Sutherland, Asbill & Brennan, L.L.P.
Atlanta $ Austin $ New York $ Washington
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
THOMAS E. BISSETH
DIRECT LINE: (202) 383-0117
Internet: [email protected]
February 4, 1997
VIA EDGARLINK
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Citicorp Life Insurance Company
Citicorp Life Variable Annuity Separate Account
File No. 33-81626
Dear Commissioners:
On behalf of Citicorp Life Insurance Company (the "Company") and Citicorp
Life Variable Annuity Separate Account (the "Account"), we are transmitting
for filing under Rule 497(c) of the Securities Act of 1933 the form of
prospectus and Statement of Additional Information ("SAI") dated February 3,
1997, used after the effective date of the registration statement on Form N-4
for deferred variable annuity contracts offered by the Company through the
Account. The form of prospectus and SAI are transmitted in the form they will
be used.
If you have any questions, please contact the undersigned at (202) 383-0117.
Sincerely,
/s/ Thomas E. Bisset
Thomas E. Bisset
Enclosures
cc: Eric S. Miller
Stephen E. Roth
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
CITICORP LIFE INSURANCE COMPANY 800
Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
Telephone: (800) 497-4857
PROSPECTUS
February 3, 1997
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
CITICORP LIFE INSURANCE COMPANY 800
Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
Telephone: (800) 497-4857
This Prospectus describes the individual flexible premium deferred
variable annuity contract (the "Contract") being offered by Citicorp Life
Insurance Company. The Contract may be sold to or in connection with retirement
plans, including those that qualify for special federal tax treatment under
Sections 403(b) or 408 of the Internal Revenue Code.
Purchase payments and Contract Values are allocated, as designated by
you, to one or more of the subaccounts of Citicorp Life Variable Annuity
Separate Account (the "Separate Account"), or to the Fixed Account, or both. The
assets of each subaccount will be invested in a corresponding portfolio of the
Landmark VIP Funds, the Variable Annuity Portfolios, the Fidelity Variable
Insurance Products Fund, the Fidelity Variable Insurance Products Fund II, the
AIM Variable Insurance Funds, Inc. or the MFS Variable Insurance Trust (the
"Funds"). The portfolios of the Landmark VIP Funds include the Landmark VIP U.S.
Government Fund, the Landmark VIP Equity Fund, the Landmark VIP Balanced Fund
and the Landmark VIP International Equity Fund. The subaccounts invested in the
Landmark VIP Funds, however, are no longer available for investment and,
therefore, those subaccounts will not accept new premium payments or transfers
from other subaccounts and the Fixed Account.
The available portfolios of the Variable Annuity Portfolios include
CitiSelect(SM) VIP Folio 200, CitiSelect(SM) VIP Folio 300, CitiSelect(SM) VIP
Folio 400, CitiSelect(SM) VIP Folio 500 and Landmark Small Cap Equity VIP Fund,
and are available for investment under the Contract. The Growth, High Income,
Equity Income and Overseas Portfolios of the Fidelity Variable Insurance
Products Fund, he Contrafund and Index 500 Portfolios of the Fidelity Variable
Insurance roducts Fund II, the V.I. Capital Appreciation Fund, V.I. Government
Securities und, V.I. Growth Fund, V.I. International Equity Fund, V.I. Value
Fund and V.I. Growth and Income Fund of the AIM Variable Insurance Funds, Inc.
and the MFS World Governments Series, the MFS Money Market Series, the MFS Bond
Series, the MFS Total Return Series, the MFS Research Series and the MFS
Emerging Growth Series of the MFS Variable Insurance Trust are also available
for investment under the Contract. The accompanying prospectuses for the Funds
describe the investment objectives of the available portfolios. The Contract
Value prior to the Annuity Income Date, except for amounts in the Fixed Account,
will vary according to the investment performance of the portfolios in which the
selected subaccounts are invested. You bear the entire investment risk on
amounts allocated to the Separate Account.
