<PAGE> 1
PROSPECTUS SUPPLEMENT DATED SEPTEMBER 1, 2000
This Supplement updates certain information contained in the following
prospectuses for products issued by First Fortis Life Insurance Company.
- First Fortis Opportunity Variable Annuity dated May 1, 2000
- First Fortis Masters Variable Annuity dated May 1, 2000
Please read this Supplement carefully. You should attach this Supplement to the
applicable product prospectus referred to above and retain it for future
reference.
FORTIS SERIES FUND
One of the subaccounts available for investment is the Global Asset Allocation
Series of the Fortis Series Fund, Inc. Effective September 1, 2000 the following
changes to the Global Asset Allocation Series will take place.
- The sub-adviser retained by Fortis Advisers, Inc. will no longer be Morgan
Stanley Dean Witter Investment Management Limited. The new sub-adviser
retained by Fortis Advisers, Inc. will be T. Rowe Price Associates, Inc.
- The name of the series will change from Global Asset Allocation Series to
International Stock Series II.
For further information on how the International Stock Series II will be
managed, please refer to the September 1, 2000 Supplement to the Fortis Series
Fund prospectus dated May 1, 2000.
<PAGE> 2
FIRST FORTIS
OPPORTUNITY
VARIABLE
ANNUITY
Individual Flexible
Premium Deferred
Variable Annuity Contract
PROSPECTUS DATED
September 1, 2000
[FORTIS SOLID PARTNERS, FLEXIBLE SOLUTIONS(SM) LOGO]
99103 (9/00)
FIRST FORTIS LIFE INSURANCE COMPANY
<TABLE>
<S> <C> <C>
MAILING ADDRESS: STREET ADDRESS: PHONE: 1-800-745-8248
P.O. BOX 3249 308 MALTBIE STREET
SYRACUSE, NY 13220 SUITE 200
SYRACUSE, NY 13204
</TABLE>
This prospectus describes an individual flexible premium deferred variable
annuity contract issued by First Fortis Life Insurance Company ("First Fortis").
The contracts allow you to accumulate funds on a tax-deferred basis. You may
elect a guaranteed interest accumulation option through a fixed account or a
variable return accumulation option through a separate account, or a combination
of these two options. Under the variable return accumulation option, you can
choose among the following investment portfolios of Fortis Series Fund, Inc.
(those portfolios which have a non-Fortis subadvisor include the name of the
subadvisor at the beginning of the portfolio name):
<TABLE>
<S> <C>
Money Market Series T. RowePrice--Blue Chip Stock Series
U.S. Government Securities Series AIM--Blue Chip Stock Series II
Diversified Income Series Lazard Freres--International Stock Series
AIM--Multisector Bond Series Dreyfus--Mid Cap Stock Series
High Yield Series Berger--Small Cap Value Series
T. Rowe Price -- International Stock Global Growth Series
Series II MFS--Global Equity Series
Asset Allocation Series Alliance--Large Cap Growth Series
Federated--American Leaders Series MFS--Investors Growth Series
Value Series Growth Stock Series
MFS--Capital Opportunities Series Aggressive Growth Series
Growth & Income Series
Dreyfus--S&P 500 Index Series
</TABLE>
The accompanying prospectus for these investment portfolios describes the
investment objectives, policies and risks of each portfolio.
This prospectus gives you information about the contracts that you should know
before investing. This prospectus must be accompanied by a current prospectus of
available investment portfolios. Both prospectuses should be read carefully and
kept for future reference.
A Statement of Additional Information, dated May 1, 2000, about the contracts
has been filed with the Securities and Exchange Commission and is available
without charge from First Fortis at the address and phone number printed above.
The Table of Contents for the Statement of Additional Information appears on
page XX of this prospectus.
THESE CONTRACTS ARE NOT OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK,
CREDIT UNION, BROKER-DEALER OR OTHER FINANCIAL INSTITUTION. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. THEY INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Special Terms Used in This Prospectus....................... 3
Information Concerning Fees and Charges..................... 4
Summary..................................................... 6
First Fortis and the Separate Account....................... 8
- First Fortis Life Insurance Company.................. 8
- The Separate Account................................. 8
- Fortis Series Fund, Inc.............................. 8
Accumulation Period......................................... 9
- Issuance of a Contract and Purchase Payments......... 9
- Contract Value....................................... 9
- Allocation of Purchase Payments and Contract Value... 10
- Total and Partial Surrenders......................... 10
- Telephone Transactions............................... 11
- Benefit Payable on Death of Annuitant or Contract
Owner................................................. 11
The Annuity Period.......................................... 11
- Annuity Commencement Date............................ 11
- Commencement of Annuity Payments..................... 12
- Relationship Between Subaccount Investment
Performance and Amount of Variable Annuity Payments... 12
- Annuity Options...................................... 12
- Death of Annuitant or Other Payee.................... 13
Charges and Deductions...................................... 13
- Premium Taxes........................................ 13
- Annual Administrative Charge......................... 13
- Charges Against the Separate Account................. 13
- Surrender Charge..................................... 14
- Miscellaneous........................................ 14
- Reduction of Charges................................. 14
Fixed Account............................................... 14
- General Description.................................. 15
- Fixed Account Value.................................. 15
- Fixed Account Transfers, Total and Partial
Surrenders............................................ 15
General Provisions.......................................... 15
- The Contract......................................... 15
- Postponement of Payments............................. 15
- Misstatement of Age or Sex and Other Errors.......... 15
- Assignment and Ownership Rights...................... 15
- Beneficiary.......................................... 16
- Reports.............................................. 16
Rights Reserved by First Fortis............................. 16
Distribution................................................ 16
Federal Tax Matters......................................... 17
Voting Privileges........................................... 19
State Regulation............................................ 20
Legal Matters............................................... 20
Contents of Statement of Additional Information............. 20
Appendix A--Sample Death Benefit Calculations............... A-1
Appendix B--Explanation of Expense Calculations............. B-1
</TABLE>
THE CONTRACTS ARE NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. FIRST FORTIS DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATION REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS WHICH IS NOT
INCLUDED IN THIS PROSPECTUS, THE RELATED STATEMENT OF ADDITIONAL INFORMATION, OR
ANY SUPPLEMENTS THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
FIRST FORTIS.
<PAGE> 4
SPECIAL TERMS USED IN THIS PROSPECTUS
Accumulation PeriodThe time period under a contract between the contract date
and the Annuity Period.
Accumulation Unit A unit of measure used to calculate the interest of the
contract owner in the Separate Account during the
Accumulation Period.
Annuitant A person during whose life annuity payments are to be made by
First Fortis under the contract.
Annuity Period The time period following the Accumulation Period, during
which annuity payments are made by First Fortis.
Annuity Unit A unit of measurement used to calculate variable annuity
payments.
Five Year Anniversary
The fifth anniversary of a contract date, and each subsequent
fifth anniversary of that date.
Fixed Annuity Option
An annuity option under which First Fortis promises to pay
the Annuitant or any other properly designated payee one or
more fixed payments.
Fortis Group Funds All publicly-available mutual funds advised by Fortis
Advisers, Inc. (other than Fortis Money Portfolios, Inc.).
Currently, these mutual funds are: Fortis Worldwide
Portfolios, Inc., Fortis Equity Portfolios, Inc., Fortis
Growth Fund, Inc., Fortis Tax-Free Portfolios, Inc., Fortis
Income Portfolios, Inc., and Fortis Advantage Portfolios,
Inc.
Fortis Series The Fortis Series Fund, Inc., a diversified, open-end
management investment company in which the Separate Account
invests.
Non-Qualified Contracts
Contracts that do not qualify for the special federal income
tax treatment applicable in connection with certain
retirement plans.
Qualified ContractsContracts that are qualified for the special federal income
tax treatment applicable in connection with certain
retirement plans.
Separate Account The segregated asset account referred to as Separate Account
A of First Fortis Life Insurance Company established to
receive and invest purchase payments made under contracts.
Valuation Date Each business day of First Fortis except, with respect to any
subaccount, days on which the related portfolio does not
value its shares. Generally, the portfolios value their
shares on each day the New York Stock Exchange is open.
Valuation Period The period that starts at the close of regular trading on the
New York Stock Exchange on a Valuation Date and ends at the
close of regular trading on the exchange on the next
succeeding Valuation Date.
Variable Annuity Option
An annuity option under which First Fortis promises to pay
the Annuitant or any other properly designated payee one or
more payments which vary in amount in accordance with the net
investment experience of the subaccounts selected by the
Annuitant.
3
<PAGE> 5
INFORMATION CONCERNING FEES AND CHARGES
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C>
Front-End Sales Charge Imposed on Purchases................. 0 %
Maximum Surrender Charge for Sales Expenses (as a percentage
of purchase payments)....................................... 5 %(1)
</TABLE>
<TABLE>
<CAPTION>
YEARS SINCE AMOUNT OF
DATE OF PAYMENT CHARGE
--------------- ---------
<S> <C>
Less than 5 5%
5 or more 0%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Other Surrender Fees........................................ 0 %
Exchange Fee................................................ 0 %
ANNUAL CONTRACT ADMINISTRATION CHARGE............................ $30 (2)
SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE OF AVERAGE ACCOUNT
VALUE)
Mortality and Expense Risk Charge........................... 1.25 %
Separate Account Administrative Charge...................... .10 %
Total Separate Account Annual Expenses...................... 1.35 %
</TABLE>
------------------------------
(1) This charge does not apply in certain cases such as partial surrenders each
year of up to 10% of "new purchase payments" as defined under the heading
"Surrender Charge" or, payment of a death benefit.
(2) This charge, which is otherwise applied at each contract anniversary and
total surrender of the contract, will not be charged during the Accumulation
Period if the contract value as of such anniversary or surrender is $25,000
or more. Currently, First Fortis waives this charge during the Annuity
Period. This charge is also subject to any applicable limitations under the
law of any state.
