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File Nos. 333-12197
811-4092
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. _______ [_]
Post-Effective Amendment No. 3 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28 [X]
FIRST VARIABLE ANNUITY FUND E
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(Exact Name of Registrant)
FIRST VARIABLE LIFE INSURANCE COMPANY
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(Name of Depositor)
2122 York Road
Oak Brook, IL 60523
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's telephone number including area code: (630) 586-5000
Name and Address of Agent for Service
-------------------------------------
Arnold R. Bergman
Vice President, General Counsel and Secretary
First Variable Life Insurance Company
2122 York Road
Oak Brook, IL 60523
Copies to:
Raymond A. O'Hara III, Esq.
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
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on (date) pursuant to paragraph (b) of Rule 485
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(X) 60 days after filing pursuant to paragraph (a) (1) of Rule 485
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on (date) pursuant to paragraph (a)(1) of Rule 485.
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If appropriate, check the following:
This post-effective amendment designates a new effective date for
------ a previously filed post-effective amendment.
Title of Securities Being Registered: Interests Under Variable Annuity
Contracts.
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FIRST VARIABLE ANNUITY FUND E
CROSS REFERENCE SHEET
(Pursuant to Rule 495(a))
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<CAPTION>
Item No. in
Form N-4
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PART A Location
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<S> <C>
Item 1. Cover Page Cover Page
Item 2. Definitions DEFINITIONS
Item 3. Synopsis or Highlights HIGHLIGHTS
Item 4. Condensed Financial Information ACCUMULATION UNIT DATA; OTHER MATTERS,
FINANCIAL STATEMENTS; STATEMENT OF ADDITIONAL
INFORMATION
Item 5. General Description of Registrant, First Variable Life Insurance Company; The
Depositor and Portfolio Companies Separate Account; Separate Account Investment
Options; Variable Investors Series Trust;
Federated Insurance Series
Item 6. Deductions MORE ABOUT CHARGES AND DEDUCTIONS
Item 7. General Description of Variable Annuity THE CONTRACT
Contracts
Item 8. Annuity Period ANNUITY PROVISIONS
Item 9. Death Benefit CONTRACT; ANNUITY B BENEFITS AND VALUES;
Death Benefits before the Annuity Date; Death
Benefits after the Annuity Date.
Item 10. Purchases and Contract Value PURCHASE PAYMENTS; CONTRACT BENEFITS AND
VALUES
Item 11. Redemptions SURRENDER AND WITHDRAWALS
Item 12. Taxes FEDERAL TAX MATTERS
Item 13. Legal Proceedings Other Matters; Legal Proceedings
Item 14. Table of Contents of Statement of TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
Additional Information INFORMATION
</TABLE>
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<TABLE>
<CAPTION>
Item No. in
Form N-4
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PART B Location
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Item 15. Cover Page............................... Cover Page
Item 16. Table of Contents........................ TABLE OF CONTENTS
Item 17. General Information and History.......... FIRST VARIABLE LIFE
INSURANCE 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.......... CALCULATION OF OTHER
PERFORMANCE INFORMATION
Item 22. Annuity Payments......................... ANNUITY PROVISIONS
Item 23. Financial Statements..................... FINANCIAL STATEMENTS
</TABLE>
PART C
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Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Registration Statement.
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Prospectus [Date]
CAPITAL SIX VA
FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACTS
Issued by
FIRST VARIABLE LIFE INSURANCE COMPANY
Our Marketing and Executive Office: Our Variable Service Center:
2122 York Road P.O. Box 1317
Oak Brook, IL 60523 Des Moines, IA 50305-1317
Automated Information Line: (800) 845-0689
(800)-59-FUNDS
Or, for express deliveries:
1206 Mulberry Street
Des Moines, IA 50309
The Contract described in this prospectus provides for the payment of monthly
annuity payments on a fixed or variable basis beginning on a preselected Annuity
Date. The Contract also permits you to accumulate Account Value until the
Annuity Date, based on the payments you make, the charges and expenses of the
Contract, and the investment results of your underlying investment options. You
have the flexibility to adjust the amount and frequency of payments, and may use
the Contract as "Qualified Contract" in a tax-qualified retirement plan or as a
"Non-Qualified Contract" for other long-term savings and retirement purposes.
You may allocate your payments and your Contract's Account Value among nine
different investment options, or to our Fixed Account. The investment options
are available through our segregated asset account called First Variable Annuity
Fund E (the "Separate Account"). The Separate Account invests in selected
portfolios of two mutual funds. The portfolios currently available under the
Contract are:
<TABLE>
<CAPTION>
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SEPARATE ACCOUNT INVESTMENT OPTIONS
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Federated
Insurance
Mutual Variable Investors Series Trust ("VIST") Series
Fund ("FIS")
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<S> <C> <C> <C> <C> <C>
Small Growth Growth Multiple Prime Money
Cap & Strategies Fund II
Growth Income
Portfolios ----------------------------------------------------------
Matrix World High U.S.
Equity Equity Income Government
Bond Bond
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</TABLE>
This prospectus contains information you should know before investing.
Additional information about the Contract and Separate Account is in our
Statement of Additional Information (the "Statement"). For a free copy, please
write to our Variable Service Center or call the number shown above. The
Statement, dated _______________, has been filed with the Securities and
Exchange Commission and is incorporated into this prospectus by reference. The
table of contents of the Statement is on page __ of this prospectus.
The Contracts:
. are not bank deposits;
. are not federally insured;
. are not endorsed by any bank or government agency; and
. are not guaranteed and may be subject to loss of principal.
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved these securities or passed upon the accuracy
or adequacy of the prospectus. Any representation to the contrary is a criminal
offense. This prospectus is accompanied by the current prospectuses of the
Variable Investors Series Trust and Federated Insurance Series. All prospectuses
should be read and retained for future reference.
We have not authorized any person to give any information not contained in this
prospectus (or in any sales literature we have approved.) We do not offer the
Contracts everywhere, and this prospectus does not constitute an offer anywhere
that it would be unlawful. In certain jurisdictions, various time periods and
other terms and conditions may vary from what is described in this prospectus.
Any such variations that apply to your Contract will be included in the Contract
or a related rider or endorsement.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
DEFINITIONS...............................................................
HIGHLIGHTS................................................................
FEE TABLE AND EXAMPLES....................................................
THE COMPANY...............................................................
THE SEPARATE ACCOUNT......................................................
YOUR INVESTMENT OPTIONS...................................................
Variable Investors Series Trust...........................................
Federated Insurance Series................................................
Fixed Account Option......................................................
Transfers Among Investment Options........................................
Before the Annuity Date.................................................
During the Annuity Period...............................................
General Requirements....................................................
Systematic Transfers Dollar Cost Averaging.............................
Asset Rebalancing Program...............................................
Restrictions on Transfers.............................................
Automatic Transfer of Small Accounts..................................
Telephone Transactions..................................................
Changes to Investment Options...........................................
MORE ABOUT CHARGES AND DEDUCTIONS.........................................
Administrative Charge...................................................
Annual Contract Maintenance Charge......................................
Mortality and Expense Risk Charge.......................................
Optional Enhanced Death Benefit Charge..................................
Premium Taxes...........................................................
Withdrawal Charge.......................................................
Withdrawal Charge Percentages.........................................
Partial Withdrawals...................................................
Free Withdrawal Amount................................................
Waiver of Withdrawal Charge...........................................
Purpose of Contract Charges.............................................
Other Charges and Expenses..............................................
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.........................................................
Delayed Investment Allocation Date......................................
Purchase Payments.........................................................
General Requirements....................................................
Conversion to Accumulation Units........................................
Automatic Investment Plan...............................................
Contract Value............................................................
Accumulation Unit Value.................................................
Reports.................................................................
Ownership.................................................................
Assignment..............................................................
Change of Designations....................................................
Owner...................................................................
Annuitant...............................................................
Beneficiary.............................................................
Restrictions on Qualified Contracts.....................................
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS (continued)
<S> <C>
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...........................................................
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..............................................
WITHDRAWALS...............................................................
Partial Withdrawals.....................................................
Systematic Withdrawals..................................................
Tax Penalties and Restrictions..........................................
Texas Optional Retirement Program.......................................
Suspension of Payments or Transfers.....................................
PERFORMANCE INFORMATION...................................................
Federated Prime Money Fund II Portfolio.................................
Other Portfolios........................................................
FEDERAL TAX MATTERS.......................................................
General.................................................................
Death Benefits..........................................................
Diversification.........................................................
Contracts Owned by Other than Natural Persons...........................
Multiple Contracts......................................................
Income Tax Withholding..................................................
Withdrawals from Non-Qualified Contracts................................
Qualified Plans.........................................................
H.R. 10 Plans.........................................................
403(b) Annuities......................................................
Traditional IRAs and Roth IRAs........................................
Corporate Pension and Profit-Sharing Plans............................
Section 457 Plans.....................................................
Withdrawals from Qualified Contracts....................................
Tax Sheltered Annuities - Withdrawal Limitations........................
OTHER MATTERS...........................................................
Financial Statements....................................................
Distribution............................................................
Legal Proceedings.......................................................
Transfers by Company....................................................
Voting Rights...........................................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION..............
APPENDIX A. Accumulation Unit Data........................................
</TABLE>
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DEFINITIONS
Account Value - The value of a Contract during the Accumulation Period.
Accumulation Period - The time between the Contract Date and the Annuity Date.
Accumulation Unit - An accounting unit of measure used to calculate the Account
Value.
Annuitant - The natural person on whose life annuity payments are based.
Annuity Date - The date on which annuity payments are scheduled to begin.
Annuity - A series of payments we make to the payee you select. "Fixed" annuity
payments are those where we guarantee the dollar amount of each payment.
"Variable" annuity payments are those where the dollar amount of each payment
will change to reflect the investment experience of the applicable Separate
Account Investment Option.
Business Day - Each day the New York Stock Exchange is open for regular trading,
The New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day.
Each Business Day ends at the close of regular trading for the day on the
exchange, which usually is 4:00 p.m. Eastern time.
Contract Anniversary - An anniversary of the Contract Date.
Contract Date - The date the Contract takes effect, as shown on the Owner's
Contract data page.
Contract Month - Each one-month period beginning on the Contract Date and
generally on the same day of each month after that.
Contract Quarter - One quarter of a Contract Year. The first Contract Quarter
begins on the Contract Date and ends on the last Business Day of the third
Contract Month.
Contract Year - One year from the Contract Date and from each Contract
Anniversary.
Withdrawal Value - The value of a Contract available during the Accumulation
Period upon surrender or withdrawal. Withdrawal Value equals your Account Value
reduced by any applicable withdrawal charges, any taxes not previously deducted,
and by any annual deductions for the Contract Year.
HIGHLIGHTS
These highlights discuss certain important aspects of the Contract. The rest of
this prospectus explains these and other aspects in greater detail. Be sure to
read the prospectus and the prospectuses of the Funds for more complete
information.
How do investment results affect a Contract?
You invest purchase payments and the Account Value under your Contract in one or
more of the investment options we offer. Your Account Value increases or
decreases by the amount of any positive or negative return it earns in those
options. Your Account Value also will decrease by the amount of all charges and
deductions we make under your Contract.
Account Value invested in our Separate Account investment options is not
guaranteed, and you bear the entire investment risk under those options.
Account Value allocated to our Fixed Account, however, is provided with our
guarantees of principal and a minimum 3% rate of interest on an annual basis.
After the Annuity Date, the investment results of our Separate Account will
affect the dollar amount of variable annuity payments. If you select a fixed
annuity, we will guarantee the amount of each annuity payment.
How much can I (or must I) invest in a Contract?
We generally require you to make a minimum initial purchase payment of $5,000
for Non-Qualified Contracts and $2,000 for Qualified Contracts. You may make
additional purchase payments after that, but each additional purchase payment
must be at least $200.
