MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
ANNUAL REPORT
DECEMBER 31, 1996
The investment results presented in this report are historical and are no
indication of future performance.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Receiver of Monarch Life Insurance Company
and Contract Owners of Monarch Life Insurance Company Separate Account VA
In our opinion, the accompanying statements of net assets and the related
statements of operations and changes in net assets present fairly, in all
material respects, the financial position of the Cash Management, U.S.
Government Bond, High Income Bond, Multiple Strategies, Common Stock, World
Equity, and Tilt Utility Divisions (constituting Monarch Life Insurance Company
Separate Account VA) at December 31, 1996 and 1995 and the results of each of
their operations and changes in their net assets for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Monarch Life Insurance Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1996, by
correspondence with the Trust, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 21, 1997
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
STATEMENT OF NET ASSETS AT DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
ASSETS Cost Shares Market Value
---------- --------- ------------
<S> <C> <C> <C>
Investment in Variable Investors Series Trust,
at Market Value (Note 2):
Cash Management Portfolio $ 708,721 708,721 $ 708,721
U.S. Government Bond Portfolio 584,165 56,489 561,458
High Income Bond Portfolio 534,686 59,419 544,968
Multiple Strategies Portfolio 1,208,403 106,319 1,350,165
Common Stock Portfolio 1,115,916 41,356 1,266,460
World Equity Portfolio 1,071,420 88,873 1,338,581
Tilt Utility Portfolio 919,877 67,016 1,022,054
---------- ----------
Total Invested Assets $6,143,188 6,792,407
==========
Total Assets 6,792,407
----------
LIABILITIES
Total Liabilities --
----------
Net Assets $6,792,407
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
STATEMENT OF NET ASSETS AT DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
ASSETS Cost Shares Market Value
---------- --------- ------------
<S> <C> <C> <C>
Investment in Variable Investors Series Trust,
at Market Value (Note 2):
Cash Management Portfolio $ 683,407 683,407 $ 683,407
U.S. Government Bond Portfolio 922,747 86,137 905,281
High Income Bond Portfolio 832,421 100,499 863,231
Multiple Strategies Portfolio 1,705,137 146,949 1,769,661
Common Stock Portfolio 1,570,071 68,233 1,764,912
World Equity Portfolio 1,495,082 125,960 1,737,559
Tilt Utility Portfolio 1,710,726 118,132 1,855,190
---------- ----------
Total Invested Assets $8,919,591 9,579,241
==========
Total Assets 9,579,241
----------
LIABILITIES
Total Liabilities --
----------
Net Assets $9,579,241
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
================================================================================
<TABLE>
<CAPTION>
TOTALS - ALL DIVISIONS
================================================
1996 1995 1994
=========== ============ ============
<S> <C> <C> <C>
Investment Income:
Dividends (Note 2) $ 454,316 $ 683,105 $ 1,201,996
Risk Charges and Administrative Expenses (Note 5) (113,284) (168,684) (256,912)
----------- ------------ ------------
Net Investment Income 341,032 514,421 945,084
----------- ------------ ------------
Net Realized Gains (Losses) 495,390 381,471 (555,432)
Net Unrealized Gains (Losses) (10,431) 1,828,180 (838,795)
----------- ------------ ------------
Net Realized and Unrealized Gains (Losses) 484,959 2,209,651 (1,394,227)
----------- ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 825,991 2,724,072 (449,143)
----------- ------------ ------------
Transfers of Net Premiums 7,229 18,332 61,319
Transfers Due to Terminations (3,620,054) (6,134,462) (9,767,763)
Transfers Among Investment Divisions -- -- --
----------- ------------ ------------
Net Decrease in Net Assets
Resulting from Principal Transactions (3,612,825) (6,116,130) (9,706,444)
----------- ------------ ------------
Total Decrease in Net Assets (2,786,834) (3,392,058) (10,155,587)
Net Assets - Beginning Balance 9,579,241 12,971,299 23,126,886
----------- ------------ ------------
Net Assets - Ending Balance $ 6,792,407 $ 9,579,241 $ 12,971,299
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Cash U.S. Gov't High Income Multiple
Management Bond Bond Strategies
Total Division Division Division Division
----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends (Note 2) $ 454,316 $ 37,582 $ 43,600 $ 36,944 $ 148,381