PORTFOLIO ANNUAL EXPENSES(a)
<TABLE>
<CAPTION>
U.S. AMERICAN
MONEY GOVERNMENT DIVERSIFIED MULTI SECTOR INTERNATIONAL ASSET LEADERS
MARKET SECURITIES INCOME BOND SERIES HIGH YIELD STOCK ALLOCATION SERIES
SERIES SERIES SERIES (B) SERIES SERIES II SERIES (C)
------ ---------- ----------- ------------ ---------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory and
Management Fee........... 0.30% 0.47% 0.47% 0.75% 0.50% 0.90% 0.47% 0.90%
Other Expenses............. 0.05% 0.50% 0.70% 0.15% 0.07% 0.12% 0.05% 0.35%
Total Series Fund Operating
Expenses................. 0.35% 0.97% 1.17% 0.90% 0.57% 1.02% 0.52% 1.25%
<CAPTION>
CAPITAL
OPPORTUNITIES GROWTH & S&P 500
VALUE SERIES INCOME INDEX
SERIES (C) SERIES SERIES
------ ------------- -------- -------
<S> <C> <C> <C> <C>
Investment Advisory and
Management Fee........... 0.70% 0.90% 0.63% 0.40%
Other Expenses............. 0.06% 0.35% 0.06% 0.06%
Total Series Fund Operating
Expenses................. 0.76% 1.25% 0.69% 0.46%
</TABLE>
<TABLE>
<CAPTION>
BLUE
CHIP
STOCK GLOBAL GLOBAL
BLUE CHIP SERIES II INTERNATIONAL MID CAP SMALL CAP GROWTH EQUITY
STOCK SERIES (C) STOCK SERIES STOCK SERIES VALUE SERIES SERIES SERIES
------------ --------- ------------- ------------ ------------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory and Management
Fee................................... 0.87% 0.95% 0.84% 0.90% 0.90% 0.70% 1.00%
Other Expenses.......................... 0.05% 0.35% 0.10% 0.28% 0.14% 0.07% 0.35%
Total Series Fund Operating Expenses.... 0.92% 1.30% 0.94% 1.18% 1.04% 0.77% 1.35%
<CAPTION>
LARGE
CAP INVESTORS GROWTH AGGRESSIVE
GROWTH GROWTH STOCK GROWTH
SERIES SERIES SERIES SERIES
------ --------- ------ ----------
<S> <C> <C> <C> <C>
Investment Advisory and Management
Fee................................... 0.90% 0.90% 0.61% 0.66%
Other Expenses.......................... 0.07% 0.35% 0.50% 0.06%
Total Series Fund Operating Expenses.... 0.97% 1.25% 1.11% 0.72%
</TABLE>
------------------------------
(a) As a percentage of portfolio average net assets based on 1999 historical
data, except for that American Leaders, Capital Opportunities, Blue Chip
Stock Series II, Global Equity and Investors Growth, these amounts are based
upon estimates after reimbursement for the current fiscal year. The
estimated expenses for those portfolios prior to reimbursement is as
follows; Global Equity 1.40%, Investors Growth 1.30%, Capital Opportunities
1.30%, American Leaders 1.30% and Blue Chip II 1.30%.
4
<PAGE> 6
EXAMPLES*
If you surrender your contract in full at the end of any of the time periods
shown below, you would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market................................................ $62 $ 98 $137 $200
U.S. Government Securities.................................. 64 104 146 218
Diversified Income.......................................... 64 104 147 220
Multisector Bond............................................ 68 115 165 257
High Yield.................................................. 64 105 148 223
International Stock II...................................... 69 119 171 269
Asset Allocation............................................ 64 104 146 218
American Leaders............................................ 71 126 183 292
Value....................................................... 67 111 159 245
Capital Opportunities....................................... 71 126 183 292
Growth & Income............................................. 66 109 154 236
S&P 500 Index............................................... 63 102 143 212
Blue Chip Stock............................................. 68 116 166 259
Blue Chip Stock II.......................................... 72 127 185 297
International Stock......................................... 68 116 167 261
MidCap Stock Series......................................... 71 123 179 285
Small Cap Value Series...................................... 69 119 172 271
Global Growth............................................... 66 111 158 244
Global Equity............................................... 72 129 187 302
Large Cap Growth Series..................................... 68 117 169 264
Investors Growth Series..................................... 71 126 183 292
Growth Stock................................................ 65 108 153 233
Aggressive Growth........................................... 66 110 156 239
</TABLE>
If you commence an annuity payment option, or do not surrender your contract,
you would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on assets:
<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market................................................ $17 $53 $ 92 $200
U.S. Government Securities.................................. 19 59 101 218
Diversified Income.......................................... 19 59 102 220
Multisector Bond............................................ 23 70 120 257
High Yield.................................................. 19 60 103 223
International Stock II...................................... 24 74 126 269
Asset Allocation............................................ 19 59 101 218
American Leaders............................................ 26 81 138 292
Value....................................................... 22 66 114 245
Capital Opportunities....................................... 26 81 138 292
Growth & Income............................................. 21 64 109 236
S&P 500 Index............................................... 18 57 98 212
Blue Chip Stock............................................. 23 71 121 259
Blue Chip Stock II.......................................... 27 82 140 297
International Stock......................................... 23 71 122 261
MidCap Stock Series......................................... 26 78 134 285
Small Cap Value Series...................................... 24 74 127 271
Global Growth............................................... 21 66 113 244
Global Equity............................................... 27 84 142 302
Large Cap Growth Series..................................... 23 72 124 264
Investors Growth Series..................................... 26 81 138 292
Growth Stock................................................ 20 63 108 233
Aggressive Growth........................................... 21 65 111 239
</TABLE>
------------------------------
* For purposes of these examples, the effect of the annual contract
administration charge has been computed based on the average total contract
value of all outstanding contracts during the year ended December 31, 1999 and
the total actual amount of annual contract administration charges collected
during the year. For the purpose of these examples, portfolio annual expenses
are assumed to continue at the rates set forth in the table above.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
------------------------------
The foregoing tables and examples, prescribed by the SEC, are included to assist
contract owners in understanding the transaction and operating expenses imposed
directly or indirectly under the contracts and Fortis Series. Amounts for state
premium taxes or similar assessments will also be deducted, where applicable.
See Appendix B for an explanation of the calculation of the amounts set forth
above.
5
<PAGE> 7
SUMMARY
The following summary should be read in conjunction with the detailed
information in this prospectus. This prospectus generally describes only the
portion of the contract involving the Separate Account. For a brief description
of First Fortis' fixed account, please refer to the heading "Fixed Account" in
this Prospectus.
The contract is designed to provide individuals with retirement benefits through
the accumulation of purchase payments on a fixed or variable basis, and by the
application of such accumulations to provide fixed or variable annuity payments.
PURCHASE PAYMENTS
For individual contracts, each initial or subsequent purchase payment must be at
least $50. For contracts issued in connection with a benefit plan covering
employees, the initial and subsequent purchase payments under each contract must
at all times average at least $50 and in no case be less than $25. No additional
purchase payments are required, if the contract value is at least $500 by the
end of the first contract year and at least $1,000 by the end of second contract
year and at all times thereafter. See "Issuance of a Contract and Purchase
Payments."
On the contract date, the initial purchase payment is allocated, as specified by
the contract owner in the contract application, among one or more of the
available investment portfolios, or to the fixed account, or to both. Subsequent
purchase payments are allocated in the same way, or pursuant to different
allocation percentages that the contract owner may subsequently request.
SEPARATE ACCOUNT INVESTMENT OPTIONS
Each of the subaccounts of the Separate Account invests in shares of a
corresponding portfolio of Fortis Series. The investment objective of each of
the subaccounts of the Separate Account and that of the corresponding portfolio
of Fortis Series is the same.
Contract value in each of the subaccounts of the Separate Account will vary to
reflect the investment experience of each of the corresponding portfolio, as
well as deductions for certain charges.
Each portfolio has a separate and distinct investment objective and is managed
by Fortis Advisers, Inc. or a subadviser of Fortis Advisers, Inc. For providing
investment management services to the portfolios, Fortis Advisers, Inc. receives
fees from Fortis Series based on the average daily net assets of each portfolio.
The portfolios also bear most of their other expenses. A full description of the
portfolios and their investment objectives, policies and risks can be found in
the current prospectus for Fortis Series, which accompanies this prospectus, and
Fortis Series' Statement of Additional Information, which is available upon
request from First Fortis at the address and phone number on the cover of this
prospectus.
TRANSFERS
During the Accumulation Period, you can transfer all or part of your contract
value from one subaccount to another or into the fixed account. Additionally,
during the accumulation period we may, in our discretion, permit a continuing
request for transfers of specified amounts automatically on a periodic basis.
There is currently no charge for any of these transfers. We reserve the right to
restrict the frequency of or otherwise condition, terminate, or impose charges
upon, transfers from a subaccount during the Accumulation Period. During the
Annuity Period the person receiving annuity payments may make up to four
transfers (but not from a Fixed Annuity Option) during each year of the Annuity
Period. For a description of certain limitations on transfer rights, see
"Allocations of Purchase Payments and Contract Values--Transfers."
TOTAL OR PARTIAL SURRENDERS
All or part of the contract value of a contract may be surrendered by you before
the earlier of the Annuitant's death or the annuity commencement date. Amounts
surrendered may be subject to a surrender charge and total surrenders may not be
made without application of the annual administrative charge if the contract
value is less than $25,000. See "Total and Partial Surrenders," "Surrender
Charge" and "Annual Administrative Charge." Particular attention should be paid
to the tax implications of any surrender, including possible penalties for
premature distributions. See "Federal Tax Matters."
CHARGES AND DEDUCTIONS
We deduct daily charges at a rate of 1.25% per annum of the value of the average
net assets in the Separate Account for the mortality and expense risks we assume
and .10% per annum of the value of the average net assets in the Separate
Account to cover certain administrative expenses. See "Mortality and Expense
Risk Charge" and "Administrative Expense Charge" under the heading "Charges
Against the Separate Account."
In order to permit investment of the entire purchase payment, we do not deduct
sales charges at the time of investment. However, a surrender charge is imposed
on certain total or partial surrenders of the contract to help defray expenses
relating to the sale of the contract, including commissions to registered
representatives and other promotional expenses. Certain amounts may be
surrendered without the imposition of any surrender charge. The amount of such
charge-free surrender depends on how recently the purchase payments to which the
surrender relates were made. The aggregate surrender charges will never exceed
5% of the purchase payments made to date.
There is also an annual administrative charge each year for contract
administration and maintenance. This charge is $30 per year (subject to any
applicable state law limitations) and is deducted on each anniversary of the
contract date and upon total surrender of the contract. Currently, this charge
is not deducted during the Annuity Period. This charge will be waived during the
Accumulation Period if the contract value at the end of the contract year (or
upon total surrender) is $25,000 or more.
Certain states and other jurisdictions impose premium taxes or similar
assessments upon us, either at the time purchase payments are made or when
contract value is applied to an annuity option. Where such taxes or assessments
are imposed by your state or other jurisdiction upon receipt of purchase
payments, we will deduct a charge for these amounts from the contract value upon
surrender, death of the Annuitant or contract owner, or annuitization of the
contract. In jurisdictions where such taxes or assessments are imposed at the
time of annuitization, we will deduct a charge for such amounts at that time.
6
<PAGE> 8
ANNUITY PAYMENTS
The contract provides several types of annuity benefits to Annuitants or their
beneficiaries, including Fixed and Variable Annuity Options. The contract owner
has considerable flexibility in choosing the annuity commencement date. However,
the tax implications of an annuity commencement date must be carefully
considered, including the possibility of penalties for commencing benefits
either too soon or too late. See "Annuity Commencement Date," "Annuity Options"
and "Federal Tax Matters" in this prospectus and "Taxation Under Certain
Retirement Plans" in the Statement of Additional Information.
DEATH BENEFIT
In the event that the Annuitant or contract owner dies prior to the annuity
commencement date, a death benefit is payable. See "Benefit Payable on Death of
Annuitant or Contract Owner."