We will reduce our minimum purchase payment requirements if you participate in
certain automatic investment plans described in this prospectus. We reserve the
right to decline any purchase payment and, unless we consent otherwise, the
maximum amount of all payments for a Contract cannot exceed $1 million.
Will I have access to my Account Value?
You may take amounts from your Contract's Withdrawal Value at any time up to the
Annuity Date. You may surrender (i.e., cancel) your Contract at any time up to
the Annuity Date, and we will pay you the Withdrawal Value.
You may take a "free withdrawal amount" from your Account Value each year up to
the Annuity Date without the imposition of a Withdrawal Charge. The annual free
withdrawal amount is equal to 15% of your purchase payments.
On the Annuity Date, we will use your Account Value to determine the amount of
annuity payments that we will make. (We will use the Withdrawal Value instead of
the Account Value if annuity payments begin during the first 2 Contract Years.)
What general income tax consequences will I have from owning a Contract?
A 10% percent federal income tax penalty may apply to the income portion of any
distribution that you take from a Non-Qualified Contract before you are age 59
1/2, with certain
<PAGE>
exceptions. Separate tax withdrawal penalties and restrictions apply to a
Qualified Contract.
This prospectus contains more information in the FEDERAL TAX MATTERS section,
including a discussion of owner control of the underlying investments in a
variable annuity contract and general information on the taxation of death
benefits.
What are the charges and deductions under a Contract?
We make the following charges and deductions:
Daily Deductions - composed of an administrative charge at an annual rate of
.25% of the daily net assets in each Separate Account Investment Option, and a
mortality and expense risk charge at an annual rate of 1.25% of the daily net
assets in each Separate Account Investment Option.
Annual Deductions - composed of a contract maintenance charge of $30 if your
Account Value is less than $100,000, and any charges for optional additional
benefit riders.
Withdrawal Charge - will be assessed from certain withdrawals of Account Value
during the first 6 Contract Years or if you surrender your Contract during that
time. It will also be deducted if the Annuity Date is within the first 2
Contract Years. The Withdrawal Charge varies for each of the 6 Contract Years,
and ranges from 7% of purchase payments in the first Contract year to 2% of
purchase payments in the sixth Contract Year.
Premium Taxes - no deductions are made for premium or other taxes payable to a
state or other governmental entity, unless imposed by the state where you
reside.
Fund Expenses - There are deductions and expenses paid out of the assets of the
Funds that are described in the accompanying prospectuses for the Funds.
Other Expenses - currently none, but we reserve the right to impose charges for
other taxes that may be payable and are attributable to the Contracts in the
future.
Owner Transaction Expenses
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Sales Load on Purchase Payments NONE
Withdrawal Charge - as a percentage of purchase
payments:
Contract Year 1 7%
Contract Year 2 6%
Contract Year 3 5%
Contract Year 4 4%
Contract Year 5 3%
Contract Year 6 2%
Contract Year 7+ NONE
Transfer Fee - on transfers of Account Value NONE
between Investment Options
Annual Contract Maintenance Charge - waived for $30
Contracts with Account Value of $100,000 or more
Optional Annual Enhanced Death Benefit Charge* 0.35%
as a percentage of average Account Value
Separate Account Expenses - as a percentage of
average Account Value
Administrative Charge 0.25%
Mortality and Expense Risk Charge 1.25%
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Total Separate Account Annual Expenses 1.50%
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*If you elect the optional enhanced death benefit described in this prospectus,
the annual charge is taken each year up to the Annuity Date or, if earlier, the
Contract Anniversary before your 80th birthday.
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SUMMARY OF EXPENSES
Annual Fund Expenses After Expense Reimbursements
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<CAPTION>
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Other
Management Operating Total
VIST Portfolios Fees Expenses Expenses*
- --------------- ---- -------- ---------
<S> <C> <C> <C>
Small Cap Growth
World Equity
Growth
Matrix Equity
Growth & Income
Multiple Strategies
High Income Bond
U.S. Government Bond
FIS Portfolio
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Prime Money Fund II
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</TABLE>
* "Total Expenses" for the Portfolios before reimbursement by the relevant
Fund's investment advisor, for the period ended December 31, 1998, were as
follows: ___ % for the VIST Small Cap Growth Portfolio; ___% for the VIST World
Equity Portfolio; ___% for the VIST Growth Portfolio; ____% for the VIST Matrix
Equity Portfolio; ___% for the VIST Growth & Income Portfolio; ___% for the VIST
Multiple Strategies Portfolio; ___% for the VIST High Income Bond Portfolio;
___% for the VIST U.S. Government Bond Portfolio and ___% for the FIS Prime
Money Fund II Portfolio of average daily net assets.
Expenses on a Hypothetical $1,000 Contract, Assuming 5% Growth:
<TABLE>
<CAPTION>
If you surrender or Annuitize a Contract during the If you do not surrender or if you Annuitize after
first 2 Contract Years 2 Contract Years
VIST Portfolios 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- --------------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap Growth
World Equity
Growth
Matrix Equity
Growth & Income
Multiple Strategies
High Income Bond
U.S. Government Bond
FIS Portfolio
- -------------
Prime Money Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Do not consider the example a representation of past or future expenses. Actual
expenses may be greater or less than those shown. For example, the example does
not reflect premium tax charges or the charge for an Optional Enhanced Death
Benefit. The impact of the 15% free withdrawal amount is also not reflected
because it is not available on a full surrender of a Contract.
<PAGE>
FIRST VARIABLE LIFE INSURANCE COMPANY
We are a stock life insurance company that was organized under Arkansas law in
1968. We engage principally in the business of variable life insurance,
variable annuities, and fixed annuities. We hold licenses to sell insurance in
49 states, the District of Columbia and the U.S. Virgin Islands. Irish Life of
North America, Inc. ("ILoNA") owns all of our outstanding stock, and Irish Life
plc ("Irish Life") in turn, owns all of ILoNA. Irish Life commenced operations
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 Europe. As of
the end of 19__, the Irish Life consolidated group had in excess of $__ billion
in assets. ILoNA is a Delaware corporation, incorporated as Carrig
International, Inc. in 1986.
We have an A (Excellent) rating from A.M. Best, an independent firm that
analyzes insurance carriers. Best assigns that rating to companies that have a
strong ability to meet obligations to policyholders over a long period of time.
We also have an AA- rating from Standard and Poor's and an AA- rating from Duff
& Phelps Credit Rating Co. on claims paying ability. Our financial strength
enhances our ability to satisfy our obligations under the Contracts.
THE SEPARATE ACCOUNT
We authorized the establishment of First Variable Separate Account E (the
"Separate Account) under Arkansas law on December 4, 1979; and we have
registered the Separate Account with the Securities and Exchange Commission
("SEC") as a unit investment trust-type investment company.
The Separate Account's assets belong to us. However, our other creditors could
reach only the amount (if any) in the Separate Account that exceeds the current
value of our obligations to policyholders who have chosen a Separate Account
investment option.
The Separate Account has several different investment options within it. We
invest the assets allocated to each investment option in one Portfolio of VIST
or FIS.
We may add other investment options to the Contracts that, in turn, may be
invested in other Portfolios of VIST or FIS, or in portfolios of other mutual
funds. We may restrict these other investment options to customers of specified
distributors.
YOUR INVESTMENT OPTIONS
The Available Options
You may allocate your premium payments and existing Account Value to one or more
of our Separate Account investment options and/or to our Fixed Account. The
currently available Portfolios for our Separate Account investment options are
listed on the cover page of this prospectus. More information, including a
discussion of potential risks, appears in the current prospectuses for the VIST
and FIS mutual funds, which accompany this prospectus. (The prospectuses for
the funds may also describe other portfolios that are not available under a
Contract.) You should read this prospectus and the prospectuses for the funds
carefully before investing in any Separate Account investment option.
We do 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 our judgment, further investment in the shares should become inappropriate or
inadvisable in view of the purpose of the Contracts, we may substitute shares of
another portfolio or investment vehicle for shares already purchased or to be
purchased in the future. We also may, in our discretion, remove Portfolios for
transfers or new investments. No substitution of securities may take place
without prior approval of the SEC, to the extent required, and in compliance
with requirements the SEC may impose.
We may also combine separate account investment options or operate them in any
form permitted by law, including a form that allows them to make direct
investments.
This prospectus generally describes only the Contract and Separate Account
investment options. Because of certain exemptions, interests in our Fixed
Account are not registered under the securities laws, nor have we registered the
Fixed Account as an investment company. Accordingly, the protections of the
federal securities laws do not apply to our Fixed Account. We will credit your
Account Values in the Fixed Account with at least a minimum effective rate of
interest per year. We may credit additional amounts of "current" interest in
our sole discretion. New purchase payments and transfers from the Separate
Account to the Fixed Account may each receive different current interest rate(s)
than the current interest rate(s) credited to Account Value that has been
previously invested in the Fixed Account. We determine current interest rates
in advance, and credit interest daily to your Account Value in the Fixed
Account.
Transfers Among Investment Options
General Requirements. You may transfer Account Value among investment options
by written request or telephone. The minimum amount you may transfer is the
lesser of (a) $1,000 or
<PAGE>
(b) your entire interest in the applicable investment option. You should mail,
fax or express written transfer requests to our Variable Service Center shown on
the front cover of this prospectus. You can also request a transfer by phoning
1-800-845-0689.
Transfer requests must clearly specify the amount to be transferred and the
investment options affected. All transfer requests made at the same time for
Separate Account investment options will be treated as a single request. The
transfer will be effective at the prices we next compute after we receive the
transfer request at our Variable Service Center.
Unless we consent, transfers from the Fixed Account to other investment options
during the first Contract Year cannot total more than 25% of the Fixed Account
Value on the Contract Date.
After the first Contract Year, your transfers from the Fixed Account during the
Accumulation Period may not exceed the greater of:
. 25% of your Account Value in the Fixed Account as of the immediately
preceding Contract Anniversary; or
. 100% of your Account Value in the Fixed Account that you transferred to other
investment options during the immediately preceding Contract Year.
After the Annuity Date, you may make a transfer once each Contract Year, subject
to certain procedures outlined in the Contract:
. from one or more Separate Account investment options to other Separate
Account Investment Options; or
. to the Fixed Account.
No transfers are permitted from the Fixed Account to the Separate Account once
annuity payments begin.
Automatic Transfer Programs - You can participate in automatic transfer
arrangements, including dollar cost averaging and asset rebalancing programs.
You initiate these programs by making a written or telephone request to our
Variable Service Center shown on the front cover of this prospectus. We make
the automatic transfers on the last business day of whichever of the following
intervals you request: quarterly, semi-annually, annually, monthly (for dollar
cost averaging only), or at any other interval that we approve. You may request
us to cease automatic transfers at any time.
Automatic transfers from the Fixed Account are subject to the restrictions
described above in General Requirements (except that, for dollar cost averaging
only, you can transfer up to 100% of your Account Value in the Fixed Account
within one Contract Year if you have selected the monthly interval.) We
currently do not charge you for an automatic transaction program, although we
reserve the right to do so in the future.
The dollar cost averaging program permits transfers from the Prime Money Fund II
investment option or the Fixed Account to other Separate Account investment
options on a regularly scheduled basis. Such systematic transfers may prevent
investing too much when the price of securities is high or too little when the
price is low. There is no guarantee of this, however. Also, since systematic
transfers, such as dollar cost averaging, involve continuous investment
regardless of fluctuating price levels, you should consider your ability to
continue purchases through periods of low price levels.
The minimum amount, for each dollar cost averaging transfer, is $100. You must
have $1,200 of Account Value in the Prime Money Fund II investment option or the
Fixed Account, as applicable, before a "dollar cost averaging" program may
begin. Transfers from the Fixed Account are also subject to the restrictions
above, except that 100% of amounts in the Fixed Account may be systematically
transferred before the Annuity Date if transfers are made monthly for a one-year
period.