Risk Charges and Administrative Expenses (Note 5) (113,284) (11,352) (9,951) (9,733) (21,543)
----------- --------- --------- --------- -----------
Net Investment Income 341,032 26,230 33,649 27,211 126,838
----------- --------- --------- --------- -----------
Net Realized Gains (Losses) 495,390 -- (31,533) 75,335 24,696
Net Unrealized Gains (Losses) (10,431) -- (5,241) (20,528) 77,239
----------- --------- --------- --------- -----------
Net Realized and Unrealized Gains (Losses) 484,959 -- (36,774) 54,807 101,935
----------- --------- --------- --------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations 825,991 26,230 (3,125) 82,018 228,773
----------- --------- --------- --------- -----------
Transfers of Net Premiums 7,229 600 -- 235 500
Transfers Due to Terminations (3,620,054) (511,575) (319,956) (230,485) (602,163)
Transfers Among Investment Divisions -- 510,059 (20,742) (170,031) (46,606)
----------- --------- --------- --------- -----------
Net Decrease in Net Assets
Resulting from Principal Transactions (3,612,825) (916) (340,698) (400,281) (648,269)
----------- --------- --------- --------- -----------
Total Increase (Decrease) in Net Assets (2,786,834) 25,314 (343,823) (318,263) (419,496)
Net Assets - Beginning Balance 9,579,241 683,407 905,281 863,231 1,769,661
=========== ========= ========= ========= ===========
Net Assets - Ending Balance $ 6,792,407 $ 708,721 $ 561,458 $ 544,968 $ 1,350,165
=========== ========= ========= ========= ===========
<CAPTION>
Common World Tilt
Stock Equity Utility
Division Division Division
----------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
Dividends (Note 2) $ 75,239 $ 37,601 $ 74,969
Risk Charges and Administrative Expenses (Note 5) (20,526) (20,961) (19,218)
----------- ----------- -----------
Net Investment Income 54,713 16,640 55,751
----------- ----------- -----------
Net Realized Gains (Losses) 314,022 110,873 1,997
Net Unrealized Gains (Losses) (44,298) 24,684 (42,287)
----------- ----------- -----------
Net Realized and Unrealized Gains (Losses) 269,724 135,557 (40,290)
----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations 324,437 152,197 15,461
----------- ----------- -----------
Transfers of Net Premiums 3,079 2,075 740
Transfers Due to Terminations (755,158) (486,797) (713,920)
Transfers Among Investment Divisions (70,810) (66,453) (135,417)
----------- ----------- -----------
Net Decrease in Net Assets
Resulting from Principal Transactions (822,889) (551,175) (848,597)
----------- ----------- -----------
Total Increase (Decrease) in Net Assets (498,452) (398,978) (833,136)
Net Assets - Beginning Balance 1,764,912 1,737,559 1,855,190
=========== =========== ===========
Net Assets - Ending Balance $ 1,266,460 $ 1,338,581 $ 1,022,054
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Cash U.S. Gov't High Income
Management Bond Bond
Total Division Division Division
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends (Note 2) $ 683,105 $ 49,240 $ 93,015 $ 81,996
Risk Charges and Administrative Expenses (Note 5) (168,684) (12,982) (18,737) (19,004)
------------ ----------- ----------- -----------
Net Investment Income 514,421 36,258 74,278 62,992
------------ ----------- ----------- -----------
Net Realized Gains (Losses) 381,471 -- (8,643) (46,200)
Net Unrealized Gains 1,828,180 -- 162,152 206,573
------------ ----------- ----------- -----------
Net Realized and Unrealized Gains 2,209,651 -- 153,509 160,373
------------ ----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,724,072 36,258 227,787 223,365
------------ ----------- ----------- -----------
Transfers of Net Premiums 18,332 1,830 116 378
Transfers Due to Terminations (6,134,462) (805,598) (735,916) (911,942)
Transfers Among Investment Divisions -- 373,630 (59,167) 20,938
------------ ----------- ----------- -----------
Net Decrease in Net Assets
Resulting from Principal Transactions (6,116,130) (430,138) (794,967) (890,626)
------------ ----------- ----------- -----------
Total Decrease in Net Assets (3,392,058) (393,880) (567,180) (667,261)
Net Assets - Beginning Balance 12,971,299 1,077,287 1,472,461 1,530,492
------------ ----------- ----------- -----------
Net Assets - Ending Balance $ 9,579,241 $ 683,407 $ 905,281 $ 863,231
============ =========== =========== ===========
<CAPTION>
Multiple Common World Tilt
Strategies Stock Equity Utility
Division Division Division Division
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends (Note 2) $ 159,914 $ 105,228 $ 100,569 $ 93,143