RIGHT TO EXAMINE THE CONTRACT
You have a right to examine the contract. You can cancel the contract by
delivering or mailing it, together with a written request, to our home office or
to the sales representative through whom it was purchased, before the close of
business on the tenth day after receipt of the contract. If these items are sent
by mail, properly addressed and postage prepaid, they will be deemed to be
received by us on the date postmarked. We will return to you the then current
contract value.
LIMITATIONS IMPOSED BY RETIREMENT PLANS
Certain rights a contract owner would otherwise have under a contract may be
limited by the terms of any employee benefit plan in connection with which the
contract is issued. These limitations may restrict such things as total and
partial surrenders, the amount or timing of purchase payments that may be made,
when annuity payments must start and the type of annuity options that may be
selected. Accordingly, you should familiarize yourself with these and all other
aspects of any retirement plan in connection with which a contract is issued.
TAX IMPLICATIONS
The tax implications for contract owners, Annuitants and beneficiaries, and
those of any related employee benefit plan can be quite important. A brief
discussion of some of these is set out under "Federal Tax Matters" in this
prospectus and "Taxation Under Certain Retirement Plans" in the Statement of
Additional Information, but such discussion is not comprehensive. Therefore, you
should consider these matters carefully and consult a qualified tax adviser
before making purchase payments or taking any other action in connection with a
contract or any related employee benefit plan. Failure to do so could result in
serious adverse tax consequences which might otherwise have been avoided.
QUESTIONS AND OTHER COMMUNICATIONS
Any question about procedures or the contract should be directed to your sales
representative, or First Fortis' home office: P.O. Box 3249, Syracuse, NY 13220;
1-800-745-8248. For certain current information relating to contract values such
as subaccount unit values, interest rates in the fixed account, and your
contract value, call 1-800-745-8248. Purchase payments and written requests
should be mailed or delivered to the same home office address. All
communications should include the contract number, the contract owner's name
and, if different, the Annuitant's name. The number for telephone transfers is
1-800-745-8248.
Any purchase payment or other communication, except a 10-day cancellation
notice, is deemed received at First Fortis' home office on the actual date of
receipt there in proper form unless received (1) after the close of regular
trading on the New York Stock Exchange, or (2) on a date that is not a Valuation
Date. In either of these two cases, the date of receipt will be deemed to be the
next Valuation Date.
--------------------------------------------------------------------------------
FINANCIAL AND PERFORMANCE INFORMATION
The information presented below represents the Accumulation Unit information for
subaccounts of the Separate Account through December 31, 1999. Accumulation
Units have been rounded to the nearest whole unit.
<TABLE>
<CAPTION>
MONEY U.S. GOV'T DIVERSIFIED MULTISECTOR HIGH INTERNATIONAL ASSET GROWTH
MARKET SECURITIES INCOME BOND YIELD STOCK II ALLOCATION VALUE & INCOME
------ ---------- ----------- ----------- ----- ------------- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1999
Accumulation Units in
Force................... 797,681 71,855 756,563 27,683 143,241 108,668 797,681 179,372 404,608
Accumulation Unit
Values.................. $1.587 $17.823 $1.998 $12.092 $12.799 $16.150 $3.923 $15.875 $23.775
December 31, 1998
Accumulation Units in
Force................... 318,605 71,200 597,806 14,497 132,635 91,185 867,243 160,886 326,229
Accumulation Unit Value... $1.532 $18.421 $2.059 $13.254 $12.823 $16.513 $3.326 $14.768 $21.757
December 31, 1997..........
Accumulation Units in
Force................... 170,961 12,970 148,631 5,883 47,286 25,317 542,582 55,753 137,613
Accumulation Unit Value... $1.474 $17.149 $1.963 $11.837 $12.917 $14.433 $2.809 $13.651 $19.487
December 31, 1996
Accumulation Units in
Force................... 31,800 427 20,649 1,347 9,846 7,591 63,004 15,690 14,412
Accumulation Unit Value... $1.418 $15.935 $1.801 $11.961 $11.928 $12.88 $2.368 $11.048 $15.468
May 1, 1996*
Accumulation Unit Value... $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
<CAPTION>
S&P BLUE INTERNATIONAL GLOBAL GROWTH AGGRESSIVE MID CAP LARGE CAP SMALL CAP
500 CHIP STOCK GROWTH STOCK GROWTH STOCK GROWTH VALUE
--- ---- ------------- ------ ------ ---------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1999
Accumulation Units in
Force................... 559,635 329,701 143,002 76,906 524,451 109,482 35,840 247,782 63,233
Accumulation Unit
Values.................. $22.189 $21.571 $19.711 $33.343 $5.925 $32.680 $10.538 $14.754 $10.659
December 31, 1998
Accumulation Units in
Force................... 385,486 270,251 125,894 75,340 475,115 105,783 13,231 90,599 23,823
Accumulation Unit Value... $18.689 $18.238 $16.113 $21.433 $3.870 $15.829 $9.625 $11.755 $9.367
December 31, 1997..........
Accumulation Units in
Force................... 96,726 74,226 36,305 47,369 240,842 47,583 -- -- --
Accumulation Unit Value... $14.786 $14.429 $14.021 $19.507 $3.296 $13.241 -- -- --
December 31, 1996
Accumulation Units in
Force................... 5,144 9,457 10,999 6,899 70,686 14,449 -- -- --
Accumulation Unit Value... $11.326 $11.520 $12.690 $18.510 $2.971 $13.232 -- -- --
May 1, 1996*
Accumulation Unit Value... $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 -- -- --
</TABLE>
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* Accumulation Unit Value at Date of initial registration effectiveness.
Audited financial statements of the Separate Account and First Fortis are
included in the Statement of Additional Information.
Advertising and other sales materials may include yield and total return figures
for the subaccounts of the Separate Account. These figures are based on
historical results and are not in-
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tended to indicate future performance. "Yield" is the income generated by an
investment in the subaccount over a period of time specified in the
advertisement. This rate of return is assumed to be earned over a full year and
is shown as a percentage of the investment. "Total Return" is the total change
in value of an investment in the subaccount over period of time specified in the
advertisement. The rate of return shown would produce that change in value over
the specified period, if compounded annually. Yield figures do not reflect the
surrender charge and yield and total return figures do not reflect premium tax
charges. This makes the performance shown more favorable.
FIRST FORTIS AND THE SEPARATE ACCOUNT
FIRST FORTIS LIFE INSURANCE COMPANY
First Fortis Life Insurance Company is the issuer of the contracts. At the end
of 1999, First Fortis had approximately $9 billion of total life insurance in
force. First Fortis is a New York corporation founded in 1971. It is qualified
to sell life insurance and annuity contracts in New York. First Fortis is a
wholly-owned subsidiary of Fortis, Inc., which is itself indirectly owned 50% by
Fortis (NL)N.V. and 50% by Fortis (B). Fortis, Inc. manages the United States
operations for these two companies.
First Fortis is affiliated with the Fortis Financial Group. This group is a
joint effort by Fortis Benefits Life Insurance Company, Fortis Advisers, Inc.,
Fortis Investors, Inc. and Fortis Insurance Company (formerly Time Insurance
Company) to offer financial products through the management, marketing and
servicing of mutual funds, annuities, life insurance and disability income
products.
Fortis (NL)N.V. is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1847. Fortis
(B) is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis (NL)N.V. and
Fortis (B) have merged their operating companies under the trade name of Fortis.
The Fortis group of companies is active in insurance, banking and financial
services, and real estate development in The Netherlands, Belgium, the United
States, Western Europe, and the Pacific Rim. The Fortis group of companies had
approximately $406 billion in assets at the end of 1999.
All of the guarantees and commitments under the contracts are general
obligations of First Fortis, regardless of whether you have allocated the
contract value to the Separate Account or to the fixed account. None of First
Fortis' affiliated companies has any legal obligation to back First Fortis'
obligations under the contracts.
THE SEPARATE ACCOUNT
The Separate Account is a segregated investment account of First Fortis. First
Fortis established Separate Account A under New York insurance law as of October
1, 1993. The assets allocated to the Separate Account are the exclusive property
of First Fortis. The Separate Account is an integral part of First Fortis.
However, the Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
Registration does not involve supervision of the management, or investment
practices, or policies of the Separate Account or of First Fortis by the
Securities and Exchange Commission.
All income, gains and losses, whether or not realized, from assets allocated to
the Separate Account are credited to or charged against the Separate Account
without regard to other income, gains or losses of First Fortis. Assets in the
Separate Account representing reserves and liabilities will not be chargeable
with liabilities arising out of any other business of First Fortis. First Fortis
may accumulate in the Separate Account proceeds from charges under variable
annuity contracts and other amounts in excess of the Separate Account assets
representing reserves and liabilities. First Fortis may from time to time
transfer to its general account any of such excess amounts.
The Separate Account has subaccounts. The assets in each subaccount are invested
exclusively in a distinct class (or series) of stock issued by Fortis Series,
each of which represents a separate investment portfolio within Fortis Series.
Income and both realized and unrealized gains or losses from the assets of each
subaccount of the Separate Account are credited to or charged against that
subaccount without regard to income, gains or losses from any other subaccount
of the Separate Account or arising out of any other business we may conduct. We
may add or eliminate new subaccounts as new portfolios are added to, or
eliminated from, Fortis Series.
FORTIS SERIES FUND, INC.
Fortis Series is a "series" type of mutual fund. Fortis Series is registered
with the Securities and Exchange Commission as a diversified, open-end
management investment company under the Investment Company Act of 1940. Fortis
Series has served as the investment medium for the Separate Account since the
Separate Account began operations.
First Fortis purchases and redeems Fortis Series' shares for the Separate
Account at their net asset value without any sales or redemption charges. These
shares are interests in the portfolios of Fortis Series available for investment
by the Separate Account. Each portfolio corresponds to one of the subaccounts of
the Separate Account. The assets of each portfolio are separate from the assets
of other portfolios. Each Series operates as a separate investment portfolio
whose investment performance has no effect on the investment performance of any
other portfolio.
We automatically reinvest dividends or capital gain distributions attributable
to contracts in shares of the portfolio from which they are received at that
portfolio's net asset value on the date paid. These dividends and distributions
will have the effect of reducing the net asset value of each share of the
corresponding portfolio and increasing, by an equivalent value, the number of
shares outstanding of that portfolio. However, the value of the interests of
contract owners, Annuitants and beneficiaries in the corresponding subaccount
will not change as a result of any of these dividends and distributions.
The portfolios of Fortis Series available for investment by the Separate Account
are listed on the cover page of this prospectus.
A full description of the portfolios, their investment policies and
restrictions, their charges, the risks attendant to investing in them, and other
aspects of their operations is contained in the prospectus for Fortis Series
accompanying this prospectus and in the Statement of Additional Information for
Fortis Series. Additional copies of these documents may be obtained from your
sales representative or from our home office.
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ACCUMULATION PERIOD
ISSUANCE OF A CONTRACT AND PURCHASE PAYMENTS
If you wish to purchase a contract, you must complete an application and make an
initial purchase payment of at least $50. The application is forwarded to us for
processing. Acceptance is subject to our underwriting and suitability rules and
procedures. We reserve the right to reject any application for any reason.
