, certain
amounts may be contributed to an IRA which will be deductible from the
individual's gross income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax_deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
Corporate Pension and Profit_Sharing Plans. Sections 401(a) and 401(k) of the
Code permit corporate employers to establish various types of retirement plans
for employees. These retirement plans may permit the purchase of a Contract to
provide benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places
limitations and restrictions on all plans including on such items as: amount
of allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. Purchasers of the Contract for use
with Corporate Pension or Profit_Sharing Plans should obtain competent tax
advice as to the tax treatment and suitability of such an investment. Unless
the Company otherwise permits, participant loans are not allowed in connection
with Contracts purchased in connection with these plans.
Section 457 Plans. Under Section 457 of the Code, governmental and certain
other tax-exempt employers may establish deferred compensation plans for the
benefit of their employees which may invest in annuity contracts. The Code,
as in the case of Qualified Plans, establishes limitations and restrictions on
eligibility, contributions and distributions. Under these Plans,
contributions made for the benefit of the employees will not be includible in
the employee's gross income until distributed from the Plan. However, under a
Section 457 Plan, all the assets remain solely the property of the employer
subject only to the claims of the employer's general creditors until such time
as made available to the participant or beneficiary.
WITHDRAWALS FROM QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty
tax on the taxable portion of certain distributions from qualified retirement
plans, including Contracts issued and qualified under Code Sections 401 (H.R.
10 and Corporate Pension and Profit_Sharing Plans), 403(b) and 408(b)
(Individual Retirement Annuities). To the extent amounts are not includible in
gross income because they have been rolled over to an IRA or to another
eligible Qualified Plan, 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 Owner or Annuitant (as applicable) reaches age
5912; (b) distributions following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (c) after separation from service,
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Owner
or Annuitant (as applicable) or the joint lives (or joint life expectancies)
of such Owner or Annuitant (as applicable) and his or her designated
Beneficiary; (d) distributions to an Owner or Annuitant (as applicable) who
has separated from service after he has attained age 55; (e) distributions
made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) 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. The exceptions stated
in (d), (e) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity without the requirement that there be a separation from service.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year, following the year in which the employee attains
age 7012. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year may be
subject to an additional 15% excise tax unless an exemption applies.
WITHDRAWAL LIMITATIONS ON 403(B) ANNUITIES
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (a) attains age 5912; (b)
separates from service; (c) dies; (d) becomes disabled within the meaning of
the Code; or (e) in the case of hardship. However, withdrawals for hardship
are restricted to the portion of the Owner's Contract Value which represents
contributions made by the Owner and does not include any investment results.
The limitations on withdrawals became effective on January 1, 1989 and apply
only to salary reduction contributions made after December 31, 1988, to income
attributable to such contributions and to income attributable to amounts held
as of December 31, 1988. The limitations on withdrawals do not affect
rollovers or transfer between certain Qualified Plans. Owners should consult
their own tax counsel or other tax adviser regarding any distributions.
OTHER MATTERS
FINANCIAL STATEMENTS
The full financial statements for the Separate Account and the Company are in
the Statement of Additional Information. As of the date of this Prospectus,
the Separate Account had not commenced sales of the Capital Variable Annuity.
Accordingly, no condensed financial information is presented for such
Contracts.
DISTRIBUTION
First Variable Capital Services, Inc. ("FVCS"), 10 Post Office Square, Boston,
MA 02109, acts as the distributor of the Contracts. FVCS is a wholly_owned
subsidiary of the Company. The Contract is offered on a continuous basis
through FVCS and approved broker-dealers who are members of the National
Association of Securities Dealers, Inc.
The Company and FVCS have agreements with various broker -dealers under which
the Contracts will be sold by registered representatives of the
broker-dealers. The registered representatives are required to be authorized
under applicable state regulations to sell variable annuity contracts. The
commissions payable to a broker-dealer for sales of the Contract may vary with
the sales agreement, but is not expected to exceed 6.50% of first year
Purchase Payments. Broker-dealers may also receive expense allowances,
wholesaler fees, bonuses and training fees.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Separate Account,
the Distributor or the Company is a party.