This Prospectus sets forth basic information about the Contract and the
Separate Account that a prospective investor should know before investing.
Additional information about the Contract and the Separate Account is contained
in the Statement of Additional Information, which has been filed with the
Securities and Exchange Commission. The Statement of Additional Information has
the same date as this Prospectus and is incorporated herein by reference. The
table of contents for the Statement of Additional Information is on page 39 of
this prospectus. You may obtain a copy of the Statement of Additional
Information free of charge by writing to or calling the Company at the address
or phone number shown above.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY CURRENT PROSPECTUSES FOR VARIABLE ANNUITY
PORTFOLIOS, THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND,
THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND II, THE AIM VARIABLE INSURANCE
FUNDS, INC. AND THE MFS VARIABLE INSURANCE TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTRACTS AND SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK
GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION, REINVESTMENT RISK AND
POSSIBLE LOSS OF PRINCIPAL INVESTED.
YOUR RIGHT TO LOOK TO A DELAWARE BANK OR TRUST COMPANY FOR PAYMENT ON ANY
INSURANCE POLICY IS LIMITED BY LAW. INSURANCE POLICIES ISSUED BY THE
SUBSIDIARIES OR DIVISIONS OF DELAWARE BANKS OR TRUST COMPANIES ARE NOT DIRECT
LIABILITIES OF SUCH BANKS OR TRUST COMPANIES. ONLY THE ASSETS OF THE INSURANCE
DIVISION OR SUBSIDIARY ISSUING A POLICY ARE APPLICABLE TO THE PAYMENT AND
SATISFACTION OF SUCH POLICY OR CLAIMS MADE THEREUNDER.
INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK OR
TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
February 3, 1997
<PAGE>
TABLE OF CONTENTS
DEFINITIONS 4
EXPENSE TABLES 6
SUMMARY 13
The Contract 13
Charges and Deductions 13
Annuity Provisions 14
Federal Tax Status 14
CONDENSED FINANCIAL INFORMATION 15
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS 17
Citicorp Life Insurance Company 17
Citicorp Life Variable Annuity Separate Account 17
The Funds 17
Addition, Deletion or Substitution of Investments 21
DESCRIPTION OF THE CONTRACT 21
Issuance of a Contract 21
Purchase Payments 21
Free-Look Period 22
Allocation of Purchase Payments 22
Variable Contract Value 22
Transfer Privileges 23
Surrenders and Partial Withdrawals 24
Death Benefit Before the Annuity Income Date 25
Annuity Payments on the Annuity Income Date 26
Payments 26
Modification 27
Owner 27
Reports to Owners 27
Inquiries 27
THE FIXED ACCOUNT 27
Fixed Account Value 28
CHARGES AND DEDUCTIONS 28
Surrender Charge (Contingent Deferred Sales Charge) 28
Annual Contract Fee 29
Asset-Based Administration Charge 29
Transfer Processing Fee 29
Mortality and Expense Risk Charge 29
Fund Expenses 30
Premium Taxes 30
Other Taxes 30
ANNUITY PAYMENT OPTIONS 30
Election of Annuity Payment Options 30
Fixed Annuity Payments 31
Legal Developments Regarding Unisex Actuarial Tables 31
Variable Annuity Payments 31
Description of Annuity Payment Options 31
2
<PAGE>
YIELDS AND TOTAL RETURNS 32
FEDERAL TAX MATTERS 33
Introduction 33
Tax Status of the Contract 34
Taxation of Annuities 35
Transfers, Assignments or Exchange of a Contract 36
Withholding 36
Multiple Contracts 36
Taxation of Qualified Plans 36
Possible Charge for the Company's Taxes 37
Other Tax Consequences 37
DISTRIBUTION OF THE CONTRACTS 37
LEGAL PROCEEDINGS 38
VOTING PRIVILEGES 38
COMPANY HOLIDAYS 38
FINANCIAL STATEMENTS 38
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 39
3
<PAGE>
DEFINITIONS
Account Any of the subaccounts or the Fixed Account.