The asset rebalancing program enables you to select the percentage levels of
Account Value you wish to maintain in particular investment options. At the
intervals you select, we will automatically rebalance your Account Value to
maintain the indicated percentages by transfers among the investment options.
You must include all of your Account Value allocated to the Separate Account
investment options in any asset rebalancing program.
Other investment programs, such as systematic transfers and systematic
withdrawals, or other transfers or withdrawals may not work well in concert with
the asset rebalancing program. Therefore, you should monitor your use of these
programs while the asset rebalancing program is being used.
We currently do not charge for enrolling in these programs, but we reserve the
right to do so.
Restrictions on Transfers. Generally, you may make an unlimited number of
transfers in any Contract Year. Frequent requests to transfer, however, may have
a detrimental effect on the value of Portfolio shares held in the Separate
Account. We 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:
. 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 Account Value or Portfolio share prices.
We may also at any time suspend or cancel acceptance of third party transfer
requests 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
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restrictions. We will not impose any restrictions, however, if we have received
satisfactory evidence that:
. you, as Owner, have appointed the third party to act on your behalf for all
financial affairs; or
. a court of competent jurisdiction has appointed the third party to act on the
Owner's behalf.
We also reserve the right at any time and without prior notice to otherwise
modify, suspend or stop the transfer privileges.
Automatic Transfer of Small Accounts. We reserve the right, subject to any
applicable law, to transfer Account Value from any investment option if less
than $250, to the investment option with the greatest Account Value.
Mixed and Shared Funding
We buy shares of VIST and FIS for the Separate Account in connection with the
Contracts, and for allocation to separate accounts funding variable annuity
policies and other variable life insurance policies issued by us. VIST and FIS
offer shares to other insurance companies and to other separate accounts, either
affiliated or unaffiliated with us, for the same purpose. In the future, it may
conceivably become disadvantageous for variable life insurance separate accounts
and variable annuity separate accounts to invest in one or more of the VIST or
FIS Portfolios simultaneously, if the interests of variable life insurance and
variable annuity policy owners differ. The boards of trustees of VIST and FIS
intend to monitor events to identify any material irreconcilable conflicts which
may arise and to determine what action, if any, they or the insurance companies
should take in response.
MORE ABOUT CHARGES AND DEDUCTIONS
Daily Deductions
Each Business Day, we deduct an administrative charge and a mortality and
expense risk charge, both before and after the Annuity Date, that we calculate
as a percentage of your Contract's net assets in each Separate Account
investment option. The annual rate for the administrative charge is 0.25%, and
the annual rate for the mortality and expense risk charge is 1.25%.
Annual Deductions
At the end of each Contract Year, we make an annual deduction from each
Contract's Account Value. We make the deduction from your Investment Options
in proportion to the amount of your Account Value in each (i.e., on a "pro-rata
basis") or by any other method you select and we approve.
For example, we will permit you to have deductions first taken from one or more
pre-selected investment options. You may also request deductions to first be
taken from the Separate Account investment option that has had the best
investment performance over the prior Contract Month.
The annual deductions are generally taken on each Contract Anniversary, based on
your Account Value at that time. If your Annuity Date is not a Contract
Anniversary, however, we will calculate the annual deductions on the Annuity
Date. Similarly, if you surrender your Contract, or make a total withdrawal at
a time other than a Contract Anniversary, we will calculate the annual
deductions on the transaction date.
The annual deductions include the following charges:
Annual Contract Maintenance Charge. This charge is $30.00 per Contract Year for
each Contract Year during the Accumulation Period. We will waive this charge for
a Contract Year if your Account Value for that year is $100, 000 or more.
Optional Enhanced Death Benefit Rider Charge. If you have elected to add this
optional additional benefit to your Contract, we will deduct an annual charge of
0.35% of your Account Value. The charge is not taken for any Contract Year that
begins after:
. the Annuity Date;
. your 80th birthday;
. the date of your death; or
. the rider otherwise terminates.
Withdrawal Charge
We may assess a withdrawal charge if you withdraw Account Value or surrender
your Contract during the first 6 Contract Years. We will also impose the
withdrawal charge on the Annuity Date if the Annuity Date is within the first 2
Contract Years.
We determine the withdrawal charge by applying the percentages shown in the Fee
Table to the purchase payments we deem withdrawn or surrendered or if the
Annuity Date is within the first 2 Contract years. Purchase payments are deemed
withdrawn or surrendered in the order in which they are made. We take
withdrawal charges from your Investment Options on a pro-rata basis, or by any
other method you select and we approve.
If the Account Value remaining in an Investment Option after a partial
withdrawal is insufficient to cover the applicable withdrawal charge, we will
deduct the charge from the amount withdrawn.
Free Withdrawal Amount. We will not assess a withdrawal charge on a partial
withdrawal of Account Value until the amount withdrawn for that Contract Year
exceeds a "free withdrawal amount" equal to 15% of your purchase payments.
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The 15% withdrawals do not reduce purchase payments for purposes of computing
the withdrawal charge. The charge will continue to apply to the amount withdrawn
or surrendered during any of the first 6 Contract Years that exceeds 15% of
Purchase Payments. The unused portion of the "free withdrawal amount" for one
Contract Year does not carry over to the next Contract Year.
The free withdrawal amount is not available on a total withdrawal of Account
Value, a surrender of your Contract, or on withdrawal requests that would result
in less than $1,000 of remaining Account Value.
Waiver of Withdrawal Charge. We will waive the withdrawal charge:
. if any death benefits are paid; or
. if your Account Value is applied after the first 2 Contract Years to an
Annuity Option.
We also will waive the withdrawal charge (where permitted):
. if you or your spouse is diagnosed with a terminal illness (we may require
evidence of such illness, including an examination by a licensed physician of
our choice); or
. after the first Contract Year, if you or your spouse is confined in a
qualifying nursing home for 90 consecutive days immediately preceding the
Contract Anniversary.
To qualify for a waiver of charges based on confinement in a qualifying nursing
home, you or your spouse must never have been confined in a qualifying nursing
home at the time you apply for a Contract.
The availability and requirements of the terminal illness and/or nursing home
waiver may vary from state to state. Your Contract will contain a complete
description of changes and requirements for any terminal illness and nursing
home waiver.
Premium Taxes
We will deduct premium taxes or other taxes payable to a state or other
governmental entity from your Contract. Some states assess premium taxes at the
time purchase payments are made; others assess premium taxes at the time annuity
payments begin. We currently intend to deduct premium taxes when incurred.
Premium taxes generally range from 0% to 4%.
Other Charges and Expenses
Fund Expenses. Our Separate Account purchases shares of the Portfolios of VIST
and FIS at net asset value, which reflects investment management fees, other
operating expenses and any expense reimbursement paid by an investment adviser
to the applicable Portfolio. (See "Highlights - Fund Expenses.")
Income Taxes. While we currently do not reduce Account Value for federal income
taxes of the Separate Account, we reserve the right to do so, if we determine
that we will incur a tax because of the operation of the Separate Account. We
will deduct for any income taxes incurred as a result of the operation of the
Separate Account whether or not our possible reserve for taxes was sufficient.
We will deduct any withholding taxes required by applicable law when amounts are
distributed from a Contract.
Special Service Fees. We do not charge you for special services, such as
additional reports, dollar cost averaging, and asset rebalancing. Although we
do not currently intend to do so, we reserve the right to charge you for these
special services in the future.
Elimination, Reduction or Refund of Charges and Deductions
We may eliminate, reduce, or refund any charges and deductions on a Contract
when sales of Contracts are made to certain individuals or to group and
sponsored arrangements. We will do this when we expect savings of sales,
administration or other expenses, or a reduction in the level of risks we expect
to assume under the Contracts. (This prospectus describes such groups under
"Group and Sponsored Arrangements" below.) We determine any such adjustment to
charges and deductions after examination of relevant factors such as:
. the size and type of group, because large numbers of Contracts tend to lower
our per-Contract expenses;
. the total amount of premium payments to be received, because certain expenses
tend to be a smaller percentage of larger premium payments;
. any prior or existing relationship we have with the purchaser, because of the
likelihood of reduced marketing and implementation expenses;
. other circumstances, of which we are not presently aware, which could result
in reduced expenses; and
. after a Contract is issued, if we anticipate expenses for later Contract
Years that are lower than initially projected.
We also may eliminate, reduce or refund charges and deductions when we issue a
Contract to an officer, director, employee or agent of ours or any of our
affiliates. We do not, however, guarantee any adjustment in charges and
deductions, and any adjustment may vary by group.
All adjustments will be made under our uniform administrative rules then in
effect. In no event will adjustments to charges or deductions be permitted if
the adjustment would be unfairly discriminatory to any person.
Group and Sponsored Arrangements. Group arrangements include those in which a
trustee, employer, association or similar entity purchases individual Contracts
covering a group of individuals on a group basis. An example of such an
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arrangement is a non-tax qualified deferred compensation plan. Sponsored
arrangements include those in which an employer, an association or similar
entity permits the Company to offer Contracts to its employees or members on an
individual basis.
Gender-Neutral Policies. In 1983, the United States Supreme Court decided in
Arizona Governing Committee v. Norris that certain annuity contracts may not be
used to fund certain employee benefit programs where the contracts provided
values and benefits that varied with the gender of the participant. We may
therefor offer Contracts that do not vary by gender for use in connection with
certain employee benefit programs. We recommend that any employer proposing to
offer the Contracts to employees under a group or sponsored arrangement consult
its attorney before doing so.
We may also offer the Contract with provisions and charges that are gender
neutral in states where required, and where the "unisex" version of the Contract
has been approved. Currently, the State of Montana prohibits the use of
actuarial tables that distinguish between men and women in determining premiums
and annuity benefits.
Purpose of Contract Charges
We have designed the Contract charges to cover our direct and indirect costs of
selling, administering and providing benefits under the Contracts. Taken
together, these charges are also designed to compensate us for the risks we
assume. These include:
. mortality risks (such as the risk that Contract owners may, on average, die
before we expect, or Annuitants may, on average, live longer than we expect,
thereby increasing the amount of claims we must pay);
. investment risks (such as the risk that adverse investment performance will
make it more costly for us to provide the death benefits under the Contracts
or reduce the amount of our asset-based fee revenues below what we
anticipate);
. sales risks (such as the risk that we sell fewer Contracts and receive lower
net revenue than we expect, thereby depriving us of expected economies of
scale);
. regulatory risks (such as the risk that tax or other regulations may be
changed in ways adverse to issuers of annuity contracts); and
. expense risks (such as the risk that the costs of administrative services
that we must provide will exceed what we currently project).
If, as expected, the charges we collect from the Contracts exceed our total
costs concerning the Contracts, we earn a profit. Otherwise, we incur a loss.
We have set the current and maximum rates of certain of our charges with
reference to estimates of the amount of specific types of expenses or risks that
we will incur. In some cases, this prospectus identifies such expenses or risks
in the name of the charge: e.g., the administrative charge, contract maintenance
charge, and mortality and expense risk charge.
However, the fact that any charge bears the name of a particular expense or risk
does not mean the amount we collect from that charge will never be more than the
amount of such expense or risk. It also does not mean that we may not be
compensated for such expense or risk out of any other charges deducted under
terms of the Contracts.
THE CONTRACT
Application and Issuance of a Contract
If you wish to purchase a Contract, you must submit an application to our
Variable Service Center, together with the minimum required initial Purchase
Payment. You select:
. the Annuitant, Annuity Date, and Annuity Option;
. the investment options to which we will allocate your purchase payment;
. the Beneficiary who will receive death benefits under the Contract if you die
during the Accumulation Period; and
. any optional additional benefit riders.