TRANSFERS BY THE COMPANY
The Company may, subject to applicable regulatory approvals, transfer its
obligations under a Contract to another qualified life insurance company under
an assumption reinsurance arrangement without the prior consent of the Owner.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of a Fund held in the Separate Account at regular or special
meetings of the shareholders in accordance with instructions received from
Owners having the voting interest in the affected Portfolio(s) held in the
Separate Account. The number of votes that an Owner has the right to instruct
for a particular Sub-Account is determined by dividing the Variable Account
Value in the Sub-Account by the net asset value per share of the corresponding
Portfolio in which the Sub-Account invests. The Company will vote shares for
which it has not received instructions, as well as shares attributable to it,
in the same proportion as it votes shares for which it has received
instructions. A Fund may not be required to hold routine annual meetings of
its shareholders.
The Funds' shares are used solely as the investment vehicle for separate
accounts of insurance companies offering variable annuity contracts and
variable life insurance policies. The use of Funds' shares as investments for
both variable annuity contracts and variable life insurance policies is
referred to as "mixed funding." The use of Funds' shares as investments by
separate accounts of unaffiliated life insurance companies is referred to as
"shared funding."
The Funds intend to engage in mixed funding and shared funding in the future.
Although the Funds do not currently foresee any disadvantage to Contract
owners due to differences in redemption rates, tax treatment, or other
considerations resulting from mixed funding or shared funding, the Trustees of
the Funds will closely monitor the operation of mixed funding and shared
funding and will consider appropriate action to avoid material conflicts and
take appropriate action in response to any material conflicts which occur.
The number of shares which an Owner has a right to vote will be determined as
of a date to be chosen by the Company not more than sixty (60) days prior to a
shareholder meeting of a Fund. Each Owner having a voting interest will
receive proxy material, reports, and other materials relating to the
appropriate Portfolio.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE
3
3
3
3
3
4
5
5
6
6
6
6
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
issued by
FIRST VARIABLE ANNUITY FUND E
and
FIRST VARIABLE LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED _________FOR THE INDIVIDUAL
FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE AND FIXED ANNUITY CONTRACTS WHICH
ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: 10 Post Office Square, 12th Floor, Boston, MA 02109 (617)
457-6700
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED __________
<PAGE>
TABLE OF CONTENTS
Page
Company 3
Independent Accountants 3
Legal Opinions 3
Distributor 3
Yield Calculation For IMS Prime Money Fund Sub-Account 3
Performance Information 4
Annuity Provisions 5
Variable Annuity 5
Fixed Annuity 6
Annuity Unit 6
Mortality and Expense Guarantee 6
Financial Statements 6
<PAGE>
COMPANY
Information regarding the Company and its ownership is contained in the
Prospectus.
INDEPENDENT ACCOUNTANTS
The Company's independent accountant
is___________________________________, ______, _____________ _____. The
financial statements for the Company as of _____________________ and the
financial statements for First Variable Annuity Fund E as of
_____________________ and for the periods indicated included in this Statement
of Additional Information, which is incorporated by reference into the
Prospectus, have been so included in reliance on the report of
__________________, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
First Variable Capital Services, Inc. ("FVCS") acts as the distributor.
FVCS is a wholly-owned subsidiary of the Company. The offering is on a
continuous basis.
YIELD CALCULATION FOR IMS PRIME MONEY FUND SUB-ACCOUNT
The IMS Prime Money Fund Sub-Account of the Separate Account will
calculate its current yield based upon the seven days ended on the date
calculation. For the seven calendar days ended December 31, 199, the
annualized yield for the IMS Prime Money Fund Sub-Account was _____%.
The current yield of the IMS Prime Money Fund Sub-Account is computed by
determining the net change (exclusive of capital changes) in the value of a
hypothetical pre-existing Owner account having a balance of one Accumulation
Unit of the Sub-Account at the beginning of the period, subtracting the
Mortality and Expense Risk Charge, the Administrative Charge and the Annual
Contract Maintenance Charge, dividing the difference by the value of the
account at the beginning of the same period to obtain the base period return
and multiplying the result by (365/7).
The IMS Prime Money Fund Sub-Account computes its effective compound
yield according to the method prescribed by the Securities and Exchange
Commission. The effective yield reflects the reinvestment of net income
earned daily on IMS Prime Money Fund Sub-Account assets.
Net investment income for yield quotation purposes will not include
either realized capital gains and losses or unrealized appreciation and
depreciation, whether reinvested or not.