In certain circumstances, an employer remits payments to us on behalf of
employee-Annuitants. Where purchase payments are remitted to us through an
employer for multiple employee-Annuitants, we must be given accurate information
that specifically identifies the contracts and accounts that are to be credited
with the payments.
If we accept your application in the form received, we will credit the initial
purchase payment within two Valuation Dates after the later of (1) receipt of
the application or (2) receipt of the initial purchase payment at our home
office. If we cannot apply the initial purchase payment within five Valuation
Dates after receipt because the application or other issuing requirements are
incomplete, we will return the initial purchase payment unless you consent to
our retaining the initial purchase payment and applying it at the end of the
Valuation Period in which the necessary requirements are fulfilled. However,
even where you give your consent, if we cannot apply your initial purchase
payment within thirty Valuation Dates after we receive your payment because the
application or issuing instructions remain incomplete, we will return your
initial purchase payment to you.
The date that we apply the initial purchase payment to the purchase of the
contract is the contract date. The contract date is the date used to determine
contract years, regardless of when we deliver the contract. Our crediting of
investment experience in the Separate Account, or a fixed rate of return in the
fixed account, begins as of the contract date, even if that date is delayed due
to an incomplete application.
We will accept additional purchase payments at any time after the contract date
and prior to the annuity commencement date, as long as the Annuitant is living.
You must transmit purchase payments (together with any required information
identifying the proper contracts and accounts to be credited with purchase
payments) to our home office. We apply additional purchase payments to the
contract, and add to the contract value, at the end of the Valuation Period in
which we receive the payments.
Each additional purchase payment must be at least $50. However, under contracts
issued in connection with a benefit plan covering employees, it is sufficient
that all purchase payments under each contract, at all times, average $50. We
will not accept a purchase payment if it is less than $25. Moreover, we reserve
the right to raise this minimum purchase payment to a maximum amount of $100. In
addition, the total of all purchase payments, for all contracts, having the same
owner or annuitant may not exceed $1 million (not more than $500,000 allocated
to the fixed account) without our prior approval. We reserve the right to modify
this limitation at any time.
You may make purchase payments in excess of the initial minimum by monthly draft
against a bank account if you have completed and returned to us a special
authorization form. You may obtain the form from your sales representative or
from our home office. We can also arrange for you to make purchase payments by
wire transfer, payroll deduction, military allotment, direct deposit and
billing. Purchase payments by check should be made payable to First Fortis Life
Insurance Company.
We may cancel any contract with a contract value of less than $1,000. However,
under our current administrative procedures, if a contract's value is at least
$500 by the end of the first contract year, we will not cancel the contract
during the first two contract years. We will provide the contract owner with 90
days' written notice so that additional purchase payments may be made in order
to raise the contract value above the applicable minimum. Otherwise, we may
cancel the contract as of the end of the Valuation Period which includes the
next anniversary of the contract date. If we do cancel the contract, we will pay
the contract owner the full contract value. In addition, as long as the contract
value remains above $1,000, we will not require additional purchase payments.
CONTRACT VALUE
Contract value is the total of any Separate Account value in all the subaccounts
of the Separate Account, plus any fixed account value. For a discussion of how
fixed account value is calculated, see "The Fixed Account."
The contract does not guarantee a minimum Separate Account value. The Separate
Account value will reflect the investment experience of the chosen subaccounts
of the Separate Account, all purchase payments made, any partial surrenders, and
all charges assessed in connection with the contract. Therefore, the Separate
Account value changes from Valuation Period to Valuation Period. You bear the
entire investment risk for the contract value that you allocate to the Separate
Account.
Determination of Separate Account Value. A contract's Separate Account value is
based on Accumulation Unit values that we determined on each Valuation Date. The
value of an Accumulation Unit for a subaccount on any Valuation Date is equal to
the previous value of that subaccount's Accumulation Unit multiplied by that
subaccount's net investment factor (discussed directly below) for the Valuation
Period ending on that Valuation Date. Purchase payments applied to a given
subaccount will be used to purchase Accumulation Units at the unit value of that
subaccount next determined after receipt of a purchase payment. See "Allocation
of Purchase Payments and Contract Value-Allocation of Purchase Payments."
At the end of any Valuation Period, a contract's Separate Account value in a
subaccount is equal to:
- the number of Accumulation Units in the subaccount; times
- the value of one Accumulation Unit for that subaccount
The number of Accumulation Units in each subaccount is equal to:
- the initial Accumulation Units purchased on the contract date; plus
- accumulation Units purchased at the time that additional purchase
payments are allocated to the subaccount; plus
- accumulation Units purchased through transfers from another subaccount or
from the fixed account; less
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- accumulation Units redeemed to pay for the portion of any partial
surrenders allocated to the subaccount; less
- accumulation Units redeemed as part of a transfer to another subaccount
or to the fixed account; less
- accumulation Units redeemed to pay charges under the contract.
Net Investment Factor. The net investment factor for a subaccount is determined
by dividing (1) the net asset value per share of the portfolio shares held by
the subaccount, determined at the end of the current Valuation Period, plus the
per share amount of any dividend or capital gains distribution made with respect
to the portfolio shares held by the subaccount during the current Valuation
Period, minus a per share charge for the increase, plus a per share credit for
the decrease, in any income taxes assessed which we determine to have resulted
from the investment operations of the subaccount or any other taxes which are
attributable to the contract, by (2) the net asset value per share of the
portfolio shares held in the subaccount as determined at the end of the previous
Valuation Period, and subtracting from that result a factor representing the
mortality risk, expense risk and administrative expense charge.
A subaccount's net investment factor for a Valuation Period is an index number
that reflects certain charges to a contract and the investment performance of
the subaccount during the Valuation Period. If the net investment factor is
greater than one, the subaccount's Accumulation Unit value has increased. If the
net investment factor is less than one, the subaccount's Accumulation Unit value
has decreased.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Allocation of Purchase Payments. In your application for a contract, you may
allocate purchase payments, or portions of payments to the:
- available subaccounts of the Separate Account, or
- to the fixed account, or
- both
Percentages must be in whole numbers and the total allocation must equal 100%.
The percentage allocations for future purchase payments may be changed, without
charge, at any time by sending a written request to First Fortis' home office.
Changes in the allocation of future purchase payments will be effective on the
date we receive your written request.
Transfers. You may transfer contract value:
- from one available subaccount to another subaccount, or
- into the fixed account.
You may request transfers by either (1) a written request sent to our home
office, or by (2) a telephone transfer as described below. Currently, we do not
charge for any transfer.
All or part of the contract value in one or more subaccounts of the Separate
Account may be transferred at one time. We may permit a continuing request for
transfers automatically and on a periodic basis. We prohibit transfers into the
fixed account within six months of a transfer out of the fixed account. In
addition, we restrict transfers of contract value from the fixed account in both
amount and timing. See "Fixed Account--Fixed Account Transfers, Total and
Partial Surrenders." Where you make all your transfer requests at the same time,
as part of one request, we will count all transfers between and among the
subaccounts of the Separate Account and the fixed account as one transfer. We
will execute the transfers, and determine all values in connection with the
transfers, at the end of the Valuation Period in which we receive the transfer
request.
Certain restrictions on very substantial investments in any one subaccount are
set forth under "Limitations on Allocations" in the Statement of Additional
Information.
TOTAL AND PARTIAL SURRENDERS
Total Surrenders. You may surrender all of the cash surrender value at any time
during the life of the Annuitant and prior to the annuity commencement date. If
you choose to make a total surrender, you must do so by written request sent to
our home office. We reserve the right to require that the contract be returned
to us prior to making payment, although this will not affect our determination
of the amount of the cash surrender value. Cash surrender value is:
- the contract value at the end of the Valuation Period during which we
receive the written request for total surrender at our home office, less
- any applicable surrender charge, and less
- any applicable administrative charge.
For a discussion of these charges and the circumstances under which they apply,
see "Annual Administrative Charge" and "Surrender Charge."
We must receive written consent of all collateral assignees and irrevocable
beneficiaries prior to any total surrender. We will generally pay surrenders
from the Separate Account within seven days of the date of receipt by our home
office of the written request. However, we may postpone payments in certain
circumstances. See "Postponement of Payment."
Since the contract owner assumes the investment risk with respect to amounts
allocated to the Separate Account, and because certain surrenders are subject to
a surrender charge, the amount we pay upon total surrender of the cash surrender
value (taking into account any prior partial surrenders) may be more or less
than the total purchase payments you made. After a surrender of the cash
surrender value or at any time the contract value is zero, all rights of the
contract owner, Annuitant, and any beneficiary, will terminate.
Partial Surrenders. At any time during the life of the Annuitant and prior to
the commencement date, you may surrender a portion of the fixed account and/or
the Separate Account. You must request partial surrender by written request sent
to First Fortis' home office. The minimum partial surrender amount is $500,
including any surrender charge. We will surrender the entire cash surrender
value under the contract if the total contract value in both the Separate
Account and fixed account would be less than $1,000 after the partial surrender.
However, under our current administrative procedures, we will honor a surrender
request during the first two contract years without regard to the remaining
contract value.
You should specify the subaccounts of the Separate Account or the fixed account
that you wish to partially surrender. If you do
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not specify, we take the partial surrender from the subaccounts and the fixed
account on a pro rata basis.
We will surrender Accumulation Units from the Separate Account and/or dollar
amounts from the fixed account so that the total amount of the partial surrender
equals the dollar amount of the partial surrender request. We will reduce the
partial surrender by the amount of any applicable surrender charge. The partial
surrender will be effective at the end of the Valuation Period in which we
receive the written request for partial surrender at our home office. We will
generally make payments within seven days of the effective date of such request,
although certain delays are permitted. See "Postponement of Payment."
The Internal Revenue Code provides that a penalty tax will be imposed on certain
premature surrenders. For a discussion of this and other tax implications of
total and partial surrenders, including withholding requirements, see "Federal
Tax Matters." Also, under tax deferred annuity contracts pursuant to Section
403(b) of the Internal Revenue Code, no distributions of voluntary salary
reduction amounts will be permitted prior to one of the following events:
attainment of age 59 1/2 by the employee or the employee's separation from
service, death, disability or hardship. (Hardship distributions will be limited
to the lesser of the amount of the hardship or the amount of salary reduction
contributions, exclusive of earnings thereon.) This restriction does not apply
to amounts transferred to another investment alternative permitted under a
Section 403(b) retirement arrangement or to amounts attributable to premium
payments received prior to January 1, 1989.
TELEPHONE TRANSACTIONS
You or your representative may make certain requests under the contract by
telephone if we have a written telephone authorization on file. These include
requests for (1) transfers, (2) withdrawals, and (3) changes in purchase payment
allocation instructions, dollar-cost averaging, portfolio rebalancing programs
and systematic withdrawals. Our home office will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures may include, among others, (1) requiring some form of personal
identification such as your address and social security number prior to acting
upon instructions received by telephone, (2) providing written confirmation of
such transactions, and/or (3) tape recording of telephone instructions. Your
request for telephone transactions authorizes us to record telephone calls. We
may be liable for any losses due to unauthorized or fraudulent instructions if
we do not employ reasonable procedures. If we do employ reasonable procedures,
we will not be liable for any losses due to unauthorized or fraudulent
instructions. We reserve the right to place limits, including dollar limits, on
telephone transactions.