We generally will not issue Contracts to owners and Annuitants older than age
85. We will review an application under our underwriting rules, and we may
request additional information or reject the application. We will not retain a
purchase payment for more than 5 business days while processing an incomplete
application unless the purchaser has authorized us to do so. If we decline an
application, we will refund any purchase payment made.
If you or the Annuitant is older than age 70 1/2, you should consult with a
qualified tax adviser on the impact of minimum distribution requirements under
your tax-qualified retirement plan before purchasing a Qualified Contract. We
recommend that any required annual minimum distribution amount be withdrawn from
your existing tax qualified retirement plan before amounts are transferred to
purchase a Qualified Contract. (See "FEDERAL TAX MATTERS - Withdrawals from
Qualified Contracts.")
"Free Look Right." You have the right to review your Contract during an initial
inspection period specified in the Contract and, if dissatisfied, to return it
to us or to the agent through whom you purchased it. We will refund the Account
Value on a Contract returned during the permitted period, unless state law
requires a different amount. The "free look" period is typically 10 days, but
may be greater depending on state requirements.
Purchase Payments
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General Requirements. Your initial purchase payment is due on the Contract Date
and is generally required to be at least $5,000 for Non-Qualified Contracts and
$2,000 for Qualified Contracts. Each subsequent purchase payment is generally
required to be $200. We reserve the right to decline any purchase payment, and,
unless we consent otherwise, the maximum permitted total for all your purchase
payments is $1 million.
Automatic Investment Plan. We will permit you to pay lower purchase payments for
a Contract if you choose to make payments by pre-authorized transfers from a
checking account. If you so choose, we will lower our initial purchase payment
requirements:
. to $1,000 for a Non-Qualified Contract, as long as you furnish us with bank
draft instructions for subsequent purchase payments of at least $100 each;
and
. to $500 for a Qualified Contract, as long as you furnish us with bank draft
instructions for subsequent purchase payments of at least $100 each.
We will require, however, that the checking account be with a bank that is a
member of the Automated Clearing House (ACH). If you choose this method of
making payment, your purchase payments may only be allocated initially to
Separate Account investment options, although you may later transfer Account
Value to the Fixed Account.
We may further reduce our minimum purchase payment requirements for automatic
investment plans under certain group sponsored arrangements. We also may suspend
or end your participation in the automatic investment if there are insufficient
funds in the checking account to cover any transfer.
Termination of Small Accounts. We reserve the right to cancel a Contract if
your Withdrawal Value falls below $1,000, and we have not received any purchase
payments during the current Contract Year and the preceding 2 Contract Years.
Before doing so, we will provide you with a 30 day period to make an additional
payment and increase your Account Value above the minimum amount. We will send a
notice of the need to make additional purchase payments to your last known
address.
Allocation of Purchase Payments
General. We allocate the purchase payments you make (after any deductions) to
the investment options you select. We use "Accumulation Units" to keep track of
your interest in any Separate Account investment option you select. We determine
the number of Accumulation Units credited to a Contract by dividing the amount
allocated to a Separate Account investment option by the value of the applicable
Accumulation Unit next determined after receipt of your purchase payment. We
calculate Accumulation Unit Values as of the end of each Business Day. Purchase
payments allocated to the Fixed Account are credited in dollars. Premium
payments are generally allocated to the Separate Account or the Fixed Account as
of the later of the Contract Date or the date we receive your payment.
Delayed Investment Allocation Date. We reserve the right to allocate purchase
payments to the Prime Money Fund II investment option for an investment delay
period before they will be invested (together with any investment gain) in any
other investment option(s) you designate. In that case, we would reallocate your
Account Value to the investment options you have selected at the end of your
Contract's "free look" period. We would measure the investment delay period from
the date your Contract is issued from our Variable Service Center and would
include up to 5 extra days in addition to the applicable "free look" inspection
period to provide time for mail or other delivery of the Contract to you.
If we elect to delay your investment allocation date, your Contract will contain
a provision to that effect.
Telephone Transactions
You may initiate various transactions by calling 1-800-845-0689. These are:
transfers of Account Value, notification of a change in your address, change of
premium allocations among investment options, partial withdrawal requests, and
systematic withdrawals. You may authorize your representative to make these
calls on your behalf.
You may also call 1-800-59-FUNDS for current Accumulation Unit values, current
Account Value, and for telephone transfers of Account Value.
If you own a Contract jointly with another owner, unless both owners have
advised us to the contrary, we will accept instructions from either one of the
joint owners.
We will use reasonable procedures (such as requiring identifying information
from the caller, tape recording the telephone instructions, and providing
written confirmation of the transaction) in order to authenticate instructions
communicated by telephone. You will be responsible for any telephone
instructions we reasonably believe to be genuine. Therefore, you will bear any
losses arising from any errors in the communication of instructions. If we do
not employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable to you for any losses due to dishonored
or fraudulent instructions. We may modify or terminate our procedures for
telephone transactions at any time.
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CONTRACT BENEFITS AND VALUES
Determination of Account Value
Your Account Value under a Contract includes its value in the Separate Account
and in the Fixed Account. Your Account Value in a Separate Account investment
option at any time before the Annuity Date equals the number of Accumulation
Units you hold in that option multiplied by the then-current value of one such
Accumulation Unit. We compute this value in such a way that the investment
return on your Account Value in any Separate Account investment option will
differ from the total return achieved by the underlying Fund Portfolio only by
the amount of the charges and deductions we make under your Contract from that
investment option.
Your Account Value in the Fixed Account investment option earns fixed rates of
interest as described elsewhere in this prospectus. Your Account Value in the
Fixed Account will increase by the amount of such interest, but will decrease by
the amount of any charges or deductions that we take from that account for your
Contract.
Your Account Value in any investment option will also vary by the amount of
transfers we make among those components of Account Value in response to
requests that you make. Your Account Value in each investment option also will
increase by the amount that you direct to that option from your purchase
payments and will decrease by the amount of any withdrawals that you take from
that option (including any applicable withdrawal charges).
Death Benefits Before the Annuity Date
Death of the Annuitant. We generally do not pay a death benefit if you are not
the Annuitant and the Annuitant dies before the Annuity Date. Instead, you may
designate a new Annuitant within 30 days of the Annuitant's death. If you do
not, you will become the Annuitant. If you are a non-natural person, however,
the death of the Annuitant is treated as your death and a new Annuitant cannot
be designated.
Death of the Owner. If we receive proof that you have died before the Annuity
Date, we will pay a death benefit to the Beneficiary. (If you are a non-natural
person, we will consider the Annuitant to be "you" for purposes of determining a
death benefit.) You may elect for the death benefit to be paid in a single sum
or under one of our other Annuity Options. If no such election is in effect, the
Beneficiary may make an election during a 60-day period following our receipt of
proof of death. We will hold up payment of the death benefit in the meantime.
If the Beneficiary is your spouse, he or she may elect to become the owner of
your Contract. If so, the Contract will continue in effect and we will not then
determine a death benefit.
We will generally pay the entire death benefit within 5 years of the date of
your death unless the Beneficiary elects to have the death benefit payable under
an Annuity Option based on his or her life or lifetime expectancy; and
distributions start within one year after the date of death.
The death benefit amount is the greater of:
. the BASIC DEATH BENEFIT; or
. the BONUS DEATH BENEFIT in effect; or
. the ENHANCED DEATH BENEFIT in effect.
If your Contract is owned jointly:
. we will determine a death benefit only when the first owner dies before the
Annuity Date; and
. the Bonus Death Benefit and the Enhanced Death Benefit will not be available.
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BASIC DEATH BENEFIT. The Basic Death Benefit before the Annuity Date is the
greater of:
. your adjusted purchase payments (i.e., all amounts you paid for your Contract
less any withdrawals of Account Value, and less any charges on your
withdrawals of Account Value); or
. the Account Value on the date of your death.
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BONUS DEATH BENEFIT. The Bonus Death Benefit before the Annuity Date is the
greater of:
. the Account Value on the date of your death; or
. the "Step-Up" amount we last determined, plus all purchase payments you have
made since then.
On the Contract Date, we will determine the initial Step-Up amount, which will
be the amount of your initial purchase payment. We will determine a new Step-Up
amount at the end of 6 Contract Years, and at the end of each succeeding 6
Contract Years after that. Each new Step-Up amount will be the greater of:
. the last Step-Up amount we determined; or
. the current Account Value.
The BONUS DEATH BENEFIT ends if you make a withdrawal of any part of your
Account Value. If you do not withdraw Account Value, the benefit ends when you
attain age 80. Unless we agree otherwise, it will also end if you change the
owner of your Contract.
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ENHANCED DEATH BENEFIT. You may elect this optional benefit only at the time you
purchase a Contract. If you do, it will increase the Annual Deductions from
your Account Value.
The Enhanced Death Benefit before the Annuity Date is generally the sum of:
. your adjusted purchase payments (i.e., all amounts you paid for your Contract
less any withdrawals of Account Value, and less any charges on your
withdrawals of Account Value); and
. interest accumulated at an annual rate of 4.5% to the date of your death.
The maximum Enhanced Death Benefit is twice the amount of your purchase payments
for a Contract.
The ENHANCED DEATH BENEFIT ends when you attain age 80. Unless we agree
otherwise, it will also end if you change the owner of your Contract.
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Optional Additional Benefit Riders
We intend to offer the Enhanced Death Benefit and other optional additional
benefit riders subject to regulatory approval in your local area and to our
underwriting and issuance standards. For more complete information about the
riders and their availability, you should consult your sales representative or
request a copy of the form of the rider in which you are interested. Coverage
under these riders may increase the Annual Deductions under your Contract.
Surrender and Withdrawals
Surrender. You may surrender your Contract for its entire Withdrawal Value at
any time before the Annuity Date by a signed written request conforming to our
administrative procedures. We calculate the Withdrawal Value as of the close of
the Business Day when your surrender request is received at our Variable Service
Center. The Withdrawal Value equals your Account Value reduced by any
applicable withdrawal charges, any taxes not previously deducted, and by any
annual deductions for the Contract Year. Our liability to pay any death benefit
ends when you surrender your Contract.
Withdrawals. You may make a partial withdrawal of the Contract's Withdrawal
Value (minimum $1,000) before the Annuity Date. If a withdrawal request is made
that reduces the remaining Withdrawal Value below $1,000, we may deem the
Contract surrendered. In such event, the Contract will end and we will pay you
the Withdrawal Value of the Contract.
We will take any withdrawals from your Policy's investment options on a pro-rata
basis, unless you make a request in writing in advance for a different method.
We reserve the right to approve or disapprove any such request.
Systematic Withdrawals. You may elect to take partial withdrawals under a
systematic withdrawal program by either written or telephone request. Under the
program, systematic withdrawals are made on the same day (or next Business Day)
of each month or quarter. Systematic withdrawals may be transferred
automatically to your bank account if your bank is a member of the Automated
Clearing House (ACH). Systematic withdrawals are not allowed simultaneously with
a dollar cost averaging program.
We do not currently impose a fee for systematic withdrawals, but may do so in
the future. Partial withdrawals during a Contract Year that exceed the 15% "free
withdrawal" amount are subject to a withdrawal charge. (The "free withdrawal"
amount is not available if you surrender your contract. See the discussion in
the "Withdrawal Charge--Free Withdrawal Amount" section of this prospectus.)
We reserve the right to modify, suspend or eliminate the systematic withdrawal
program at any time.
Payment of Proceeds
We ordinarily will pay any Withdrawal Value (or death benefit proceeds) from the
Separate Account investment options within 7 days after receipt by our Variable
Service Center of a request (or proof of death), and all other required
elections and documentation in a form satisfactory to us. However, we may delay
payment or transfers from a Separate Account investment option in certain
circumstances. (See "Suspension of Payments and Transfers.")