The yields quoted should not be considered a representation of the yield
of the IMS Prime Money Fund Sub-Account in the future since the yield is not
fixed. Actual yields will depend not only on the type, quality and maturities
of the investments held by the IMS Prime Money Fund Sub-Account and changes in
the interest rates on such investments, but also on changes in the IMS Prime
Money Fund Sub-Account's expenses during the period.
Yield information may be useful in reviewing the performance of the IMS Prime
Money Fund Sub-Account and for providing a basis for comparison with other
investment alternatives. However, the IMS Prime Money Fund Sub-Account's yield
fluctuates, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time.
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Company may advertise performance data as
described in the Prospectus. Any such advertisement will include total return
figures for the time periods indicated in the advertisement. Such total
return figures will reflect the deductions of a 1.25% Mortality and Expense
Risk Charge, a .15% Administrative Charge, the investment advisory fee for the
underlying Portfolio being advertised and any applicable Annual Contract
Maintenance Charges.
The hypothetical value of a Contract purchased for the time periods
described in the advertisement will be determined by using the actual
Accumulation Unit values for an initial $1,000 purchase payment, and deducting
any applicable Annual Contract Maintenance Charges to arrive at the ending
hypothetical value. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase payment would have
to earn annually, compounded annually, to grow to the hypothetical value at
the end of time periods described. The formula used in these calculations is:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment
made at the beginning of the time periods used.
The annualized total returns as of December 31, 1995 of each Sub-Account
are listed below:
*Common Stock is a ten year Annualized return.
In addition to total return data, the Company may include yield information in
its advertisements. For each Sub-Account (other than the IMS Prime Money Fund
Sub-Account) for which the Company will advertise yield, it will show a yield
quotation based on a 30 day (or one month) period ended on the date of the
most recent balance sheet of the Separate Account included in the registration
statement, computed by dividing the net investment income per Accumulation
Unit earned during the period by the maximum offering price per Unit on the
last day of the period, according to the following formula:
Yield = 2 [(a-b +1) 6 -1]
cd
Where:
a = Net investment income earned during the period by the Trust
attributable to shares owned by the Sub-Account.
b = Expenses accrued for the period (net of reimbursements).
c = The average daily number of Accumulation Units outstanding during
the
period.
d = The maximum offering price per Accumulation Unit on the last day
of the
period.
Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of the Sub-Account's total return or
yield for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return or yield may be in any
future period.
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not
predetermined as to dollar amount: and (2) will vary in amount with the net
investment results of the applicable Sub-Account(s) of the Separate Account.
At the Annuity Date, the Contract Value in each Sub-Account will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. If, as of the Annuity Date, the then current Annuity
Option rates applicable to this class of Contracts provide a first Annuity
Payment greater than guaranteed under the same Annuity Option under this
Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value
of an Annuity Unit as of the Annuity Date. This establishes the number of
Annuity Units for each monthly payment. The number of Annuity Units
remains fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month proceeding the month for
which the payment is due. This result is the dollar amount of the
payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments reduced by the applicable portion of the
Annual Contract Maintenance Charge.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period
which are guaranteed as to dollar amount by the Company and do not vary with
the investment experience of the Separate Account. The General Account Value
on the day immediately preceding the Annuity Date will be used to determine
the Fixed Annuity monthly payment. The first monthly Annuity Payment will be
based upon the Annuity Option elected and the appropriate Annuity Option
Table.
ANNUITY UNIT
The value of an Annuity Unit for each Sub-Account was arbitrarily set
initially at $10.
The Sub-Account Annuity Unit Value at the end of any subsequent Valuation
Period is determined by subtracting (2) from (1) and dividing the result by
(3) and multiplying the result by a factor which neutralizes the assumed
investment rate of 3% contained in the Annuity Tables where:
1. is the net result of:
a. the assets of the Sub-Account attributable to the Annuity Units;
plus or
minus
b. the cumulative charge or credit for taxes reserved which is
determined by
the Company to have resulted from the operation or maintenance of
the Sub-
Account;
2. is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and
for the Administrative Charge.
3. is the number of Annuity Units outstanding at the end of the
Valuation Period.