Risk Charges and Administrative Expenses (Note 5) (32,268) (26,224) (28,391) (31,078)
----------- ----------- ----------- -----------
Net Investment Income 127,646 79,004 72,178 62,065
----------- ----------- ----------- -----------
Net Realized Gains (Losses) (7,409) 203,174 211,658 28,891
Net Unrealized Gains 516,062 296,759 142,561 504,073
----------- ----------- ----------- -----------
Net Realized and Unrealized Gains 508,653 499,933 354,219 532,964
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations 636,299 578,937 426,397 595,029
----------- ----------- ----------- -----------
Transfers of Net Premiums 1,596 7,037 5,691 1,684
Transfers Due to Terminations (1,231,242) (703,335) (730,399) (1,016,030)
Transfers Among Investment Divisions (81,273) 6,500 (126,769) (133,859)
----------- ----------- ----------- -----------
Net Decrease in Net Assets
Resulting from Principal Transactions (1,310,919) (689,798) (851,477) (1,148,205)
----------- ----------- ----------- -----------
Total Decrease in Net Assets (674,620) (110,861) (425,080) (553,176)
Net Assets - Beginning Balance 2,444,281 1,875,773 2,162,639 2,408,366
----------- ----------- ----------- -----------
Net Assets - Ending Balance $ 1,769,661 $ 1,764,912 $ 1,737,559 $ 1,855,190
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Cash U.S. Gov't High Income
Management Bond Bond
Total Division Division Division
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends (Note 2) $ 1,201,996 $ 67,878 $ 126,072 $ 157,715
Risk Charges and Administrative Expenses (Note 5) (256,912) (25,895) (38,043) (21,630)
------------ ----------- ----------- -----------
Net Investment Income (Loss) 945,084 41,983 88,029 136,085
------------ ----------- ----------- -----------
Net Realized Gains (Losses) (555,432) -- (196,650) (232,094)
Net Unrealized Gains (Losses) (838,795) -- (19,141) (26,896)
------------ ----------- ----------- -----------
Net Realized and Unrealized Gains (1,394,227) -- (215,791) (258,990)
------------ ----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations (449,143) 41,983 (127,762) (122,905)
------------ ----------- ----------- -----------
Transfers of Net Premiums 61,319 7,916 685 4,085
Transfers Due to Terminations (9,767,763) (1,040,900) (2,190,969) (534,627)
Transfers Among Investment Divisions -- 760,697 (115,200) (323,212)
------------ ----------- ----------- -----------
Net Decrease in Net Assets
Resulting from Principal Transactions (9,706,444) (272,287) (2,305,484) (853,754)
------------ ----------- ----------- -----------
Total Decrease in Net Assets (10,155,387) (230,304) (2,433,246) (976,659)
Net Assets - Beginning Balance 23,126,886 1,307,591 3,905,707 2,507,151
------------ ----------- ----------- -----------
Net Assets - Ending Balance $ 12,971,299 $ 1,077,287 $ 1,472,461 $ 1,530,492
============ =========== =========== ===========
<CAPTION>
Multiple Common World Tilt
Strategies Stock Equity Utility
Division Division Division Division*
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends (Note 2) $ 348,390 $ 16,158 $ 124,764 $ 361,019
Risk Charges and Administrative Expenses (Note 5) (50,104) (35,811) (35,328) (50,101)
----------- ----------- ----------- -----------
Net Investment Income (Loss) 298,286 (19,653) 89,436 310,918
----------- ----------- ----------- -----------
Net Realized Gains (Losses) (162,691) (298,125) 187,055 147,073
Net Unrealized Gains (Losses) (419,619) 214,548 (76,828) (510,859)
----------- ----------- ----------- -----------
Net Realized and Unrealized Gains (582,310) (83,577) 110,227 (363,786)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations (284,024) (103,230) 199,663 (52,868)
----------- ----------- ----------- -----------
Transfers of Net Premiums 11,609 14,999 16,014 6,011
Transfers Due to Terminations (1,911,389) (1,188,000) (1,091,263) (1,810,615)
Transfers Among Investment Divisions (14,995) (199,446) 189,600 (297,444)
----------- ----------- ----------- -----------
Net Decrease in Net Assets
Resulting from Principal Transactions (1,914,775) (1,372,447) (885,649) (2,102,048)
----------- ----------- ----------- -----------
Total Decrease in Net Assets (2,198,799) (1,475,677) (685,986) (2,154,916)
Net Assets - Beginning Balance 4,643,080 3,351,450 2,848,625 4,563,282
----------- ----------- ----------- -----------
Net Assets - Ending Balance $ 2,444,281 $ 1,875,773 $ 2,162,639 $ 2,408,366
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
* Prior to April 1, 1994, the Tilt Utility Division was known as the Equity
Income Division (See Note 1).