Tax Withholding and Tax Penalties. All distributions from your Contract, or
portions thereof, which are included in your gross income are subject to federal
income tax withholding. We will generally withhold federal taxes at the rate of
10% from each distribution, unless you have previously provided us with a
written election not to have taxes withheld or to have taxes withheld at a
different rate. Mandatory withholding rules apply to certain distributions from
Qualified Contracts issued to 403(b) plans. Additionally, the Internal Revenue
Code provides that a 10% penalty tax may be imposed on certain early surrenders
and withdrawals. See the FEDERAL TAX MATTERS section of this prospectus for a
general discussion.
Annuity Benefits
General. We will make annuity payments after the Annuity Date to the Annuitant
unless you designate a different payee when you purchase a Contract. You may
also designate a payee, or change a previously designated payee, by sending a
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written notice to the Variable Service Center at least 30 days before the
Annuity Date.
Annuity Options. You elect the Annuity Option and may change it by written
request to our Variable Service Center at least 30 days before the Annuity Date.
If no Annuity Option election is in effect 30 days before the Annuity Date, we
will make Annuity payments under Option B as a life Annuity with a 120 month
period certain.
You can choose from the following Annuity Options, or any other option we
approve:
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OPTION A - Life Annuity. Monthly payments during the lifetime of the Annuitant.
Annuity payments cease when the Annuitant dies.
OPTION B - Life Annuity with Periods Certain of 60, 120, 180 or 240 Months.
Monthly payments 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. Monthly payments during the joint
lifetime of the Annuitant and a designated second person. At the death of either
payee, Annuity payments continue to the survivor payee. The survivor's Annuity
payments will equal 100%, 75%, 66 2/3% or 50% of the amount payable during the
joint lifetime, as chosen.
OPTION D - Joint and Contingent Annuity. Monthly payments during the lifetime of
the Annuitant and continued during the lifetime of a designated second person
after the Annuitant's death. The second person's Annuity payments will equal
100%, 75%, 66 2/3% or 50% of the amount payable, as chosen.
OPTION E - Fixed Payments for a Period Certain. Monthly payments of a fixed
amount for any specified period (at least 5 years but not exceeding 30 years),
as chosen.
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Form of Annuity Payments. 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. You may make a selection
of the form of Annuity payments by sending a written request to our Variable
Service Center no later than 7 calendar days before the Annuity Date. If you do
not, we will make a combination of fixed Annuity payments and variable Annuity
payments to reflect the allocation of your Account Value among the fixed Account
and the Separate Account investment options. (We will, however, transfer your
Account Value to the Fixed Account before making payments under Annuity Option
E.)
Annuity Date. You select the Annuity Date when you purchase a Contract, and may
later change it by sending a written request to our Variable Service Center at
least 30 days before the existing Annuity Date. If the Annuity Date you select
is less than 2 Contract Years from the Contract Date, we will deduct a
withdrawal charge from your Account Value before the first annuity payment is
made.
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. If your Contract is a Qualified Contract, you
should select an Annuity Date that is consistent with the requirements of your
tax-qualified retirement plans. A qualified tax advisor should be consulted for
more information.
Annuitization Bonus. We will increase your Account Value by an "Annuitization
Bonus" when Account Value is applied to an Annuity Option. The increase will be
based on your Account Value at the end of the Business Day immediately preceding
the Annuity Date.
We determine the Annuitization Bonus rate for a Contract at the time of issue,
but the Bonus may be modified, reduced or eliminated for subsequently issued
Contracts. On the date of this prospectus, the Annuitization Bonus rate is 3% of
Account Value. We will pro-rate any increase among your Contract's investment
options on the Annuity Date. Under current federal income tax rules, this
increase is deemed "income" on a Contract. (See "FEDERAL TAX MATTERS.")
Calculation of Annuity Payments. The initial dollar amount of an Annuity payment
is based on the Account Value applied to a specific Annuity Option and the
annuity tables in your Contract. The annuity tables for variable Annuity
payments are based on a 3% assumed investment rate. If the actual net investment
rate exceeds 3%, variable Annuity payments increase. Conversely, if the actual
rate is less than 3%, variable Annuity payments decrease. Variable Annuity
payments will reflect the performance of your Contract's Separate Account
investment options.
We reserve the right to pay Annuity payments in one sum when the remaining
payments are less than $2,000 (or other minimum amount we may establish), or
when the Annuity option elected results in periodic payments of less than $100.
Death Benefits after the Annuity Date
Death of the Annuitant. Any remaining Annuity payments under Annuity Options B
or E are made to the Beneficiary. The Beneficiary may elect to receive the
commuted value of the remaining Annuity Payments in a single sum instead. We
determine the commuted value by discounting the remaining Annuity Payments at
the then current interest rate used for commutation.
Death of the Owner. No death benefits are provided under a Contract if you die
after the Annuity Date, unless you are also
<PAGE>
the Annuitant and Annuity payments are made under Annuity Options B or E.
OTHER PROVISIONS OF THE CONTRACT
Misstatement of Age or Sex
If the age or sex of the Annuitant is misstated, we may change the annuity
benefits to those that correspond with the correct age and sex.
If the misstatement is discovered after the Annuity Date:
. we will add interest to any overpayments at the rate of 6% per year,
compounded annually, and deduct the amount against remaining annuity
payments; and
. we 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.
Owner and Beneficiary
The Contract application names the Contract owner, who in turn may name a new
owner at any time before the Annuity Date. At the death of the owner, the
designated Beneficiary becomes the owner. Because the owner has the authority
to exercise most rights under a Contract, this prospectus generally refers to
the owner when it refers to "you" or "your."
We will permit the Contract to be owned jointly if one owner is the spouse of
the other, and we will generally assume that each owner has the authority to act
for all owners. However, we may require the written consent of all owners for
certain transactions, such as an assignment of a Contract.
Beneficiary. The Contract application also names the Beneficiary under the
Contract and any contingent Beneficiary. You may change the Beneficiary of the
Contract (other than an irrevocably named Beneficiary)at any time before death
benefits are payable. If your Contract is owned jointly by two spouses, we will
treat each spouse as the designated beneficiary for any death benefits that may
be payable upon the death of the other, unless you tell us otherwise.
Changes and Assignments. A change of owner or Beneficiary requires a written
request satisfactory to us that is dated and signed by all of the owners. The
change will take effect on the date it is signed, but is subject to all payments
made and actions taken by us under the Contract before we receive the request at
our Variable Service Center.
Assignments
The owner may assign (transfer) the owner's rights in a Contract to someone
else. An assignment requires a written request signed by all of the Contract's
owners. An assignment will take effect only when we record it at our Variable
Service Center. We have no responsibility for any assignment not submitted for
recording; nor for the sufficiency or validity of any assignment.
Unfavorable tax consequences, including recognition of taxable income and the
imposition of a 10% penalty tax may result from transferring ownership or making
an assignment. In addition, Qualified Contracts owned by tax-qualified
retirement plans may be subject to mandatory assignment restrictions.
Therefore, you should consult with a qualified tax adviser before transferring
your Contract.
Change of Annuitant Designation
The Owner may designate a new Annuitant before the Annuity Date, but not if a
non-natural person owns the Contract.
Texas Optional Retirement Program
A Contract issued to a participant in the Texas Optional Retirement Program
("ORP") contains an ORP endorsement that amends the Contract to provide that:
. 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
. 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 70 1/2.
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.
Voting Rights
We will vote the shares of the Portfolios held by the Separate Account at
regular or special meetings of the Portfolio's shareholders in accordance with
instructions received from you and other owners having the voting interest in
the affected Portfolio(s). We compute the number of votes that an owner has
the right to instruct for a particular Portfolio by dividing the owner's Account
Value in that Portfolio by that Portfolio's net asset value per share. We will
vote a Portfolio's shares held in our Separate Account for which we do not
receive instructions, as well as shares held in our Separate Account that are
not attributable to owners in the same proportion as we vote that Portfolio's
shares held in the Separate Account for which we have received instructions.
<PAGE>
Suspension of Payments or Transfers
We reserve the right to suspend or postpone payments for withdrawals or
transfers from the Separate Account investment options for any period when:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists that makes it impracticable to dispose of Separate
Account securities or determine the Separate Account net asset values; or
. any other period when so ordered by the Securities and Exchange Commission
for the protection of Owners.
We reserve 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 we receive the transaction request.
DISTRIBUTION AND OTHER AGREEMENTS
First Variable Capital Services, Inc. ("FVCS"), 2122 York Road, Oak Brook, IL
60523, acts as the distributor of the Contracts. We wholly-own FVCS. The
Contracts are offered on a continuous basis through FVCS and approved broker-
dealers who are members of the National Association of Securities Dealers, Inc.
We 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
are not expected to exceed 7.00% of first year purchase payments and annual
renewal compensation of up to 1.00% of Account Value in later Contract Years.
Broker-dealers may also receive expense allowances, wholesaler fees, bonuses and
training fees.
FEDERAL TAX MATTERS
General
BECAUSE OF THE COMPLEXITY OF THE LAW AND BECAUSE TAX RESULTS WILL VARY ACCORDING
TO YOUR IDENTITY AND STATUS, YOU SHOULD SEEK INDIVIDUALIZED LEGAL AND TAX ADVICE
BEFORE PURCHASING OR TAKING ANY ACTION UNDER A CONTRACT.
We cannot provide a comprehensive description of the federal income tax
consequences regarding the Contracts in this prospectus, and special tax rules
may apply that we have not discussed herein. Nor does this discussion address
any applicable state, local, gift, inheritance, estate, and foreign or other tax
laws. This discussion assumes that you, the Contract's owner, are a natural
person and a U.S. citizen and resident. Finally, we would caution that the law
and the related regulations and interpretations on which we base our tax
analysis can change, and such changes can be retroactive.
Our Taxation
Under current federal income tax law, the operations of the Separate Account and
the Fixed Account do not require us to pay any tax. Thus, we currently impose
no charge for our federal income taxes. However, we may decide to charge the
Separate Account or Fixed Account for our federal income taxes, if there are
changes in federal tax law.
We may incur state and local taxes (in addition to premium taxes) in several
states. At present, these taxes are not significant and, accordingly, we do not
currently impose a charge for them. If they increase, however, we may impose a
charge for such taxes attributable to the Separate Account and/or Fixed Account.
Income Tax Deferral on Increases in Account Value
In general, an owner of an annuity contract is not taxed on increases in the
contract's value until a distribution occurs, either in the form of a lump sum
payment or as annuity payments.
Contracts Owned by Other than Natural Persons. If you are a non-natural person,
e.g., a corporation, or certain other entities, your Contract will generally not
be treated as an annuity contract for federal income tax purposes, and you will
be subject to immediate taxation on the increases in your Contract's Account
Value. However, this treatment does not apply to Contracts held by a trust or
other entity as an agent for a natural person or to Qualified Contracts held by
a tax-qualified retirement plan (i.e., a plan that qualifies under section 401,
403(a), 403(b), 408, 408A or 457 of the Code).
Diversification Requirements. The Internal Revenue Code provides that a variable
annuity contract will not be treated as an annuity contract under the Code for
any period (and any subsequent period) for which the related investments are not
adequately diversified. We intend that all Portfolios of the Funds in which
your Contract may invest will comply with the diversification requirements. If
your Contract did not qualify as an annuity contract, you would be subject to
immediate taxation on the increases in your Contract's Account Value. This
treatment would apply for the period of non-compliance and subsequently, unless
and until we are able to settle the matter
<PAGE>
with the Internal Revenue Service. We have no legal obligation to seek or agree
to any such settlement, however.