BENEFIT PAYABLE ON DEATH OF ANNUITANT OR CONTRACT OWNER
If the owner or Annuitant dies prior to the annuity commencement date, we will
pay a death benefit to the beneficiary. If more than one Annuitant has been
named, we will pay the death benefit payable upon the death of an Annuitant only
upon the death of the last survivor of the persons so named. The death benefit
will equal the greatest of (1), (2), or (3) as follows:
(1) the sum of all purchase payments made, less all prior surrenders (other than
any automatic surrenders made to pay the annual administrative charge) and
previously-imposed surrender charges,
(2) the contract value as of the date used for valuing the death benefit, or
(3) the contract value (less the amount of any subsequent surrenders and
surrender charges) as of the contract's Five Year Anniversary immediately
preceding the earlier of (a) the date of death of either the contract owner
or the Annuitant, or (b) the date either first reaches his or her 75th
birthday.
See Appendix A for sample death benefit calculations.
The death benefit may be reduced by premium taxes where such taxes were imposed
upon receipt of purchase payments and were paid by us in behalf of the contract
owner. For further information, see "Charges and Deductions--Premium Taxes."
The value of the death benefit is determined as of the end of the Valuation
Period in which we receive, at our home office, proof of death and the written
request as to the manner of payment. Upon receipt of these items, the death
benefit generally will be paid within seven days. Under certain circumstances,
payment of the death benefit may be postponed. See "Postponement of Payment." If
we do not receive a written request for a settlement method, we will pay the
death benefit in a single sum, based on values determined at that time.
The beneficiary may (1) receive a single sum payment, which terminates the
contract, or (2) select an annuity option. If the beneficiary selects an annuity
option, he or she will have all the rights and privileges of an Annuitant under
the contract. If the beneficiary desires an annuity option, the election should
be made within 60 days of the date the death benefit becomes payable. Failure to
make a timely election can result in unfavorable tax consequences. For further
information, see "Federal Tax Matters."
We accept any of the following as proof of death: (1) a copy of a certified
death certificate, (2) a copy of a certified decree of a court of competent
jurisdiction as to the finding of death, (3) a written statement by a medical
doctor who attended the deceased at the time of death.
The Internal Revenue Code requires that a Non-Qualified Contract contain certain
provisions about an owner's death. We discuss these provisions below under
"Federal Tax Matters--Required Distributions for Non-Qualified Contracts." It is
imperative that written notice of the death of the contract owner be promptly
transmitted to us at our home office, so that we can make arrangements for
distribution of the entire interest in the contract to the beneficiary in a
manner that satisfies the Internal Revenue Code requirements. Failure to satisfy
these requirements may result in the contract not being treated as an annuity
contract for federal income tax purposes with possible adverse tax consequences.
THE ANNUITY PERIOD
ANNUITY COMMENCEMENT DATE
You may not specify an annuity commencement date in your application that is
later than the Annuitant's 90th birthday. The annuity commencement date marks
the beginning of the period during which an Annuitant receives annuity payments
under the contract. The annuity commencement date must be at least two
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years after the contract date. However, we may allow an earlier annuity
commencement date associated with certain annuitizations where the contract is
purchased in conjunction with the purchase of a life insurance policy issued by
us, if it fulfills certain other minimum guidelines established by us, and the
annuity payments are designated to be applied to the payment of the premiums on
such life insurance policy.
The Internal Revenue Code may impose penalty taxes on amounts distributed either
too soon or too late depending on the type of retirement arrangement involved.
See "Federal Tax Matters." You should consider this carefully in selecting or
changing an annuity commencement date.
You must submit a written request to us in order to advance or defer the annuity
commencement date. In addition, you must submit a written request during the
Annuitant's lifetime. We must receive the request at our home office at least 30
days before the then-scheduled annuity commencement date. The new annuity
commencement date must also be at least 30 days after we receive the written
request. You have no right to make any total or partial surrender during the
Annuity Period.
COMMENCEMENT OF ANNUITY PAYMENTS
We may pay the entire contract value, rather than apply the amount to an annuity
option, if the contract value at the end of the Valuation Period that contains
the annuity commencement date is less than $2,000. We would make the payment in
a single sum to the Annuitant or other properly designated payee and cancel the
contract. We would not impose any charge other than the premium tax charge.
Otherwise, we will apply (1) the fixed account value to provide a Fixed Annuity
Option and (2) the Separate Account value in any subaccount to provide a
Variable Annuity Option using the same subaccount, unless you have notified us
by written request to apply the fixed account value and Separate Account value
in different proportions. We must receive written request at our home office at
least 30 days before the annuity commencement date.
We will make annuity payments under a Fixed or Variable Annuity Option on a
monthly basis to the Annuitant or other properly-designated payee, unless we
agree to a different payment schedule. If you name more than one person as an
Annuitant, you may elect to name one of such persons to be the sole Annuitant as
of the annuity commencement date. We reserve the right to change the frequency
of any annuity payment so that each payment will be at least $50.
The amount of each annuity payment will depend on (1) the amount of contract
value applied to an annuity option, (2) the form of annuity selected, and (3)
the age of the Annuitant. For information concerning the relationship between
the Annuitant's sex and the amount of annuity payments, including special
requirements in connection with employee benefit plans, see "Calculation of
Annuity Payments" in the Statement of Additional Information. The Statement of
Additional Information also contains detailed information about how the amount
of each annuity payment is computed.
The dollar amount of any fixed annuity payments is specified during the entire
period of annuity payments according to the provisions of the annuity option
selected.
The dollar amount of variable annuity payments varies during the annuity period
based on changes in Annuity Unit values for the subaccounts that you choose to
use in connection with your payments.
RELATIONSHIP BETWEEN SUBACCOUNT INVESTMENT PERFORMANCE AND AMOUNT OF VARIABLE
ANNUITY PAYMENTS
The amount of an annuity payment depends on the average effective net investment
return of a subaccount during the period since the preceding payment as follows:
- if the return is higher than 4% annually, the Annuity Unit value will
increase, and the second payment will be higher than the first; and
- if the return is lower than 4% annually, the Annuity Unit value will
decrease, and the second payment will be lower than the first.
"Net investment return," for this purpose, refers to the subaccount's overall
investment performance, after deduction of the mortality and expense risk and
administrative expense charges, which are assessed at an annual rate of 1.35%.
We guarantee that the amount of each variable annuity payment after the first
payment will not be affected by variations in our mortality experience or our
expenses, except to the extent that we reserve the right to impose the $30
annual administrative expense charge during the Annuity Period just as we do
during the Accumulation Period.
Transfers. A person receiving annuity payments may make up to four transfers a
year among subaccounts or from subaccounts to the fixed account. The current
procedures for these transfers are the same as we describe above under
"Allocation of Purchase Payments and Contract Value Transfers." We do not permit
transfers out of the fixed account during the Annuity Period.
ANNUITY OPTIONS
You may select an annuity option or change a previous selection by written
request. We must receive your request by at least 30 days before the annuity
commencement date. You may select one annuity form, although payments under that
form may be on a combination fixed and variable basis. If no annuity form
selection is in effect on the annuity commencement date, we usually
automatically apply OPTION B (described below), with payments guaranteed for ten
years. However, federal pension law may require that we make default payments
under certain retirement plans, pursuant to plan provisions and/or federal law.
Tax laws and regulations may impose further restrictions to assure that the
primary purpose of the plan is distribution of the accumulated funds to the
employee.
Your contract offers the following options for fixed and variable annuity
payments. Under each of the options, we make payments as of the first Valuation
Date of each monthly period, starting with the Annuity Commencement Date.
Option A, Life Annuity. We make no payments after the annuitant dies. It is
possible for the annuitant to receive only one payment under this option if the
annuitant dies before the second payment is due.
Option B, Life Annuity with Payments Guaranteed for 10 Years or 20 Years. We
continue payments as long as the annuitant
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lives. If the annuitant dies before we have made all of the guaranteed payments,
we continue installments of the guaranteed payments to the beneficiary.
Option C, Joint and Full Survivor Annuity. We continue payments as long as
either the annuitant or the joint annuitant is alive. We stop payments when both
the annuitant and the joint annuitant have died. It is possible for the payee or
payees to receive only one payment under this option if both annuitants die
before the second payment is due.
Option D, Joint and One-Half Contingent Survivor Annuity. We continue payments
as long as either the annuitant or the joint annuitant is alive. If the
annuitant dies first, we continue payments to the joint annuitant at one-half
the original amount. If the joint annuitant dies first, we continue payments to
the annuitant at the original full amount. We stop payments when both the
annuitant and the joint annuitant have died. It is possible for the payee or
payees to receive only one payment under this option if both annuitants die
before the second payment is due.
We also have other annuity options available. You can get information about them
from your sales representative or by calling or writing to our home office.
DEATH OF ANNUITANT OR OTHER PAYEE
Under most annuity forms offered by us, the amounts, if any, payable on the
death of the annuitant during the Annuity Period are the continuation of annuity
payments for any remaining guarantee period or for the life of any joint
annuitant. In all cases, the person entitled to receive payments also receives
any rights and privileges under the annuity form in effect.
Additional rules applicable to such distributions under Non-Qualified Contracts
are described under "Federal Tax Matters--Required Distributions for
Non-Qualified Contracts". Though the rules there described do not apply to
contracts issued in connection with qualified plans, similar rules apply to the
plans themselves.
CHARGES AND DEDUCTIONS
PREMIUM TAXES
We deduct state premium taxes as follows:
- when imposed on purchase payments, we pay the amount on your behalf and
deduct the amount from your contract value upon (1) our payment of
surrender proceeds or death benefit or (2) annuitization of a contract;
or
- when imposed at the time annuity payments begin, we deduct the amount
from your contract value at that time
Applicable premium tax rates depend upon your place of residence. Rates can
change by legislation, administrative interpretations or judicial acts.
ANNUAL ADMINISTRATIVE CHARGE
A $30 annual administrative charge is deducted from the contract value on each
anniversary of the contract date. This charge helps to cover administrative
costs:
- incurred in issuing contracts,
- establishing and maintaining records relating to contracts,
- making regulatory filings and furnishing confirmation notices,
- voting materials and other communications,
- providing computer, actuarial and accounting services, and
- processing contract transactions.
We will initially waive this charge during the Annuity Period, although we
reserve the right to reinstitute it at any time. In addition, we will waive this
charge during the Accumulation Period if the contract value is $25,000 or more
at the end of the contract year.
We will deduct the annual administrative charge by redeeming Accumulation Units
from each subaccount of the Separate Account and by redeeming Accumulation Units
from the fixed account. Contract value is the total value of the Separate
Account and the fixed account. We will redeem Accumulation Units in proportion
to the allocation of contract value among both:
- the subaccounts of the Separate Account, and
- the fixed account
If you totally surrender the contract and the contract value is less than
$25,000, we will deduct the full annual administration charge at the time of
surrender.