Accumulation Unit A unit of measure used to calculate Variable
Contract Value. We use Accumulation Units to
calculate the value of a subaccount before
annuity payments.
Administrative Office Our principal office at 800 Silver Lake
Blvd., P.O. Box 7031, Dover, DE 19903
Age Your age on your last birthday.
Annuitant The Annuitant is the person upon whose
life annuity benefits are based and to
whom payments are made under this
contract, commencing on the Annuity
Income Date. The Annuitant must be a
natural person.
Annuity Income Date The date on which annuity payments begin.
Annuity Unit A unit of measure used to calculate variable
annuity payments.
Attained Age Your age on the prior Contract Anniversary.
Beneficiary The person who becomes the Owner of the
Contract upon any Owner's death prior to
the Annuity Income Date and who receives
the Death Benefit. The Contingent
Beneficiary is the person who will
become the Beneficiary if the named
Beneficiary is not living. An
Irrevocable Beneficiary is one whose
consent is necessary to change
Beneficiaries and exercise certain other
rights under the Contract.
The Code The Internal Revenue Code of 1986, as
amended.
Contract Anniversary The same date each year after the Contract
Date.
Contract Date The Contract Date is the date the Contract
becomes effective.
Contract Owner The person(s) who owns the Contract and who
is entitled to exercise all rights and
privileges provided in the Contract.
Contract Value The total amount invested under the Contract.
It is the sum of the Variable Contract Value
and the value of the Contract in the Fixed
Account.
Dollar Cost Averaging A series of systematic monthly transfers from
either the Money Market Subaccount or the
Fixed Account to the available subaccounts.
Fixed Account An allocation option under
our General Account. Under the Fixed
Account, we credit any portion of the
initial purchase payment allocated to
the Fixed Account with the Initial Fixed
Account Interest Rate shown in the
Contract Schedule. We may declare
different initial interest rates for
each subsequent purchase payment or
transfer to the Fixed Account. After the
initial one-year period, the interest
rate earned will be the Current Fixed
Account Interest Rate. The Current Fixed
Account Interest Rate is determined by
us in our discretion and is guaranteed
for one year.
General Account Assets other than those allocated
to the Separate Account or any other
separate account.
"In writing" and
"written request" A written form satisfactory to
us and received by us at our
Administrative Office. We have the right
to require a signature guarantee from an
institution qualified to give such a
guarantee before acting on any written
request.
Net Asset Value
per Share The share value of any portfolio as of
any Valuation Day reflecting investment
performance and decreased by any
expenses and fees assessed against the
portfolio.
Net Investment Factor An index used to measure the investment
performance of a subaccount from one
Valuation Period to the next.
4
<PAGE>
Non-Qualified Contract A Contract that is not a "qualified
contract."
Premium Taxes Taxes charged by a state or
municipality on purchase payments. We
deduct premium taxes from the Contract
Value either: (1) at the time the
Contract is surrendered; (2) on the
Annuity Income Date; or (3) at such other
date as the taxes are assessed.
Qualified Contract A Contract that is issued in
connection with retirement plans that
qualify for special federal income tax
treatment under Sections 403(b) or 408 of
the Code.
SEC U.S. Securities and Exchange Commission.
Subaccount A subdivision of the Separate Account, the
assets of which are invested in a
corresponding portfolio.
Surrender Value The Contract Value less any
applicable surrender charges payable,
premium taxes not previously deducted and
the Annual Contract Fee for that year.
Valuation Day For each subaccount, each day on which
both we and the New York Stock Exchange
are open for business.
Valuation Period The period that starts following
the close of regular trading on the New
York Stock Exchange on any Valuation Day
and ends at the close of regular trading
on the next succeeding Valuation Day.
Separate Account Citicorp Life Variable Annuity
Separate Account. Assets of the Separate
Account equal to the reserves and other
contract liabilities with respect to the
Separate Account are separate from our
other assets and are not chargeable with
liabilities arising out of any other
business we may conduct.