Investment Control. The amount of investment control which you may exercise
under a Contract differs in some respects from the situations addressed in
published rulings issued by the Internal Revenue Service in which it held that
variable contract owners were not deemed, for federal income tax purposes, to
own the related assets held in a separate account by the issuing insurance
company. It is possible that these differences, such as your ability to
transfer among investment choices or the number and type of investment choices
available, would cause you to be taxed as if you were the owner of the Portfolio
shares that are attributable to your Contract. In that case, you would be
liable for income tax on an allocable portion of any current income and gains
realized by the Separate Account, even though you have received no distribution
of those amounts.
In the event any forthcoming guidance or ruling by federal income tax
authorities sets 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, result in your being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, we reserve the right to modify your
Contract in an attempt to maintain its intended tax treatment.
Distributions from Non-Qualified Contracts
For a lump sum payment received upon surrender of a Contract, or upon a
withdrawal of Account Value, you will be taxed on the portion that exceeds your
investment in the Contract. The taxable portion is taxed as ordinary income.
Amounts that are not received as an annuity payment will be treated as coming
first from the earnings and then, only after that income portion is exhausted,
as coming from your investment in the Contract.
Penalty tax on Premature Distributions. The taxable portion of a distribution
from a Contract may be subject to a 10% penalty tax. However, the penalty is not
imposed on amounts received:
. after you reach age 59 1/2;
. after the death of the owner;
. if you are totally disabled as defined in Code section 72(m)(7));
. in a series of substantially equal periodic payments made not less frequently
than annually for your life (or life expectancy) or for the joint lives (or
joint life expectancies) of you and your Beneficiary;
. under an immediate annuity; or
. that are allocable to purchase payments made before August 14, 1982.
Annuity Payments. For annuity payments, the portion of each payment that exceeds
a pre-determined "exclusion amount" is considered taxable income. The
exclusion amount is determined:
. for payments based on a fixed annuity option, by multiplying the payment by
the ratio that your investment in the Contract (adjusted for any period
certain or refund feature) bears to the expected return under the Contract.
. for payments based on a variable annuity option, by dividing your investment
in 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 total of the excludable amounts equals the
investment in the Contract are fully taxable. The taxable portion is taxed at
ordinary income tax rates.
Death Benefits. The Beneficiary is taxed on the portion of the Death Benefit
that exceeds your investment in the Contract. However, if the Beneficiary elects
to receive the Death Benefit under an Annuity Option, payments made to the
Beneficiary are taxed as annuity payments as discussed above.
Multiple Contracts. Multiple non-qualified annuity contracts issued within a
calendar year to the same contract owner by one company or its affiliates are
treated as one annuity contract when determining the tax consequences of any
distribution. Such treatment may result in adverse tax consequences, including
more rapid taxation of the distributed amounts from the combined contracts.
Owners should consult a tax adviser before purchasing more than one non-
qualified annuity contract in a calendar year.
Tax-Qualified Retirement Plans
This Prospectus offers a Contract that may be used under various types of tax-
qualified retirement plans. Taxation of participants varies with the type of
plan and terms and conditions of each specific qualified plan. The terms and
conditions of a plan may restrict the permitted contributions to, and benefits
of, a Contract issued to the plan, regardless of the terms and conditions of the
Contract itself. Because a retirement plan's contribution limits and
distribution and other requirements may not be not incorporated into our
administrative procedures, Contract owners, participants and beneficiaries are
responsible for determining that transactions with respect to the Contract
comply with applicable law.
The tax rules for tax-qualified retirement plans are very complex and will have
different applications depending on individual facts and circumstances. For
example, Contracts issued under tax qualified retirement plans are generally not
transferable, except upon surrender or annuitization. Contract owners,
annuitants and beneficiaries should therefor obtain competent tax advice before
purchasing a Contract issued under a tax-qualified retirement plan, or engaging
in various
<PAGE>
transactions (i.e., making contributions or taking distributions) in connection
with a Contract.
The following are general descriptions of the types of Qualified Plans with
which the Contracts may be used. Such descriptions are not exhaustive and are
for general informational purposes only:
Traditional IRAs and Roth IRAs. Eligible individuals may maintain: (a) an
individual retirement account or individual retirement annuity under section 408
of the Code ("Traditional IRA"); and (b) a non-tax deductible individual
retirement account or individual retirement annuity under section 408A of the
Code ("Roth IRA").
Under applicable limitations, amounts may be contributed to a Traditional IRA
that will be deductible from the individual's gross income. The amounts
contributed to a Traditional IRA may be reduced if an individual also
contributes to a Roth IRA.
Traditional IRAs and Roth IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled over or
transferred on a tax-deferred basis into a Traditional IRA (An "education IRA"
under section 530 of the Code does not qualify for this treatment.). Rollovers
may also be made to a Roth IRA, but only from a Traditional IRA or from another
Roth IRA. Rollovers from a Traditional IRA to a Roth IRA are subject to
immediate federal income taxation.
Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and Profit Sharing
Plans. Section 401(a) and 403(a) of the Code permit corporate and self-employed
individuals to establish Qualified Plans for themselves and their employees.
These retirement plans may permit the purchase of a Contract to provide benefits
under the plan. Contributions made to the plan for the benefit of the employees
are not 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 Internal Revenue Code places limitations
and restrictions on all plans including items such as:
. amount of allowable contributions;
. form, manner and timing of distributions;
. transferability of benefits;
. vesting and nonforfeitability of interests;
. incidental death benefits;
. nondiscrimination in eligibility and participation; and
. the tax treatment of distributions, withdrawals and surrenders.
403(b) Annuities. Public schools and certain charitable, educational and
scientific organizations may purchase "403(b)" or "tax-sheltered annuities" (IRC
Section 501(c)(3)). These qualifying employers may contribute to a Contract for
the benefit of their employees. Such contributions are not included in the gross
income of the employees until employees receive distributions from the
Contracts. Tax-sheltered annuity contributions are limited to certain maximums.
Plus, additional restrictions govern such items as transferability,
distributions, nondiscrimination and withdrawals.
Section 457 Plans. Government and certain other tax-exempt employers may
establish deferred compensation plans for the benefit of their employees that
invest in annuity contracts. As in the case of Qualified Plans, limitations and
restrictions exist on eligibility, contributions and distributions. Under these
Plans, contributions made for the benefit of the employees will not be included
in the employee's gross income until distributed from the Plan.
Distributions from Qualified Contracts
In the case of a withdrawal under a Qualified Contract (other than a "qualified
distribution" from a Roth IRA), a portion of the amount received is taxable.
This is generally based on the ratio of the individual's cost basis to the
individual's total accrued benefit under the retirement plan.
Roth IRAs. A "qualified distribution" from a Roth IRA is generally not subject
to federal income taxation, but can only be made after the assets have been in
the Roth IRA for 5 years and the Owner:
. reaches age 59 1/2;
. dies or is disabled (IRC Section 72(m)(7)); or
. takes a qualified first-time homebuyer distribution (as defined in section
72(t)(8) of the Code). Special tax rules may be available for certain other
distributions from a Qualified Contract.
Penalty tax on Pre-retirement Distributions. The taxable portion of any
distribution from a qualified retirement plan may be subject to a 10% penalty
tax. This tax could apply to withdrawals from a Contract issued and qualified
under Code sections 401 (Corporate and Self-Employed Pension and Profit-Sharing
Plans), 403(b) (Tax-Sheltered Annuities), 408 (Traditional IRAs) or 408A (Roth
IRAs - "nonqualified distributions" only). It is not imposed on:
. qualified rollovers or permitted direct transfers to a Traditional IRA, a
Roth IRA, or to another eligible qualified plan;
. distributions made on or after the date on which the Owner or Annuitant (as
applicable) reaches age 59 1/2;
. distributions following the death or disability (as defined in section
72(m)(7) of the Code) of the Owner or Annuitant (as applicable);
. distributions that are part of substantially equal periodic payments made not
less than annually for the life (or life expectancy) of the Owner or
Annuitant (as applicable) or
<PAGE>
the joint lives (or joint life expectancies) of such Owner or Annuitant (as
applicable) and his or her designated Beneficiary (Qualified Plans other than
Traditional IRAs and Roth IRAs require the employee to be separated from
service for this exception to apply);
. distributions made to the Owner or Annuitant (as applicable) for payment of
medical expenses which exceed 7.5% of adjusted gross income;
. distributions from a Traditional IRA or from a Roth IRA for payment of health
insurance premiums while unemployed, if certain conditions are met;
. amounts paid from a Traditional IRA and Roth IRA for qualified higher
education expenses (IRC Section 72(t)(7) of the Code); and
. amounts paid from a Traditional IRA or Roth IRA as a qualified first-time
homebuyer distribution (IRC Section 72(t)(8) of the Code).
The penalty tax for a Contract issued and qualified under Code sections 401 or
403(b) is also not imposed on:
. distributions to an Owner or Annuitant (as applicable) who has separated from
service after he has attained age 55; and
. distributions made to an alternate payee pursuant to a qualified domestic
relations order.
Generally, distributions from a qualified plan (other than a Roth IRA) must
start no later than April 1 of the calendar year following the year in which the
employee attains age 70 1/2 or retires, whichever is later. These required
distributions must span a period that does not exceed the life expectancy of the
individual or the joint lives or life expectancies of the individual and his or
her designated beneficiary. If required minimum distributions are not made, a
50% penalty tax is imposed on the amount not distributed.
Tax-Sheltered Annuities--Withdrawal Limitations. Withdrawals from contributions
made according to a salary reduction agreement are limited to when the Owner:
. attains age 59 1/2;
. separates from service;
. dies;
. becomes disabled (IRC Section 72(m)(7) of the Code); or
. in the case of hardship.
Hardship withdrawals are restricted to the portion of the Owner's Contract Value
that represents contributions made by the Owner and do not include investment
results.
Withdrawal limitations 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 about distributions.
Federal Income Tax Withholding
All distributions from your Contract, or portions thereof, that are included in
your gross income are subject to federal income tax withholding. We will
withhold federal taxes at the rate of 10% from each distribution. However, you
may elect not to have taxes withheld or to have taxes withheld at a different
rate.
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, may be subject to a mandatory 20% withholding for federal
income tax.
ADVERTISING PRACTICES
FIS Prime Money Fund II Portfolio
From time to time, the FIS Prime Money Fund II Investment Option of the Separate
Account may advertise its "yield" and "effective yield." Both yield figures are
based on historical earnings and are not intended to indicate future
performance.
The "yield" of the Federated Prime Money Fund II Investment Option refers to the
income generated by Account Values in the FIS Prime Money Fund II Investment
Option over a seven-day period (which 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 Account Values in the FIS Prime Money
Fund II Investment Option.
The "effective yield" is calculated similarly. However, when annualized, the
income earned by Account 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.
Other Portfolios
From time to time, we may advertise performance data for the Contract's other
Portfolios. Such data will show the percentage change in the value of an
Accumulation Unit based on the performance of an investment over a period of
time, usually a calendar year. It is determined by dividing the increase
(decrease) in value for that Unit by the Accumulation Unit value at the
beginning of the period. This percentage will reflect the deduction of any
asset-based charges and any applicable annual contract maintenance charges under
the Contracts.
<PAGE>
Advertisements also will 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, as well as any
asset-based charges.
We may make yield information available, 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.
We may also show historical Accumulation Unit values in certain advertisements
that contain illustrations. These illustrations will be based on Accumulation
Unit values for a specific period.
Quotations of standardized total return for any Investment Option will be
expressed in terms of the average annual compounded rate of return on a
hypothetical investment in a Contract over a period of one, five and ten years
(or, if less, up to the life of the Investment Option). They will reflect the
deduction of a Contract's daily and annual charges, the applicable withdrawal
charge, and fees and expenses of the underlying Portfolio. Quotations of non-
standardized total return may simultaneously be shown for the periods indicated
in the advertisement and may not reflect some or all of these deductions.