CHARGES AGAINST THE SEPARATE ACCOUNT
We will assess certain charges against the Separate Account. These charges will
be assessed as a percentage of the net assets of the Separate Account. These
charges compensate us for contract risks and for administrative expenses.
Mortality and Expense Risk Charge. We assess each subaccount of the Separate
Account with a daily charge for mortality and expense risk. This charge is a
nominal annual rate of 1.25% of the average daily net assets of the Separate
Account. It consists of approximately .8% for mortality risk and approximately
.45% for expense risk. We guarantee not to increase this charge for the duration
of the contract. We assess this charge daily when we determine the value of an
Accumulation Unit. This charge is assessed during both the Accumulation Period
and the Annuity Period.
The mortality risk we bear arises from our obligation to make annuity payments
(determined in accordance with the annuity tables and other provisions contained
in the contract) for the full life of all Annuitants regardless of how long all
Annuitants or any individual Annuitant might live. This assures that neither an
Annuitant's own longevity, nor an improvement in life expectancy generally, will
have an adverse effect on the annuity payments the Annuitant will receive under
the contract. This relieves the Annuitant from the risk that he or she will
outlive the funds accumulated for retirement.
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In addition, we bear a mortality risk in that we guarantee to pay a death
benefit in a single sum (which may also be taken in the form of an annuity
option) upon the death of an Annuitant or contract owner prior to the annuity
commencement date. We do not impose a surrender charge upon payment of a death
benefit. This places a further mortality risk on us.
The expense risk we assume is that actual expenses incurred in connection with
issuing and administering the contracts will exceed the limits on administrative
charges set in the contracts.
We bear the loss if the administrative charges and the mortality and expense
risk charge are insufficient to cover the expenses and costs assumed.
Conversely, we profit if the amount deducted proves more than sufficient.
Administrative Expense Charge. We assess each subaccount of the Separate Account
with a daily charge at a nominal annual rate of .10% of the average daily net
assets of the subaccount. We assess this charge during both the Accumulation
Period and the Annuity Period. The daily administrative expense charge helps
cover administrative expenses such as those described above under "Annual
Administrative Charge." The daily administrative expense charge, like the annual
administrative charge, is designed to defray expenses incurred. There is no
necessary relationship between the amount of administrative charges assessed on
a given contract and the amount of expenses actually incurred for that contract.
Tax Charge. Currently, we do not impose a charge for taxes payable by us in
connection with this contract. However, we do impose a charge for applicable
premium taxes. We reserve the right to impose a charge for any other taxes that
may become payable by us in the future for the contracts or the Separate
Account.
The annual administrative charge and charges against the Separate Account
described above are for the purposes described. We may receive a profit as a
result of these charges.
SURRENDER CHARGE
We do not deduct a sales charge from purchase payments. We deduct surrender
charges on certain total or partial surrenders. We use the revenue from
surrender charges to partially pay our expenses in the sale of the contracts,
including (1) commissions (2) promotional, distribution, and marketing expenses,
and (3) costs of printing and distribution of prospectuses and sales material.
Free Surrenders. You can withdraw the following amounts from the contract
without a surrender charge:
- Any purchase payments that we received more than five years before the
surrender date and that you have not previously surrendered;
- In any contract year, up to 10% of the purchase payments that we received
less than five years before the surrender date (whether or not you have
previously surrendered the purchase payments).
Surrender charges do not apply to contract earnings. Therefore, we deem purchase
payments not subject to a surrender charge as withdrawn first. If all purchase
payments have been withdrawn, the remaining earnings can be withdrawn without a
surrender charge. We assume that all purchase payments are withdrawn before
earnings are withdrawn. However, for federal income tax purposes, certain
partial surrenders will be deemed to come first from earnings. See "Federal Tax
Matters."
We do not impose a surrender charge on (1) annuitization or (2) payment of a
single sum because the contract value is less than the minimum required to
provide an annuity on the annuity commencement date or (3) payment of any death
benefit.
In addition, we have an administrative policy to waive surrender charges for
full surrenders of contracts that have been in force for at least ten years if
the amount then subject to the surrender charge is less than 25% of the contract
value. We have offered these contracts since 1994. Therefore, we have made no
waivers. We reserve the right to change or terminate this practice at any time,
both for new and for previously issued contracts.
Amount of Surrender Charge. We only apply surrender charges if the amount being
withdrawn exceeds the sum of the amounts listed above under Free Surrenders. The
surrender charge is 5% of the purchase payments withdrawn which we received less
than five years before the surrender date.
We anticipate the surrender charge will not be sufficient to cover our
distribution expenses. To the extent that the surrender charge is insufficient,
we will pay such costs from our general account assets. Those assets will
include any profit that we derive from the mortality and expense risk charge.
MISCELLANEOUS
The Separate Account invests in shares of the portfolios. Therefore, the net
assets of the Separate Account will reflect the investment advisory fees and
certain other expenses incurred by the portfolios and described in their
prospectuses.
REDUCTION OF CHARGES
We will not impose a surrender charge under any contract owned by First Fortis
and the following persons associated with First Fortis, if at the contract issue
date they are (1) officers and directors, (2) employees, (3) spouses of any such
persons or any of such persons' children.
FIXED ACCOUNT
You may allocate purchase payments and transfer contract value to the fixed
account. In this case, purchase payments and transfers of contract value are
held in our general account.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933, and the fixed account
has not been registered as an investment company under the Investment Company
Act of 1940. Accordingly, neither the fixed account, nor any interests therein,
are subject to the provisions of these acts. As a result, the staff of the
Securities and Exchange Commission has not reviewed the disclosures in this
prospectus relating to the fixed account.
Disclosures regarding the fixed account may, however, be subject to certain
generally applicable provisions of federal securities law relating to the
accuracy and completeness of statements made in prospectuses. This prospectus is
generally intended to serve as a disclosure document only for the aspects of the
contract involving the Separate Account and contains only selected information
regarding the fixed account. More information
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regarding the fixed account may be obtained from our home office or from your
sales representative.
GENERAL DESCRIPTION
Our obligations with respect to the fixed account are supported by our general
account. Subject to applicable law, we have sole discretion over the investment
of assets in our general account.
First Fortis guarantees that contract value in the fixed account will accrue
interest at an effective annual rate of at least 4%, independent of the actual
investment experience of the general account. We may, at our sole discretion,
credit higher rates of interest, although we are not obligated to credit
interest in excess of the guaranteed annual rate of 4%. Any interest rate in
excess of 4% per year with respect to any amount in the fixed account pursuant
to a contract will not be modified more than once each calendar year. Any higher
rate of interest will be quoted at an effective annual rate. The rate of any
excess interest initially or subsequently credited to any amount can vary. This
will depend on when the amount was originally allocated to the fixed account.
Once credited, excess interest will be guaranteed and will be added to the
contract value in the fixed account (from which deductions for fees and charges
may be made).
Charges under the contract are the same as those applied to the Separate
Account. However, the 1.35% annual charge for mortality and expense risk and for
administrative expense is not imposed on amounts of contract value in the fixed
account.
FIXED ACCOUNT VALUE
The contract's fixed account value on any Valuation Date is the sum of:
- the purchase payments allocated to the fixed account, plus
- any transfers from the Separate Account, plus
- any interest credited to the fixed account, less
- any surrenders, surrender charges or annual administrative charges
allocated either to the fixed account, or to transfers to the Separate
Account.
FIXED ACCOUNT TRANSFERS, TOTAL AND PARTIAL SURRENDERS
With respect to total and partial transfers, amounts in the fixed account are
generally subject to the same rights and limitations as amounts allocated to the
subaccounts of the Separate Account. Therefore, with respect to total and
partial surrenders, amounts in the fixed account are also subject to the same
charges as amounts allocated to the subaccounts of the Separate Account. See
"Total and Partial Surrenders."
Transfers out of the fixed account have special limitations. Prior to the
annuity commencement date, you may transfer all or part of the contract value
from the fixed account to the Separate Account, provided that (1) no more than
one transfer is made each contract year, (2) no more than 50% of the fixed
account value is transferred at any time (unless the balance in the fixed
account after the transfer would be less than $1,000, in which case the entire
balance may be transferred), and (3) at least $500 is transferred at any one
time (or, if less, the entire amount in the fixed account). However, we may
permit a continuing request for automatic transfers, on a periodic basis, of
lesser specified amounts. We reserve the right to discontinue or modify any such
arrangements at our discretion.
No transfers from the fixed account may be made after the annuity commencement
date.
GENERAL PROVISIONS
THE CONTRACT
The entire contract includes any application, amendment, rider, or endorsement
and revised contract pages. Only an officer of First Fortis can agree to change
or waive any provision of a contract. Any change or waiver must be in writing
and signed by one of these representatives of First Fortis.
The contracts are non-participating and do not share in dividends or earnings of
First Fortis.
POSTPONEMENT OF PAYMENTS
With respect to amounts in the subaccounts of the Separate Account, payment of
any amount due upon a total or partial surrender, death or under an annuity
option will ordinarily be made within seven days after all documents required
for such payment are received by us at our home office.
However, we may defer the determination, application, or payment of any death
benefit, partial or total surrender or annuity payment, to the extent dependent
on Accumulation or Annuity Unit values as follows: (1) for any period during
which the New York Stock Exchange is closed (other than customary weekend and
holiday closings) or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, (2) for any period during
which any emergency exists as a result of which it is not reasonably practicable
for us to determine the investment experience for the contract, or (3) for such
other periods as the Securities and Exchange Commission may by order permit for
the protection of investors.
Additionally, we may defer for up to 15 days the payment of any amount
attributable to a purchase payment made by check to allow the check reasonable
time to clear. We may also defer payment of surrender proceeds payable out of
the fixed account for a period of up to 6 months.
MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the Annuitant's age or sex was misstated, we pay the amount that the purchase
payments paid would have purchased at the correct age and sex. If we make any
overpayment because of incorrect information about age, or sex, or any other
miscalculation, we deduct the overpayment from the next payment due. We add
underpayments to the next payment. We will credit or charge the amount of any
adjustment with interest at the rate of 4% annually.
ASSIGNMENT AND OWNERSHIP RIGHTS
Owners and payees may assign their rights and interests under a Qualified
Contract only in certain narrow circumstances referred to in the contract.
Contract owners and other payees may assign their rights and interests under
Non-Qualified Contracts, including their ownership rights.
We do not take responsibility for the validity of any assignment. Owners and
payees must make a change in ownership rights in
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writing and send it to our home office. The change will be effective on the date
made, although we are not bound by a change until the date we record it.
The rights under a contract are subject to any assignment of record at our home
office. An assignment or pledge of a contract may have adverse tax consequences.
See below under "Federal Tax Matters."
BENEFICIARY
You may name or change a beneficiary or a contingent beneficiary before the
annuity commencement date. You must send a written request of the change to
First Fortis. Certain retirement programs may require spousal consent to name or
change a beneficiary. In addition, applicable tax laws and regulations may limit
the right to name a beneficiary other than the spouse. We are not responsible
for the validity of any change. A change will take effect as of the date it is
signed but will not affect any payment we make or action we take before
receiving the written request. We also need the consent of any irrevocably named
person before making a requested change.