Variable Contract
Value The value of the Contract in the Separate
Account.
"We", "Our", "Us" Citicorp Life Insurance Company.
and the "Company"
"You" and "Your" The Owner of the Contract. In the event
of Joint Ownership, you and your apply
equally to either Joint Owner unless the
context clearly indicates otherwise.
5
<PAGE>
EXPENSE TABLES
The following expense information assumes that the entire Contract Value is
Variable Contract Value.
Owner Transaction Expenses
Sales Charge Imposed on Purchase Payments None
Maximum Surrender Charge (contingent
deferred sales charge) as a percentage
of the premium payment withdrawn 7%
Surrender Fee None*
Transfer Processing Fee (imposed after the 18th $25**
transfer in any Contract Year)
Annual Contract Fee $30***
Separate Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge 1.25%
Administration Charge 0.15%
Total Separate Account Expenses 1.40%
Annual Fund Expenses****
(as percentage of average net assets)
Landmark VIP U.S. Government Fund
Management Fees (investment advisory fees) 0.40%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 0.60%
and reimbursements)]
Landmark VIP Equity Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses (after fee waivers and reimbursements) 0.25%
Total Annual Fund Expenses (after fee waivers 0.75%
and reimbursements)
Landmark VIP Balanced Fund
Management Fees (investment advisory fees) 0.40%
Other Expenses (after fee waivers and reimbursements) 0.30%
Total Annual Fund Expenses (after fee waivers 0.70%
and reimbursements)
* We reserve the right to assess a processing charge equal to the lesser
of $25 or 2% of the amount withdrawn for each withdrawal (including the final
surrender) after the first 12 withdrawals in any Contract Year. See "Charges and
Deductions."
** We reserve the right to charge a $25 transfer fee on each transfer
after the first 12 transfers in any Contract Year. See "Charges and Deductions."
*** We will waive the Annual Contract Fee in its entirety if, at the time
this charge would be deducted, the Contract Value is at least $25,000. The
Annual Contract Fee will also be waived in its entirety for any Contract Year
during which purchase payments of at least $2,500 ($2,000 for Qualified
Contracts), excluding the initial purchase payment, are paid.
**** Certain of the unaffiliated investment advisers reimburse Citicorp
Life for administrative costs incurred in connection with administering the
funds as variable funding options. These reimbursements are paid out of the
advisers' investment advisory fees as a percentage of assets under management.
6
<PAGE>
Landmark VIP International Equity Fund
Management Fees (investment advisory fees) 1.00%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 1.20%
and reimbursements)
CitiSelect VIP Folio 200
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 0.95%
and reimbursements)
CitiSelect VIP Folio 300
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waive 0.95%
and reimbursements)
CitiSelect VIP Folio 400
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers 1.25%
and reimbursements)
CitiSelect VIP Folio 500
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers 1.25%
and reimbursements)
Landmark Small Cap Equity VIP Fund
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.15%
Total Annual Fund Expenses (after fee waivers 0.90%
and reimbursements)
Fidelity Growth Portfolio
Management Fees (investment advisory fees) 0.61%
Other Expenses 0.09%
Total Annual Fund Expenses 0.70%
Fidelity High Income Portfolio
Management Fees (investment advisory fees) 0.60%
Other Expenses 0.11%
Total Annual Fund Expenses 0.71%
Fidelity Equity Income Portfolio
Management Fees (investment advisory fees) 0.51%
Other Expenses 0.10%
Total Annual Fund Expenses 0.61%
Fidelity Overseas Portfolio