Total return performance information for Investment Options may also be
advertised based on the historical performance of the Portfolio underlying an
Investment Option for periods beginning before the date Accumulation Unit Values
were first calculated for Contracts funded in that Investment Option. Any such
performance calculation will be based on the assumption that the Investment
Option corresponding to the applicable Portfolio was in existence throughout the
stated period and that contractual charges and expenses of the Investment Option
during the period were equal to those currently assessed under a Contract.
We may also distribute sales literature that compares the percentage change in
Accumulation Unit values for 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 that have
investment objectives similar to the Portfolio being compared.
The Standard & Poor's 500 Stock 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.
We may also distribute sales literature that compares the performance of our
variable annuities' Accumulation Unit values with the unit values of variable
annuities issued through 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 that tracks
the performance of investment companies. The rankings compiled by Lipper may or
may not reflect the deduction of asset-based insurance charges. Our sales
literature using these rankings will indicate whether such charges were
deducted. Where the charges have not been deducted, the sales literature will
indicate that, had the charges 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 Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges.
Morningstar rates each variable annuity investment option against its peers with
similar investment objectives. Morningstar does not rate any investment option
with fewer than three years of performance data.
OTHER MATTERS
Financial Statements
Our financial statements and the financial statements of the Separate Account
are included in the Statement of Additional Information.
Legal Proceedings
We are not subject to any material pending legal proceedings nor is the Separate
Account or the Distributor.
Transfers by the Company
We may, subject to applicable regulatory approvals, transfer obligations under a
Contract to another qualified life insurance company under an assumption
reinsurance arrangement without the prior consent of the Owner.
<PAGE>
YEAR 2000 ISSUES
Like other financial and business organizations around the world, we could be
adversely affected if our computer systems and those of our service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. We have completed an assessment of the Year 2000 impact
on our systems, procedures, customers and business processes. At December 31,
1998, our management is satisfied that our main operating systems are Year 2000
compliant. We are currently reviewing our general office systems and contacting
our service providers.
We believe that we will complete our Year 2000 project prior to any anticipated
impact on our operating systems. The date on which we believe we will complete
the Year 2000 project is based on our management's best estimates. Although
there can be no guarantee that these estimates will be achieved, our management
does not at this time believe that actual results will differ materially from
those anticipated. Specific factors that might cause such material differences
would most likely result from our service providers.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information for the Separate Account and the
Contract contains the following information:
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
First Variable Life Insurance Company..................................... SA-2
Independent Auditors...................................................... SA-2
Legal Counsel............................................................. SA-2
Distributor............................................................... SA-2
Yield Calculation for the FIS Prime Money Fund
II Investment Option...................................................... SA-2
Calculation of Other Performance Information.............................. SA-3
Annuity Provisions........................................................ SA-4
Variable Annuity....................................................... SA-4
Fixed Annuity.......................................................... SA-5
Annuity Unit........................................................... SA-5
Mortality and Expense Guarantee........................................ SA-5
Financial Statements...................................................... SA-6
</TABLE>
<PAGE>
APPENDIX A
ACCUMULATION UNIT DATA
(for a unit outstanding throughout the period)
The following condensed financial information is derived from the financial
statements of the Separate Account (Contract Form 20230). The information should
be read in conjunction with the financial statements, related notes and other
financial information for the Separate Account included in the Statement of
Additional Information.Our financial statements and report of independent
auditors are also contained in the Statement of Additional Information.
<TABLE>
<CAPTION>
Period Ended Period Ended Period Ended Period Ended
----------------- ----------------- ----------------- ----------------
12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Small Cap Growth Investment Option (1)
Beginning of Period (5/4/95) $12.91 $ 13.01 $ 10.36 $ 10.00
End of Period $ 12.91 $ 13.01 $ 10.36
Number of Accum. Units Outstanding 112,393 25,465 2,212
World Equity Investment Option
Beginning of Period $12.28 $ 11.33 $ 10.24 $ 10.00
End of Period $ 12.28 $ 11.33 $ 10.24
Number of Accum. Units Outstanding 75,105 37,590 3,989
Growth Investment Option (2)
Beginning of Period $15.31 $ 12.57 $ 10.14 $ 10.00
End of Period $ 15.31 $ 12.57 $ 10.14
Number of Accum. Units Outstanding 106,746 30,672 6,026
Matrix Equity Investment Option (3)
Beginning of Period $13.16 $ 10.94 $ 10.62 $ 10.00
End of Period $ 13.16 $ 10.94 $ 10.62
Number of Accum. Units Outstanding 43,263 11,951 918
Growth & Income Investment Option
Beginning of Period (5/31/95) $14.84 $ 11.75 $ 10.63 $ 10.00
End of Period $ 14.84 $ 11.75 $ 10.63
Number of Accum. Units Outstanding 152,210 51,500 2,754
Multiple Strategies Investment Option
Beginning of Period $14.10 $ 11.84 $ 10.15 $ 10.00
End of Period $ 14.10 $ 11.84 $ 10.15
Number of Accum. Units Outstanding 77,185 30,934 5,995
High Income Bond Investment Option
Beginning of Period $12.80 $ 11.45 $ 10.17 $ 10.00
End of Period $ 12.80 $ 11.45 $ 10.17
Number of Accum. Units Outstanding 114,612 30,956 1,905
U.S. Government Bond Investment Option
Beginning of Period $11.19 $ 10.39 $ 10.30 $ 10.00
End of Period $ 11.19 $ 10.39 $ 10.30
Number of Accum. Units Outstanding 63,534 43,540 7,532
Prime Money Fund II Investment Option (4)
Beginning of Period $10.74 $ 10.39 $ 10.06 $ 10.00
End of Period $ 10.74 $ 10.39 $ 10.06
Number of Accum. Units Outstanding 89,012 39,582 0
</TABLE>
(1) Before May 1, 1997, the Small Cap Growth Sub-Account was known as the
"Small Cap Sub-Account."
(2) Before May 1, 1997, the Growth Investment Option was known as the "Common
Stock Sub-Account."
(3) Before May 1, 1997, the Matrix Equity Sub-Account was known as the "Tilt
Utility Sub-Account" and had different investment policies.
(4) On January 2, 1997, shares of Federated Prime Money Fund II were
substituted for shares of the VIST Cash Management Portfolio. Accumulation
Unit Values before that date are based on the value of VIST Cash
Management Portfolio shares held for the periods shown.
<PAGE>
PART B
<PAGE>
CAPITAL SIX VA
FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACT
(the "Contract")
Issued by
FIRST VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
for
FIRST VARIABLE ANNUITY FUND E
(the "Separate Account")
This is not a prospectus. You should read this Statement of Additional
Information with the prospectus dated ____, 1999 for the Contract referred to
above.
The prospectus concisely sets forth information that you ought to know before
investing in a Contract. For a copy of the prospectus, call or write us at 2122
York Road, Oak Brook, IL 60523 (800) 228-1035.
TABLE OF CONTENTS
Item Page
---- ----
First Variable Life Insurance Company............ SA-2
Independent Auditors............................. SA-2
Legal Counsel.................................... SA-2
Distributor...................................... SA-2
Yield Calculation for the FIS Prime Money Fund II
Investment Option............................... SA-2
Calculation of Other Performance Information..... SA-3
Annuity Provisions............................... SA-4
Variable Annuity.............................. SA-4
Fixed Annuity................................. SA-5
Annuity Unit.................................. SA-5
Mortality and Expense Guarantee............... SA-5
Financial Statements............................. SA-6
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED ______, 1999.
SA - 1
<PAGE>
FIRST VARIABLE LIFE INSURANCE COMPANY
You will find information about our company and its ownership in the prospectus.
INDEPENDENT AUDITORS
The independent accounting and auditing experts of _______ LLP have audited the
following consolidated financial statements:
. First Variable Life Insurance Company dated __________, and for each of the
three years in the period ended December 31, 1998, and
. the financial statements of the Separate Account at December 31, 199__ and
199__, and for each of the years then ended appearing in this Statement of
Additional Information.
Their report appears at the end of this Statement of Additional Information.
LEGAL COUNSEL
Our Legal Department reviewed legal matters about the Contracts. Blazzard, Grodd
& Hasenauer, P.C., Westport, Connecticut, advised us on certain matters relating
to the federal securities and tax laws.
DISTRIBUTOR
First Variable Capital Services, Inc. ("FVCS") acts as the distributor. FVCS is
a wholly owned subsidiary of First Variable Life Insurance Company. The offering
is on a continuous basis.
YIELD CALCULATION FOR FIS PRIME MONEY FUND II INVESTMENT OPTION
The FIS Prime Money Fund II Investment Option of the Separate Account calculates
its current yield based upon the seven-day period that ends on the date of
calculation. For the seven calendar days ended December 31, 199__, the
annualized yield was ____% and the effective yield was ____%.
To calculate the current yield,, we create a hypothetical Contract account with
a balance of one Accumulation Unit of this investment option. We determine the
net change (exclusive of capital changes) in the value of the Accumulation Unit
at the beginning and at the end of the period. Next, we subtract the Annual
Contract Maintenance Charge and divide the difference by the value of the
hypothetical account at the beginning of the same period to obtain the base
period return. We then multiply the result by (365/7) to obtain the current
yield.
We calculate the "effective" yield according to the method prescribed by the
Securities and Exchange Commission. The effective yield reflects the
reinvestment of net income earned daily on FIS Prime Money Fund II Investment
Option 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.
You may find yield information useful as you review the performance of the FIS
Prime Money Fund II Investment Option and compare it with other investments.
However, the yield fluctuates, unlike bank deposits or other investments that
typically pay a fixed yield for a set period. You should therefor not consider
any yields quoted as a representation of the yield of the FIS Prime Money Fund
II Investment Option in the future. Actual yields depend on the type, quality
and maturities of the investments held by the Portfolio and changes in the
interest rates on such investments, as well as changes in expenses during the
period.
SA - 2
<PAGE>
CALCULATION OF OTHER PERFORMANCE INFORMATION
From time to time, we may advertise standardized performance data as described
in the prospectus. These advertisements will include total return figures for
the times indicated in the advertisement. Total return figures will reflect the
deductions of
. 1.25% Mortality and Expense Risk Charge,
. 25% Administrative Charge,
. investment advisory fee for the underlying Portfolio being advertised and
. any applicable withdrawal charges and Annual Charges (charges for
optional riders excluded).
To determine the hypothetical value of a Contract for the time periods described
in the advertisement, we will use the Accumulation Unit values for an initial
$1,000 purchase payment, and deduct any applicable Annual Contract Maintenance
Charges and Withdrawal Charges.
For periods before the date that actual Accumulation Unit Values were first
computed for the Contracts, we have derived Accumulation Unit Value performance
from the historical performance of the Portfolios. We determine the average
annual total return 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 the periods described.
Here is the formula used in these calculations:
[P x (1+T)/n/] = ERV
P = a hypothetical initial payment of $1,000 T = average annual total return
N = number of years ERV = Ending Redeemable Value of
a hypothetical $1,000 payment
made at the beginning of the
applicable periods.
The standardized average annualized total returns as of December 31, 19__, for 1
year, 5 years and for the life of the Separate Account investment option (or 10
years if the Portfolio has been in existence for more than 10 years) are listed
below:
Separate Account Investment Option 1 Year 5 Years 10 Years (or inception,
- ---------------------------------- ------ ------- -----------------------
if earlier)
-----------
VIST Portfolios
Small Cap Growth (inception 5/4/95)
World Equity (inception 6/10/88)
Growth (inception 5/1/87)
Matrix Equity (inception 6/16/88) [To be filed by amendment.]
Growth & Income (inception 5/31/95)
Multiple Strategies (inception 5/5/87)
High Income Bond (inception 6/1/87)
US Govt. Bond (inception 5/27/87)
FIS Portfolios
Prime Money Fund II
On December 3, 1997, we substituted shares of FIS Prime Money Fund II for shares
of the VIST Cash Management Portfolio. Calculations before that date are based
on the value of VIST Cash Management Portfolio shares held for the periods
shown.