The value of an Annuity Unit may increase or decrease from Valuation
Period to Valuation Period.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment
after the first Annuity Payment will not be affected by variations in
mortality or expense experience.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
[to be filed by amendment]
<PAGE>
PART C
<PAGE>
FIRST VARIABLE ANNUITY FUND E
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The financial statements of the Separate Account and the Company will be
filed by pre-effective amendment
(b) Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account*
2. Not Applicable
3(a). Underwriting Agreement**
(b). to be filed by Pre-Effective Amendment*
(c). Form of Principal Underwriter's Agreement
(d). Form of Broker-Dealer Agreement
(e). Form of Master Service Agreement (to be filed by pre-effective
amendment)
4. Individual Flexible Payment Deferred Variable Annuity Contract (to
be filed by pre-effective amendment)
5. Application for Variable Annuity
6. Articles of Incorporation and By-laws of First Variable Life
Insurance Company*
7. Not Applicable
8. Not Applicable
9. Opinion and Consent of Counsel (to be filed by pre-effective
amendment)
10. Consent of Accountants (to be filed by pre-effective amendment)
11. Not Applicable
12. Not Applicable
13. Schedule of Performance Calculations (to be filed by
pre-effective amendment)
14. Not Applicable
* Incorporated by reference to the Registrant's Original Registration
Statement.
File Nos. 2-92856, 811-4092
** Incorporated by reference to the Registrant's Post-Effective Amendment
No. 3 to Registration Statement. File Nos. 2-92856, 811-4092
# Incorporated by reference to the Registrant's Post-Effective Amendment
No. 4 to Form N-4 (File Nos. 33-35749 and 811-4092) as filed on April 30,
1993.
## Incorporated by reference to the Registrant's Post-Effective Amendment
No. 5 to Form N-4 (File Nos. 33-35749 and 811-4092) as filed on February 2,
1994.
ITEM 25. OFFICERS AND DIRECTORS OF DEPOSITOR
The following are the Officers and Directors of the Company.
Name and Principal Positions and Offices with the Depositor
Ronald M. Butkiewicz Chairman and Director
Stephan M. Largent President and Director
Michael J. Corey Director
Michael R. Ferrari Director
Peter D. Fullam Director
T. David Kingston Director
Jeff S. Liebmann Director
Kenneth R. Meyer Director
Phillip R. O'Connor Director
Norman A. Fair Director
Thomas K. Neavins Director
Arnold R. Bergman Vice President - Legal & Administration & Secretary
Martin Sheerin Vice President and Chief Actuary
Mark Reynolds Vice President and Treasurer
Anthony Koenig Assistant Controller
Constance Graves Assistant Controller
Mark Kelly Assistant Controller
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
THE DEPOSITOR OR REGISTRANT
Incorporated by reference to the Registrant's Post-Effective
Amendment No. 15 to Form N-4 (File Nos. 33-35749 and 811-4092) as filed on
November 22, 1994.
.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
Insofar as indemnification's for liability arising under the Securities
Act of 1933("ACT") may bee permitted to directors and officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification's is against
public policy as expressed in the Act and is therefor, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by its against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) First Variable Capital Services, Inc. ("FVCS") is the principal
underwriter for the Contracts funded in First Variable Annuity Fund E and for
the following investment companies:
<PAGE>
(b) The following persons are directors and officers of FVCS:
Name and Principal Positions and Offices with the Depositor
Stephan Largent President, Chairman, Director
Mark E. Reynolds Treasurer
Tony Koenig Assistant Treasurer
Mark Kelly Assistant Treasurer
Arnold R. Bergman Secretary
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Arnold R. Bergman, Secretary of the Company and Mark E. Reynolds,
Treasurer of the Company whose address is 10 Post Office Square, 12th Floor,
Boston, Massachusetts, 02109, maintain physical possession of the accounts,
books, or documents of the Separate Account required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file post-effective amendment to
his registration statement as frequently as is necessary to ensure that the
audit financial statements in the registration statement are never more than
sixteen (6) months old for so long as payment under the variable annuity
contracts may be accepted.
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space than an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statement required to be made
available under this Form promptly upon written or oral request.
<PAGE>
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connections with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connections with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b) (11), and (2) other investment
alternative available under the employer's Section 403(b) arrangement to which
the participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, as amended, the Registrant has caused this Registration Statement to
be signed on its behalf, in the City of Boston, and the Commonwealth of
Massachusetts, on this 19th day of March, 1996.