Management Fees (investment advisory fees) 0.76%
Other Expenses 0.15%
Total Annual Fund Expenses 0.91%
7
<PAGE>
Fidelity Contrafund Portfolio
Management Fees (investment advisory fees) 0.61%
Other Expenses 0.11%
Total Annual Fund Expenses 0.72%
Fidelity Index 500 Portfolio
Management Fees (investment advisory fees after 0.09%
fee waivers and reimbursement)
Other Expenses 0.19%
Total Annual Fund Expenses (after fee waivers and 0.28%
reimbursements)
AIM V.I. Capital Appreciation Fund
Management Fees (investment advisory fees) 0.65%
Other Expenses 0.10%
Total Annual Fund Expenses 0.75%
AIM V.I. Government Securities Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses 0.69%
Total Annual Fund Expenses 1.19%
AIM V.I. Growth Fund
Management Fees (investment advisory fees) 0.65%
Other Expenses 0.19%
Total Annual Fund Expenses 0.84%
AIM V.I. International Equity Fund
Management Fees (investment advisory fees) 0.75%
Other Expenses 0.40%
Total Annual Fund Expenses 1.15%
AIM V.I. Value Fund
Management Fees (investment advisory fees) 0.65%
Other Expenses 0.10%
Total Annual Fund Expenses 0.75%
AIM V.I. Growth and Income Fund
Management Fees (investment advisory fees after 0.26%
fee waivers and reimbursements)
Other Expenses 0.52%
Total Annual Fund Expenses (after fee waivers and 0.78%
reimbursements)
MFS World Governments Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Money Market Series
Management Fees (investment advisory fees) 0.50%
Other Expenses (after fee reduction) 0.10%
Total Annual Fund Expenses (after fee reduction) 0.60%
8
<PAGE>
MFS Bond Series
Management Fees (investment advisory fees) 0.60%
Other Expenses (after fee reduction) 0.40%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Total Return Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Research Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Emerging Growth Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
Premium taxes may be applicable, depending on the laws of various
jurisdictions. Various states and other governmental entities levy a premium
tax, currently ranging up to 3.5%, on annuity contracts issued by insurance
companies.
The above tables are intended to assist the Owner in understanding the costs
and expenses that he or she will bear directly or indirectly. The tables reflect
fiscal year 1995 expenses for the Separate Account and fiscal year 1995 expenses
for the Landmark VIP U.S. Government Fund, the Landmark VIP Equity Fund, the
Landmark VIP Balanced Fund, the Landmark VIP International Equity Fund, the
Fidelity Growth, Fidelity High Income, Fidelity Equity Income, Fidelity
Overseas, Fidelity Contrafund and Fidelity Index 500 Portfolios, the AIM V.I.
Capital Appreciation, AIM V.I. Government Securities, AIM V.I. Growth, AIM V.I.
International Equity, AIM V.I. Value and AIM V.I. Growth and Income Funds and
the MFS World Governments, MFS Money Market, MFS Bond, MFS Total Return, MFS
Research and MFS Emerging Growth Series. CitiSelect VIP Folio 200, CitiSelect
VIP Folio 300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500 and Landmark
Small Cap Equity VIP Fund commenced operations during the current fiscal year.
Therefore, their "Other Expenses" are estimates and not based on past
experience. Absent fee waivers and reimbursements, "Other Expenses" and "Total
Annual Fund Expenses" that are estimated to be incurred in the current fiscal
year would be: CitiSelect VIP Folio 200 - 8.67% and 9.42%; CitiSelect VIP Folio
300 - 6.92% and 7.67%; CitiSelect VIP Folio 400 - 6.92% and 7.67%; CitiSelect
VIP Folio 500 - 3.84% and 4.59% and Landmark Small Cap Equity VIP Fund - 1.75%
and 2.50%, respectively. Absent fee waivers and reimbursements, "Other Expenses"
and "Total Annual Fund Expenses" incurred for fiscal year 1995 were: Landmark