We may also advertise non-standardized performance information that does not
include all Contract charges.
SA - 3
<PAGE>
CALCULATION OF OTHER PERFORMANCE INFORMATION (continued)
In addition to total return data, we may include yield information in our
advertisements. For each Investment Option (other than the Federated Prime Money
Fund II Investment Option) for which we advertise yield, we 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. We compute it 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:
[(a-b )/6/ ]
Yield = 2 [(--- + 1) - 1 ]
[( cd ) ]
a = Net investment income earned during the period by the Portfolio attributable
to shares owned by the Separate Account investment option.
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.
The yield for the U.S. Government Bond investment option for the period ended
December 31, 199_, was ____%.
The yield for the High Income Bond investment option for the period ended
December 31, 199_, was ___%.
The investment results of each Separate Account investment option will fluctuate
over time. Any presentation of a Separate Account investment option's total
return for any period should not be considered as a representation of future
performance.
ANNUITY PROVISIONS
Variable Annuity
A variable annuity is an annuity with payments that:
. are not predetermined as to dollar amount; and
. will vary in amount with the net investment results of the Separate Account
investment option(s) selected.
At the Annuity Date, we will apply your Account Value in each Separate Account
investment option to the applicable Annuity table shown in your Contract to
determine the dollar amount of the initial Annuity payment. The Annuity table we
use depends on the Annuity Option chosen. If, as of the Annuity Date, the then
current Annuity Option rates applicable to this class of Contracts provide an
initial Annuity payment greater than that guaranteed under the same Annuity
Option table under your Contract, we will make the greater payment.
We next determine the number of "Annuity Units" for future payments from that
Separate Account investment option. To do this, we divide the dollar amount of
the initial Annuity payment by the applicable Annuity Unit value for that
investment option as of the Annuity Date. The number of Annuity Units remains
fixed during the Annuity Payment period.
Each month after the Annuity Date, we multiply the previously determined number
of Annuity Units by the applicable Separate Account investment option's Annuity
Unit value. (We use the Annuity Unit value at the end of the last Business Day
of the month preceding the month for which the payment is due.) This will be the
dollar amount of the current Annuity payment from that Separate Account
investment option. The total dollar amount of each variable Annuity payment is
the sum of all amounts payable from the selected Separate Account investment
options.
SA - 4
<PAGE>
ANNUITY PROVISIONS (continued)
Fixed Annuity
A fixed annuity is a series of payments made after the Annuity Date that we
guarantee as to dollar amount. Fixed annuity payments do not vary with the
investment experience of the Separate Account.
At the Annuity Date, we will apply your Account Value in the Fixed Account to
the applicable Annuity table shown in your Contract to determine the dollar
amount of each "fixed" Annuity payment. (We use your Account Value in the Fixed
Account as of the day immediately before the Annuity Date ).
Annuity Unit
The initial value of an Annuity Unit for each Separate Account investment option
was arbitrarily set at $10. After that, the Annuity Unit value for that
Separate Account investment option is determined at the end of each Business
Day.
We determine an Annuity Unit's value by:
. calculating the assets of the applicable Separate Account investment
option that are attributable to Annuity Units;
. subtracting any unpaid daily and annual charges for the Contracts that
are attributable to that investment option;
. subtracting (or adding) any charges (or credits) for taxes that we have
reserved for that investment option;
. dividing the remainder by the number of then outstanding Annuity Units in
that investment option; and
. multiplying the result by a factor that neutralizes the assumed
investment rate of 3% contained in the Contract's annuity tables.
The value of an Annuity Unit will increase or decrease from Business Day to
Business Day, and will differ depending on the Separate Account investment
options selected.
Mortality and Expense Guarantee
We guarantee that the dollar amount of each Annuity payment after the Annuity
Date will not be affected by variations in our mortality or expense experience.
FINANCIAL STATEMENTS
The consolidated financial statements of First Variable Life Insurance Company
included herein should be considered only as bearing upon our ability to meet
our obligations under the Contracts.
SA - 5
<PAGE>
Financial Statements
First Variable Life Insurance Company
First Variable Annuity Fund E
To be filed by amendment.
<PAGE>
FIRST VARIABLE ANNUITY FUND E
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements of First Variable Annuity Fund E and First Variable
Life Insurance Company to be filed by amendment.
(b) Exhibits
--------
1. Resolution of Board of Directors for the Company authorizing the
establishment of the Separate Account (1)
2. Not Applicable
3(a). Form of Principal Underwriter's Agreement (2)
(b). Form of Broker-Dealer Agreement (2)
(c). Specimen Broker-Dealer Supervisory and Selling Agreement (3)
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract (4)
5. Application for Variable Annuity (4)
6(a). Articles of Incorporation of First Variable Life Insurance Company
(1)
(b) By-laws of First Variable Life Insurance Company (2)
7. Not Applicable
8. Form of Fund Participation Agreements (3)
9.(a) Consent of Counsel, First Variable Life Insurance Company (4)
(b) Consent of Blazzard, Grodd & Hasenauer, P.C. (4)
10. Consent of Ernst & Young LLP, Independent Auditors (5)
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information (5)
14. Not Applicable
15. Powers of Attorney (6) - of the following individuals appointing
John M. Soukup or Arnold R. Bergman their attorney-in-fact to act
for them in their capacities as Directors of the Company or
otherwise, to do all things necessary to comply with the provisions
and intent of the Securities Act of 1933 and the Investment Company
Act of 1940 with respect to variable life insurance policies and
variable annuity contracts:
Ronald M. Butkiewicz Shane W. Gleeson Philip R. O'Connor
Michael J. Corey Jeff S. Liebmann
Michael R. Ferrari Kenneth R. Meyer
- ----------------
(1) Incorporated by reference to the Registrant's Post-Effective Amendment No.
4 to the Form N-4 Registration Statement (Registration No. 33-86738) filed
electronically with the Securities and Exchange Commission on or about
April 27, 1998.
<PAGE>
(2) Incorporated by reference to the Pre-Effective Amendment No. 1 to the Form
S-6 Registration Statement of First Variable Life Insurance Company
Separate Account VL, filed electronically with the Securities and Exchange
Commission on November 15, 1996 (File No. 333-05053).
(3) Incorporated by reference to the Registrant's Form N-4 Registration
Statement (Registration No. 333-12197)filed electronically with the
Securities and Exchange Commission on September 14, 1996.
(4) Incorporated by reference to the Registrant's Post-Effective Amendment No.
2 to the Form N-4 Registration Statement (Registration No. 333-12197)
filed electronically with the Securities and Exchange Commission on April
27, 1998.
(5) To be filed by amendment.
(6) Incorporated by reference to the Post-Effective Amendment No. 1 to the Form
S-6 Registration Statement of First Variable Life Insurance Company
Separate Account VL, filed electronically with the Securities and Exchange
Commission on or about April 27, 1998 (Registration No. 333-19193).
ITEM 25. OFFICERS AND DIRECTORS OF DEPOSITOR
The following are the Directors and Executive Officers of First Variable Life
Insurance Company. Unless otherwise noted, our directors are located at 2211
York Road, Suite 202, Oak Brook, Illinois 60523 and all our executive officers
are located at 2122 York Road, Suite 300, Oak Brook, Illinois 60523.
Directors
Ronald M. Butkiewicz, Chairman.
Michael J. Corey - 401 East Host Drive, Lake Geneva, WI 53147.
Norman A. Fair
Michael R. Ferrari, 25th & University Ave., Des Moines, IA
Shane W. Gleeson
Jeff S. Liebmann, Esq., 1301 Avenue of the Americas
New York, NY 10019
Kenneth R. Meyer, Lincoln Capital Management Co., 200 South Wacker Dr., Suite
2100, Chicago, IL 60606
Philip R. O'Connor, President of NEV Midwest, LLC 111 West Washington, Suite
1247 ,Chicago, IL 60602
Clark Ramsey
Executive Officer & Director
John M. Soukup, President
Other Executive Officers
Steven J. Horn, Senior Vice President and Chief Operations Officer
Arnold R. Bergman, Vice President, General Counsel & Secretary
Thomas Gualdoni, Vice President, Sales
Martha Gross, Vice President, Administration
Christopher S. Harden, Vice President & Treasurer
Martin Sheerin, Vice President & Chief Actuary.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
Incorporated by reference to Registrant's Post-Effective Amendment No.
4 to the Form N-4 Registration Statement, filed electronically with the
Securities and Exchange Commission on or about April 27, 1998. (File Nos.
33-86738 and 811-4092).
ITEM 27. NUMBER OF CONTRACT OWNERS
To be filed by amendment.
<PAGE>
ITEM 28. INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act of
1933 ("Act") may be 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 is against public policy
as expressed in the Act and is, therefore, 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 it is 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 and for the following investment companies:
First Variable Annuity Fund A
Separate Account VL of First Variable Life Insurance Company
(b) The following persons are directors and officers of FVCS. Unless otherwise
noted, FVCS directors and officers are located at 2122 York Road, Suite 300,
Oak Brook, Illinois 60523:
<TABLE>
<CAPTION>
Name and Principal Business Address Positions and Offices with Underwriter
- ----------------------------------- --------------------------------------
<S> <C>
Norman A. Fair Director
2211 York Road, Suite 202
Oak Brook, IL 60523
John M. Soukup President and Director
Arnold R. Bergman Secretary and Director
Thomas Gualdoni Vice President - Sales
Robert Miner Treasurer
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Our Secretary and our Treasurer who are located at 2122 York Road, Oak Brook, IL
60523, 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
1. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more
than sixteen (16) months old for so long as payment under the variable
annuity contracts may be accepted.
2. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that
an applicant can check to request a Statement of Additional Information, or
(2) a postcard or similar written communication affixed to or included in
the Prospectus that the applicant can remove to send for a Statement of
Additional Information.
3. 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>
4. In accordance with section 26(e) of the Investment Company Act of 1940,
First Variable Life Insurance Company hereby represents that the fees and
charges deducted under the Contract described in this Registration
Statement on Form N-4, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed by First Variable Life Insurance Company.
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 connection 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 connection
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 plan 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 restriction on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant has caused this Amendment to the Registration
Statement to be signed on its behalf, in the City of Oak Brook, and the State of
Illinois, on this 29th day of January, 1999.
FIRST VARIABLE ANNUITY FUND E
(Registrant)
By: FIRST VARIABLE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ John M. Soukup
-------------------------------------
John M. Soukup, President
FIRST VARIABLE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ John M. Soukup
------------------------------------
John M. Soukup, President
<PAGE>
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 indicated with First Variable Life Insurance Company on the 29th day
of Janaury, 1999.
PRINCIPAL EXECUTIVE OFFICER:
/s/ John M. Soukup
- -----------------------------------
John M. Soukup
President
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Christopher S. Harden
- -----------------------------------
Christopher S. Harden
Vice President & Treasurer
DIRECTORS:
/s/ Ronald M. Butkiewicz* /s/ Clark Ramsey
- ---------------------- ----------------------
Ronald M. Butkiewicz Clark Ramsey
/s/ John M. Soukup /s/ Jeff S. Liebmann*
- ---------------- ----------------------
John M. Soukup Jeff S. Liebmann
/s/ Michael J. Corey* /s/ Kenneth R. Meyer*
- ------------------ ----------------------
Michael J. Corey Kenneth R. Meyer
/s/ Michael R. Ferrari* /s/ Philip R. O'Connor*
- -------------------- ----------------------
Michael R. Ferrari Philip R. O'Connor
/s/ Shane W. Gleeson* /s/ Norman A. Fair
- ------------------ ----------------------
Shane W. Gleeson Norman A. Fair
* By: /s/ Arnold R. Bergman
---------------------
Arnold R. Bergman
Attorney-in-Fact