FIRST VARIABLE ANNUITY FUND E
(Registrant)
By: FIRST VARIABLE LIFE INSURANCE CO.
(Depositor)
By: __________________
Stephan Largent, President
Attest: FIRST VARIABLE LIFE INSURANCE COMPANY
____________________ By:----------------__________________
Arnold R. Bergman Stephan Largent, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
DATE
Ronald M. Butiewicz* Chairman & Director 3/19/96
Ronald M. Butiewicz
Michael J. Corey * Director 3/19/96
Michael J. Corey
__________________ Director ______
Michael R. Ferrari
__________________ Director _______
Peter Fullam
Stephan Largent President and Director 3/19/96
Stephan Largent
T. David Kingston* Director 3/19/96
T. David Kingston
_______________________ Director ---------------------______
Jeff S. Liebman
______________________ Director _______
Kenneth R. Meyer
______________________ Director _______
Phillip R. O'Connor
Norman A. Fair* Director 3/19/96
Norman A. Fair
Thomas K. Neavins* Director 3/19/96
Thomas K. Neavins
Mark E. Reynolds Vice President, Treasurer 3/19/96
Mark E. Reynolds
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Ronald M. Butkiewicz, a Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, Scott Randall Grodnick and
Mark E. Reynolds, or any one of the foregoing individually, as my attorney
and agent, for me, and in my name as a Director of this company on behalf of
the Company or otherwise, with full power to execute, deliver and file with
the Securities and Exchange Commission all documents required for registration
of variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each and
every act that said attorney may deem necessary or advisable to comply with
the intent of the aforesaid Acts.
WITNESS my hand this 18thday of November, 1994.
WITNESS;
/S/ BRUCE D. LAWERENCE /S/ RONALD M. BUTKIEWICZ
Bruce D. Lawerence Ronald M. Butkiewicz
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Michael J. Corey, a Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, Scott Randall Grodnick and
Mark E. Reynolds, or any one of the foregoing individually, as my attorney
and agent, for me, and in my name as a Director of this company on behalf of
the Company or otherwise, with full power to execute, deliver and file with
the Securities and Exchange Commission all documents required for registration
of variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each and
every act that said attorney may deem necessary or advisable to comply with
the intent of the aforesaid Acts.
WITNESS my hand this 18thday of November, 1994.
WITNESS;
/S/ MICHAEL COREY
Michael Corey
/S/ MARKE. REYNOLDS
Mark E. Reynolds
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, T. David Kingston, a Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, Scott Randall Grodnick and
Mark E. Reynolds, or any one of the foregoing individually, as my attorney
and agent, for me, and in my name as a Director of this company on behalf of
the Company or otherwise, with full power to execute, deliver and file with
the Securities and Exchange Commission all documents required for registration
of variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each and
every act that said attorney may deem necessary or advisable to comply with
the intent of the aforesaid Acts.
WITNESS my hand this 18thday of November, 1994.
WITNESS;
/S/ T. DAVID KINGSTON
T. David Kingston
/S/ MAUREEN HAMILTON
Maureen Hamilton
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Norman A. Fair, a Director of First
Variable Life Insurance Company, a corporation duly organized under the laws
of the State of Arkansas, do hereby appoint, Scott Randall Grodnick and Mark
E. Reynolds, or any one of the foregoing individually, as my attorney and
agent, for me, and in my name as a Director of this company on behalf of the
Company or otherwise, with full power to execute, deliver and file with the
Securities and Exchange Commission all documents required for registration of
variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each and
every act that said attorney may deem necessary or advisable to comply with
the intent of the aforesaid Acts.
WITNESS my hand this 18thday of November, 1994.
WITNESS;
/S/ NORMAN ARNOLD FAIR
Norman A. Fair
/S/ BRUCE D. LAWERENCE
Bruce D. Lawerence
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Thomas K. Neavins, a Director of
First Variable Life Insurance Company, a corporation duly organized under the
laws of the State of Arkansas, do hereby appoint, and Scott Randall Grodnick
and Mark E. Reynolds, or any one of the foregoing individually, as my
attorney and agent, for me, and in my name as a Director of this company on
behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 18thday of November, 1994.
WITNESS;
/S/ THOMAS K. NEAVINS
Thomas K. Neavins
/S/ BRUCE D. LAWERENCE
Bruce D. Lawerence
<PAGE>