Upon the death of a contract owner or Annuitant prior to the annuity
commencement date, the beneficiary will be deemed to be as follows:
- if there is a surviving contract owner, the surviving contract owner will
be the beneficiary (this overrides any other beneficiary designation).
- if there is no surviving contract owner, the beneficiary will be the
beneficiary designated by the contract owner.
- if there is no surviving contract owner and no surviving beneficiary who
has been designated by the contract owner, the estate of the last
surviving contract owner will be the beneficiary.
REPORTS
We will mail to the contract owner, at the last known address of record, any
report required by applicable law or regulation. You should therefore give us
prompt written notice of any address change. Each contract owner will also be
sent an annual and a semi-annual report for Fortis Series and a list of the
portfolio securities held in each portfolio of Fortis Series. All reports will
be mailed to the person receiving payments during the Annuity Period, rather
than to the contract owner.
RIGHTS RESERVED BY FIRST FORTIS
We reserve the right to make certain changes if, in our judgement, they would
best serve the interests of contract owners and Annuitants or would be
appropriate in carrying out the purposes of the contract. We will make any
change only as permitted by applicable laws. We will obtain your approval of the
changes and approval from any appropriate regulatory authority if required by
law. Examples of the changes we may make include:
- to operate the Separate Account in any form permitted under the
Investment Company Act of 1940 or in any other form permitted by law.
- to transfer any assets in any subaccount to another subaccount, or to one
or more separate accounts, or to the fixed account; or to add, combine or
remove subaccounts in the Separate Account.
- to substitute, for the portfolio shares held in any subaccount, the
shares of another portfolio of Fortis Series or the shares of another
investment company or any other investment permitted by law.
- to make any changes required by the Internal Revenue Code or by any other
applicable law in order to continue treatment of the contract as an
annuity.
- to change the time or times of day at which a Valuation Date is deemed to
have ended.
- to make any other necessary technical changes in the contract in order to
conform with any action the above provisions permit us to take, including
to change the way we assess charges, but without increasing, as to any
then outstanding contract, the aggregate amount of the types of charges
that we have guaranteed.
DISTRIBUTION
Fortis Investors, Inc. ("Fortis Investors") is the principal underwriter of the
contracts. The contracts will be sold by individuals who are licensed by state
insurance authorities to sell the contracts of First Fortis and (1) are
registered representatives of Fortis Investors or (2) registered representatives
of other broker-dealer firms or (3) representatives of other firms that are
exempt from broker-dealer regulation. Fortis Investors and any other
broker-dealer firms are (1) registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as broker-dealers and (2)
members of the National Association of Securities Dealers, Inc.
Fortis Investors will pay an allowance to its registered representatives and
selling brokers in varying amounts. Fortis Investors does not expect the
allowances under normal circumstances to exceed 6.25% of purchase payments plus
a servicing fee of .25% of contract value per year, starting in the first
contract year.
We and Fortis Investors may, under certain flexible compensation arrangements,
pay lesser or greater selling allowances and larger or smaller service fees to
its registered representatives and other broker dealer firms than as set forth
above. However, in such case, such flexible compensation arrangements will have
actuarial present values that are approximately equivalent to the amounts of the
selling allowances set forth above. Additionally, registered representatives,
broker-dealer firms and exempt firms may qualify for additional compensation
based upon meeting certain production standards. Fortis Investors may
"chargeback" commissions paid to others if the contract upon which the
commission was paid is surrendered or canceled within certain specified time
periods.
First Fortis or Fortis Investors may also provide additional compensation to
broker-dealers in connection with sales of contracts. Compensation may include
financial assistance to broker-dealers in connection with (1) conferences, (2)
sales or training programs for their employees, (3) seminars for the public, (4)
advertising, (5) sales campaigns regarding contracts, and (6) other
broker-dealer sponsored programs or events. Compensation may also include trips
taken by invited sales representatives and their family members to locations
within or without the United States for business meetings or seminars. First
Fortis or
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Fortis Investors may pay travel expenses that arise from these trips.
Fortis Investors is an indirect subsidiary of Fortis (NL)N.V. and Fortis (B).
Therefore, Fortis Investors is under common control with First Fortis. Fortis
Investors' principal business address is 500 Bielenberg Drive, Woodbury,
Minnesota 55115 and its mailing address is P.O. Box 64284, St. Paul, MN 55164.
FEDERAL TAX MATTERS
The following description is a general summary of the tax rules, primarily
related to federal income taxes. These rules are based on laws, regulations, and
interpretations that are subject to change at any time. This summary is not
comprehensive. We do not intend it as tax advice. Federal estate and gift tax
considerations, as well as state and local taxes, may also be material. You
should consult a qualified tax adviser as to the tax implications of taking any
action under a contract or related retirement plan.
NON-QUALIFIED CONTRACTS
Section 72 of the Internal Revenue Code (the "Code") governs the taxation of
annuities in general. Neither you nor any other person may exclude or deduct
purchase payments under Non-Qualified Contracts from gross income. However, you
are not currently taxed, until receipt, on any increase in the accumulated value
of a Non-Qualified Contract that results from (1) the investment performance of
the Separate Account or (2) interest credited to the fixed account. Contract
owners who are not natural persons ARE taxed annually for any increase in the
contract value subject to certain exceptions. You may wish to discuss this with
your tax adviser.
The following discussion applies generally to contracts owned by natural
persons.
In general, surrenders or partial withdrawals under contracts are taxed as
ordinary income to the extent of the accumulated income or gain under the
contract. If you assign or pledge any part of the contract value, you pay on the
value so pledged or assigned to the same extent as a partial withdrawal.
With respect to annuity payment options, the tax consequences may vary depending
on the option elected under the contract. Until the "investment in the contract"
is recovered, generally only the portion of the annuity payment that represents
the amount by which the contract value exceeds the "investment in the contract"
will be taxed. In general, "investment in the contract" is the aggregate amount
of purchase payments made. After recovery of the "investment in the contract",
the full amount of any additional annuity payments is taxable.
For variable annuity payments in general, the taxable portion of each annuity
payment (prior to recovery of the "investment in the contract") is the amount of
the payment less the nontaxable portion. The nontaxable portion of each payment
is the "investment in the contract" divided by the total number of expected
annuity payments.
For fixed annuity payments in general, prior to recovery of the "investment in
the contract," there is no tax on the amount of each payment that bears the same
ratio to such payment that the "investment in the contract" bears to the total
expected return under the contract. The remainder of each annuity payment is
taxable. The taxable portion of a distribution (in the form of an annuity or a
single sum payment) is taxed as ordinary income.
For purposes of determining the amount of taxable income resulting from
distributions, all contracts and other annuity contracts we or our affiliates
issue to you within the same calendar year will be treated as if they were a
single contract.
You, or any other payee, will pay a 10% penalty on the taxable portion of a
"premature distribution". Generally, an amount is a "premature distribution"
unless the distribution is:
- made on or after you or another payee reach age 59 1/2, or is
- made to a beneficiary on or after your death, or is
- made upon your disability or that of another payee, or is
- part of a series of substantially equal annuity payments for your life or
life expectancy, or the life or life expectancy of you or your
beneficiary
Premature distributions may result, for example, from:
- an early annuity commencement date
- an early surrender or partial surrender of a contract
- an assignment of a contract
- the early death of an annuitant other than you or another person
receiving annuity payments under the contract
If you transfer ownership of a contract, or designate an Annuitant or a payee
other than yourself, you may have certain income or gift tax consequences that
are beyond the scope of this discussion. If you are contemplating any transfer
or assignment of a contract, you should contact a competent tax adviser.
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
In order that a Non-Qualified Contract be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires:
- if any person receiving annuity payments dies on or after the annuity
commencement date but prior to the time the entire interest in the
contract has been distributed, the remaining portion of such interest
will be distributed at least as rapidly as under the method of
distribution being used as of the date of the person's death; and
- if you die prior to the annuity commencement date, the entire interest in
the contract will be distributed:
- within five years after your death, or
- as annuity payments that will begin within one year of your death and
will be made over your designated beneficiary's life or over a period
not extending beyond the life expectancy of that beneficiary.
However, if the contract owner's designated beneficiary is the surviving spouse,
the surviving spouse may continue the contract as the new contract owner. Where
the contract owner or other person receiving payments is not a natural person,
the required distributions under Section 72(s) apply on the death of the primary
Annuitant.
The Internal Revenue Service has not issued regulations interpreting the
requirements of Section 72(s). However, it has issued
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proposed regulations interpreting similar requirements for qualified plans. We
intend to review and modify the contract if necessary to ensure that it complies
with the requirements of Section 72(s) when clarified by regulation or
otherwise.
Generally, the above requirements will be satisfied with a single sum payment
where the death occurs prior to the annuity commencement date. A single sum
payment will be subject to proof of the contract owner's death. The beneficiary,
however, may elect by written request to receive an annuity option instead of a
lump sum payment. However, if the election is not made within 60 days of the
date the single sum death benefit otherwise becomes payable, the IRS may
disregard the election for tax purposes and tax the beneficiary as if a single
sum payment had been made.
QUALIFIED CONTRACTS
The contract may be used with several types of tax-qualified plans. The tax
rules applicable to contract owners, Annuitants, and other payees vary according
to the type of plan and the terms and conditions of the plan itself. In general,
purchase payments made under a tax qualified plan on your behalf are excludible
from your gross income during the Accumulation Period. The portion, if any, of
any purchase payment that is not excluded from your gross income during the
Accumulation Period constitutes your "investment in the contract".
When annuity payments begin, you will receive back your "investment in the
contract," if any, as a tax-free return of capital. The Code provides which
portion of each payment is taxable and which portion is tax free. These rules
may vary depending on the type of tax qualified plan.
The contracts are available in connection with the following types of retirement
plans:
- Section 403(b) annuity plans for employees of certain tax-exempt
organizations and public education institutions;
- Section 401 or 403(a) qualified pension, profit-sharing or annuity plans;
- individual retirement annuities ("IRAs") under Section 408(b);
- simplified employee pension plans ("SEPs") under Section 408(k);
- SIMPLE IRA Plans under Section 408(p); and
- Section 457 unfunded deferred compensation plans of tax-exempt
organizations and private employer unfunded deferred compensation plans.
WITHHOLDING
Annuity payments and other amounts received under contracts are subject to
income tax withholding unless the recipient elects not to have taxes withheld.
The amounts withheld will vary among recipients depending on the tax status of
the individual and the type of payments from which taxes are withheld.
Despite the recipient's election, the Code may require withholding from certain
payments outside the United States. The Code may also require withholding from
certain distributions from certain types of qualified retirement plans unless
the proceeds are transferred directly from the qualified retirement plan to
another qualified retirement plan. Moreover, special "backup withholding" rules
may require that we disregard the recipient's election if the recipient fails to
supply us with a "TIN" or taxpayer identification number (social security number
for individuals), or if the Internal Revenue Service notifies us that the TIN
provided by the recipient is incorrect.