7
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1-ORGANIZATION
Monarch Life Insurance Company Separate Account VA (the Account) is a segregated
account of Monarch Life Insurance Company (Monarch Life) and is registered as a
unit investment trust under the Investment Company Act of 1940, as amended (1940
Act). Each of the seven investment divisions of the Account are invested solely
in the shares of the seven corresponding portfolios of the Variable Investors
Series Trust (the Trust), a no-load, diversified, open-end, series management
investment company registered under the 1940 Act. Under applicable insurance
law, the assets and liabilities of the Account are clearly identified and
distinguished from the other assets and liabilities of Monarch Life. The Account
cannot be charged with liabilities arising out of any other business of Monarch
Life.
Monarch Life is a wholly-owned subsidiary of Regal Reinsurance Company (Regal
Re). On June 9, 1994, the Insurance Commissioner of the Commonwealth of
Massachusetts (the Commissioner) was appointed receiver (the Receiver) of
Monarch Life in a rehabilitation proceeding pending before the Supreme Judicial
Court for Suffolk County, Massachusetts (the Court). A term sheet dated July 19,
1994 (the Term Sheet) among the Commissioner (in her capacity as Commissioner
and Receiver) and certain of Regal Re shareholders and noteholders and holders
of Monarch Life's surplus notes (representing approximately 85% of both the
total outstanding Regal Re notes and common stock) (the Holders) was approved by
the Court on September 1, 1994. Pursuant to the Term Sheet, the Holders
transferred their notes and stock into voting trusts for which the Commissioner
is the sole trustee, which effectively vests control of Monarch Life and Regal
Re in the Commissioner.
On January 31, 1997, the Receiver, with Court approval, appointed a Special
Deputy Receiver for Monarch Life. The Special Deputy Receiver is responsible for
the management of Monarch Life=s operations and reports to the Receiver as has
been the case with Monarch Life=s President, who recently announced plans to
retire at the end of the first quarter of 1997. The Receiver=s active
involvement in the rehabilitation of Monarch Life will not change.
Insurance departments of various jurisdictions have either suspended Monarch
Life's certificate of authority, ordered Monarch Life to cease writing new
business, or have requested a voluntary suspension of sales. In addition,
Monarch Life's certificate of authority has been revoked by the insurance
departments of the states of Louisiana (1994), Michigan (1995), Missouri (1994),
and Wyoming (1992).
Monarch Life currently limits its business to maintaining its existing
disability income insurance, variable life, and annuity business. Monarch Life
ceased issuing new variable life insurance policies and new annuity contracts
effective May 1, 1992, and new disability income insurance policies effective
June 15, 1993.
The assets of the Account are not available to meet the general obligations of
Monarch Life or Regal Re and are held for the exclusive benefit of the contract
owners participating in the Account.
On April 1, 1994, the Trust's Equity Income Portfolio changed its name to the
Tilt Utility Portfolio and the Account's Equity Income Division changed its name
to the Tilt Utility Division.
On October 11, 1996, Monarch Life filed with the Securities and Exchange
Commission (SEC), an application requesting an order approving the substitution
of shares of certain portfolios of Merrill Lynch Variable Series Funds, Inc.,
for shares of each of the portfolios of the Trust currently held in the Account.
8
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 2-SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Account in preparation of its financial statements. Preparation
of financial statements requires the use of estimates made by management. Actual
results may differ from these estimates. The policies are in conformity with
generally accepted accounting principles.
INVESTMENTS: The investments in shares of the Trust are stated at the net
asset value per share of the respective portfolios of the Trust. Investment
transactions are accounted for on the date the shares are purchased or
sold. The cost of shares sold and redeemed is determined on the first-in,
first-out method. Dividend and capital gain distributions received from the
Trust are reinvested in additional shares of the Trust and are recorded as
income by the Account on the ex-dividend date. Capital gains distributions
are included in dividend income in the statements of operations and changes
in net assets.
FEDERAL INCOME TAXES: For federal income tax purposes, operations of the
Account are combined with those of Monarch Life which is taxed as a life
insurance company. Under existing federal income tax law, investment income
(dividends) and capital gains attributable to the Account are not taxed.
NOTE 3-PURCHASES AND SALES OF SECURITIES
Total cost of purchases and proceeds from sales of Trust shares by the Account
during the year ended December 31, 1996, are shown below:
Purchases Sales
---------- ----------
Cash Management Portfolio $1,179,863 $1,154,550
U.S. Government Bond Portfolio 60,991 368,040
High Income Bond Portfolio 439,463 812,534
Multiple Strategies Portfolio 226,286 747,716
Common Stock Portfolio 363,162 1,131,338
World Equity Portfolio 49,604 584,139
Tilt Utility Portfolio 86,774 879,619
---------- ----------
Totals $2,406,143 $5,677,936
========== ==========
NOTE 4-CONTRACT OWNERS' EQUITY
Contract owners' equity at December 31, 1996, consists of the following:
Accumulation
Accumulation Unit
Units Value Equity
---------- ---------- ----------
Cash Management Division 58,685.066 $12.076676 $ 708,721
U.S. Goverment Bond Division 36,556.209 15.358760 561,458
High Income Bond Divison 33,798.670 16.123960 544,968
Multiple Strategies Division 61,197.117 22.062560 1,350,165
Common Stock Division 20,336.542 62.275070 1,266,460
World Equity Division 77,396.703 17.295070 1,338,581
Tilt Utility Division 44,915.815 22.754880 1,022,054
----------
Totals $6,792,407
==========
9
<PAGE>
MONARCH LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 5-EXPENSES
Monarch Life assumes mortality and expense risks and administrative expenses
related to the operations of the Account. Monarch Life deducts a daily charge
from the assets of the Account to cover these risks. This charge is, on an
annual basis, equal to a rate of 1.4% (0.85% for mortality risks, 0.40% for
expense risks, and 0.15% for administrative charges) of the daily net assets of
the Account.
NOTE 6-DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the Code),
a variable annuity contract, other than a contract issued in connection with
certain types of employee benefits plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments of
the segregated asset account, on which the contract is based, are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of the Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of the
Code. Monarch Life believes, based on assurances from the Trust, that the
Account satisfies the current requirements of the regulations.
NOTE 7-PRINCIPAL UNDERWRITER AND GENERAL DISTRIBUTOR
Since June 13, 1995, Baystate Capital Services, Inc. (BCSI), has been the
principal underwriter and general distributor of the contracts maintained in the
Account. BCSI is a wholly-owned subsidiary of Monarch Life. Prior to June 13,
1995, the function of principal underwriter and general distributor was
performed by First Variable Capital Services, Inc., a wholly-owned subsidiary of
First Variable Life Insurance Company (FVL). Prior to September 22, 1994, FVL
was a wholly-owned subsidiary of Monarch Life. Effective September 22, 1994, FVL
is no longer an affiliate of Monarch Life.
NOTE 8-INVESTMENT ADVISORY AND BUSINESS MANAGEMENT AGREEMENTS
First Variable Advisory Services Corp. (FVASC), a wholly-owned subsidiary of
FVL, manages the business and affairs of the Trust and serves as investment
advisor to all portfolios of the Trust, subject to the authority and direction
of the Board of Trustees of the Trust. FVASC has engaged sub-advisers for each
portfolio to make investment decisions and place orders. The sub-advisers for
the portfolios are:
Portfolio Sub-Adviser
--------- -----------
Cash Management Portfolio Federated Investment Counseling
U.S. Government Bond Portfolio Strong Capital Management, Inc.
High Income Bond Portfolio Federated Investment Counseling
Multiple Strategies Portfolio Value Line, Inc.
Common Stock Portfolio Value Line, Inc.
World Equity Portfolio Keystone Investment Management Co.
Tilt Utility Portfolio State Street Global Advisors
FVASC began performing these functions on April 1, 1994. Prior to April 1, 1994,
INVESCO Capital Management, Inc., had acted as investment adviser to all
portfolios of the Trust.
10