PORTFOLIO DIVERSIFICATION
The United States Treasury Department has adopted regulations under Section
817(h) of the Code that set forth diversification requirements for the
investments underlying the Non-Qualified Contracts. We believe that the
investments will satisfy these requirements. Failure to do so would result in
immediate taxation to you or another person of all income credited to Non-
Qualified Contracts. Also, current regulations do not provide guidance as to any
circumstances in which control over allocation of values among different
investment alternatives may cause you or another person to be treated as the
owners of Separate Account assets for tax purposes. We reserve the right to
amend the contracts in any way necessary to avoid any such result. The Treasury
Department has stated that it expects to establish standards in this regard
through regulations or rulings. Such standards may apply only prospectively,
although retroactive application is possible if the Treasury Department
considered such standards not to embody a new position.
CERTAIN EXCHANGES
Section 1035 of the Code provides generally that no gain or loss will be
recognized upon the exchange of a life insurance or annuity contract for an
annuity contract. Thus, a properly completed exchange pursuant to the special
annuity contract exchange form we provide for this purpose is not generally a
taxable event under the Code. Moreover, your investment in the contract will be
the same as your investment in the contract you exchanged out of. However, an
exchange from a Fortis Group Fund or other investment that is not a life
insurance or annuity contract may be a taxable event.
Various provisions of the tax laws may "grandfather" certain annuity contracts.
For example, certain annuity contracts issued before January 19, 1985 may not be
subject to the distribution rules of Code Section 72(s), and certain
distributions from contracts issued before the same date may not be subject to
the 10% penalty tax for premature distributions. In addition, if a contract
contained principal on August 13, 1982, that principal may generally be
withdrawn in a partial distribution before the withdrawal of any taxable gain in
the contract. These provisions may be lost if a grandfathered contract is
exchanged for a non-grandfathered contract.
Certain contract exchanges are subject to Code Section 1035. Where an exchange
is subject to this Code Section, certain grandfathered provisions may be
preserved. If your exchange is subject to Section 1035, we may be able to assist
you in preserving grandfathered provisions by "tracking" amounts accumulated
through past purchase payments. Payments made before or after the effective date
of the Tax Equity and Fiscal Responsibility Act of 1982 may have different tax
consequences. Therefore, you must provide us with an accurate history of your
past purchase payments.
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Because of the complexity of these matters, you should consult a qualified tax
adviser before making any exchange.
TAX LAW RESTRICTIONS AFFECTING SECTION 403(b) PLANS
Section 403(b)(11) of the Internal Revenue Code restricts the distribution under
Section 403(b) annuity contracts of:
(1) elective contributions made for years beginning after December 31, 1988;
(2) earnings on those contributions; and
(3) earnings on amounts held as of December 31, 1988.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, we may not distribute income attributable to elective
contributions which accrues after December 31, 1988.
VOTING PRIVILEGES
In accordance with our view of current applicable law, we will vote shares of
each of the portfolios attributable to a contract at regular and special
meetings of the shareholders of Fortis Series. We will vote those shares in
proportion to instructions we receive from the persons having the voting
interest in the contract as of the record date for the corresponding Fortis
Series shareholders meeting. Contract owners have the voting interest during the
Accumulation Period. Persons receiving annuity payments have the voting interest
during the Annuity Period, and beneficiaries have the voting interest after the
death of the Annuitant or contract owner. However, if the Investment Company Act
of 1940 or any rules thereunder should be amended, or if the present
interpretation thereof should change and as a result we determine that we are
permitted to vote shares of the portfolios in our own right, we may elect to do
so.
We determine the number of shares of a portfolio attributable to a contract as
follows:
- During the Accumulation Period, we divide the amount of contract value in
a subaccount by the net asset value of one share of the portfolio
corresponding to that subaccount. We make this calculation as of the
record date for the applicable portfolio.
- During the Annuity Period, or after the death of the Annuitant or owner,
we make a similar calculation. However, for subaccount value we use the
liability for future variable annuity payments allocable to that
subaccount as of the record date for the applicable portfolio. We
calculate the liability for future variable annuity payments on the basis
of the following on the record date:
- mortality assumptions,
- the assumed interest rate used in determining the number of Annuity
Units under the contract, and
- the applicable Annuity Unit value
During the Annuity Period, the number of votes attributable to a contract will
generally decrease since funds set aside to make the annuity payments will
decrease.
Under certain contracts, we will vote portfolio shares according to instructions
we receive from the contract owner. However, we adjust this policy where the
Annuitant or payee is not the contract owner. Under this circumstance, the
Annuitant or payee may instruct the contract owner who, in turn, relays this
instruction to us. We will vote those portfolio shares that we can attribute to
the purchase payments of the Annuitant or payee in accordance with the
instruction relayed to us. In addition, in certain circumstances such as an
employee benefit plan, we allow the Annuitant or payee to direct how we vote
additional shares beyond those that we can attribute to the purchase payments of
the Annuitant or payee. However, we do so only to the extent authorized by the
contract. We compute the number of shares that may be attributed to the
Annuitant of payee on a basis consistent with that for attributing portfolio
shares to contract owners, as described above.
Contract owners are to instruct First Fortis to vote in accordance with such
directions from Annuitants and payees. Furthermore, contract owners are to
instruct First Fortis to vote shares of any portfolio for which directions could
have been but were not received from Annuitants and other payees in the same
proportion as other shares in that portfolio attributable to the contract owner
which are to be voted in accordance with directions received from Annuitants and
other payees. The contract owner may instruct us as to the voting of any other
shares attributable to contracts as the contract owner may determine. The
Separate Account, Fortis Series, and First Fortis do not have any obligation to
determine whether or not voting directions are requested or received by a
contract owner or whether or not a contract owner has instructed First Fortis in
accordance with directions given by Annuitants and other payees.
We will vote shares for which we have not received timely instructions, and we
will vote shares that we can attribute to excess amounts we have accumulated in
the related subaccount. We will vote these shares in proportion to the voting
instructions which we receive for all contracts and other variable annuity
contracts participating in a portfolio. To the extent that we or any affiliated
company holds any shares of a portfolio, those shares will be voted in the same
proportion as instructions for that portfolio from all our policy owners holding
voting interests in that portfolio. Shares held by separate accounts other than
the Separate Account will in general be voted in accordance with instructions of
participants in such other separate accounts. This diminishes the relative
voting influence of the contracts.
Each person having a voting interest in a subaccount of the Separate Account
will receive proxy material, reports and other materials relating to the
appropriate portfolio. Under the procedures described above, these persons may
give instructions regarding:
- the election of the Board of Directors of the portfolios,
- ratification of the selection of a portfolio's independent auditors,
- the approval of the investment managers of a portfolio,
- changes in fundamental investment policies of a portfolio, and
- all other matters that are put to a vote of portfolio shareholders
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<PAGE> 21
STATE REGULATION
We are subject to regulation and supervision by the Insurance Department of the
State of New York, which periodically examines our affairs.
LEGAL MATTERS
David A. Peterson, Esquire, Vice President and Assistant General Counsel with
our legal department has passed on the legality of the contracts described in
this prospectus. Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have
advised First Fortis on certain federal securities law matters.
CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION
<TABLE>
<S> <C>
First Fortis...................................
Calculation of Annuity Payments................
Services.......................................
Safekeeping of Separate Account Assets.........
Principal Underwriter..........................
Limitation On Allocations......................
Change of Investment Adviser or Investment
Policy.......................................
Taxation Under Certain Retirement Plans........
Other Information..............................
Financial Statements...........................
APPENDIX A--Performance Information............
</TABLE>
20
<PAGE> 22
APPENDIX A--SAMPLE DEATH BENEFIT CALCULATIONS
(FOR CONTRACTS ISSUED ON AND AFTER MAY 1, 1997 WITH ENHANCED DEATH BENEFIT
RIDER)
<TABLE>
<CAPTION>
EXAMPLE 1 EXAMPLE 2
DATE OF DEATH IS THE 3RD CONTRACT ANNIVERSARY: --------- ---------
<S> <C> <C>
a. Purchase Payments Made Prior to Date of Death $20,000 $20,000
b. Contract Value on Date of Death $17,000 $25,000
Death Benefit is larger of a, and b $20,000 $25,000
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 3 EXAMPLE 4 EXAMPLE 5
DATE OF DEATH IS THE 8TH CONTRACT ANNIVERSARY: --------- --------- ---------
<S> <C> <C> <C>
a. Purchase Payments Made Prior to Date of Death $20,000 $20,000 $20,000
b. Contract Value on 5th contract Anniversary $15,000 $30,000 $30,000
c. Contract Value on Date of Death $17,000 $25,000 $35,000
Death Benefit is larger of a, b, and c $20,000 $30,000 $35,000
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 6 EXAMPLE 7 EXAMPLE 8
DATE OF DEATH IS THE 13TH CONTRACT ANNIVERSARY: --------- --------- ---------
<S> <C> <C> <C>
a. Purchase Payments Made Prior to Date of Death $20,000 $20,000 $20,000
b. Contract Value on 10th contract Anniversary $15,000 $40,000 $40,000
c. Contract Value on Date of Death $17,000 $30,000 $50,000
Death Benefit is larger of a, b, and c $20,000 $40,000 $50,000
</TABLE>
A-1
<PAGE> 23
APPENDIX B--EXPLANATION OF EXPENSE CALCULATIONS
The expense for a given year is calculated by multiplying the projected
beginning of the year policy value by the total expense rate. The total expense
rate is the sum of the variable account expense rate plus the total Series Fund
expense rate plus the annual administrative charge rate.
The policy values are projected by assuming a single payment of $1,000 grows at
an annual rate equal to 5% reduced by the total expense rate described above.
For example, the 3 year expense for the Growth Stock Series is calculated as
follows:
<TABLE>
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
Total Variable Account Annual Expenses 1.35%
----------------------------------------------------------------------------------
+ Total Series Fund Operating Expenses .66%
----------------------------------------------------------------------------------
+ Annual Administrative Charge Rate (See Below) .02%
----------------------------------------------------------------------------------
= Total Expense Rate 2.03%
----------------------------------------------------------------------------------
</TABLE>
The Annual Administrative Charge Rate is calculated by dividing the total Annual
contract charges collected in 1999 by the average policy value in force in 1999.
Year 1 Beginning Policy Value = $1000.00
Year 1 Expense + $1000.00 X .0203 = $20.30
Year 2 Beginning Policy Value = $1029.70
Year 2 Expense = $1,029.70 X .0203 = $20.90
Year 3 Beginning Policy Value = $1060.29
Year 3 Expense = $1,060.29 X .0203 = $21.52
So the cumulative expenses for years 1-3 for the Growth Stock Series are equal
to $20.30 + $20.90 + $21.52 = $62.72.
If the contract is surrendered, the surrender charge is the surrender charge
percentage times the purchase payment minus the 10% free withdrawal amount:
Surrender Charge Percentage X (Initial Premium - 10% Free Withdrawal) =
Surrender Charge 0.05 X ($1000.00 - $100.00) = $45.00
So the total expense if surrendered is $62.72 + $45.00 = $107.72.
B-1