VIP U.S. Government Fund - 8.67% and 9.07%; Landmark VIP Equity Fund - 7.33% and
7.83%; Landmark VIP Balanced Fund - 6.92% and 7.32%; Landmark VIP International
Equity Fund - 3.84% and 4.84%; MFS World Governments Series 1.24% and 1.99%; MFS
Money Market Series 21.04% and 21.54%; MFS Bond Series 43.25% and 43.85%; MFS
Total Return Series 2.02% and 2.77%; MFS Research Series 3.15% and 3.90% and MFS
Emerging Growth Series 2.16% and 2.91%, respectively. The Investment Advisor for
the Fidelity Index 500 Portfolio also voluntarily agreed to limit the funds
operating expenses to 0.28% of average net assets. Absent this agreement, the
"Management Fees" and "Total Annual Fund Expenses" incurred for fiscal year 1995
were 0.28% and 0.47%, respectively. Similarly, the Investment Advisor for the
AIM V.I. Growth and Income Fund voluntarily agreed to waive or reduce their
advisory fees to 0.26% of average net assets. Absent this waiver or reduction,
the "Management Fees" and "Total Annual Fund Expenses" incurred for fiscal year
1995 were 0.78% and 1.17%, respectively. There can be no assurance that the fee
waivers and reimbursements reflected in the table will continue at their
reflected levels. However, the MFS Investment Advisor has agreed to bear,
subject to reimbursement, until December 31, 2004, expenses such that the
aggregate expenses of the MFS World Governments Series and the MFS Money Market
Series do not exceed, on an annualized basis 1.00% and 0.60% of the average
daily net assets, respectively. In addition, the MFS investment advisor has
agreed to bear, subject to reimbursement, expenses such that the aggregate
expenses of the MFS Bond Series, the MFS Total Return Series, the MFS Research
Series and the MFS Emerging Growth Series do not exceed, on an annualized basis,
1.00% of the average daily net assets until December 31, 1996, 1.25% of the
average daily net assets from January 1, 1997 through December 31, 1998 and
1.50% of the average daily net assets from January 1, 1999 through December 31,
2004, respectively. For a more complete description of the various costs and
expenses see "Charges and Deductions" and the prospectuses for the Funds.
9
<PAGE>
Examples
An owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets:
1. If the Contract is surrendered or annuitized under an annuity option not
providing a life annuity or a life annuity with a period certain of at least
five years at the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
Landmark VIP U.S. Government Fund $ 89 $ 122 $ 157 $ 270
Landmark VIP Equity Fund $ 90 $ 127 $ 165 $ 285
Landmark VIP Balanced Fund $ 90 $ 125 $ 162 $ 280
Landmark VIP International Equity $ 94 $ 140 $ 187 $ 330
Fund
CitiSelect VIP Folio 200* $ 92 $ 133 - -
CitiSelect VIP Folio 300* $ 92 $ 133 - -
CitiSelect VIP Folio 400* $ 95 $ 142 - -
CitiSelect VIP Folio 500* $ 95 $ 142 - -
Landmark Small Cap Equity VIP Fund* $ 92 $ 133 - -
Fidelity Growth Portfolio $ 90 $ 125 $ 162 $ 280
Fidelity High Income Portfolio* $ 90 $ 126 - -
Fidelity Equity Income Portfolio* $ 89 $ 123 - -
Fidelity Overseas Portfolio* $ 92 $ 132 - -
Fidelity Contrafund Portfolio* $ 90 $ 126 - -
Fidelity Index 500 Portfolio* $ 86 $ 113 - -
AIM V.I. Capital Appreciation Fund $ 90 $ 127 $ 165 $ 285
AIM V.I. Government Securities Fund* $ 92 $ 134 - -
AIM V.I. Growth Fund* $ 89 $ 122 - -
AIM V.I. International Equity Fund* $ 92 $ 134 - -
AIM V.I. Value Fund* $ 92 $ 134 - -
AIM V.I. Growth and Income Fund* $ 92 $ 134 - -
MFS World Governments Series $ 92 $ 134 $ 177 $ 311
MFS Money Market Series $ 89 $ 122 $ 157 $ 270
MFS Bond Series* $ 92 $ 134 - -
MFS Total Return Series* $ 92 $ 134 - -
MFS Research Series* $ 92 $ 134 - -
MFS Emerging Growth Series* $ 92 $ 134 - -
10
<PAGE>
2. If the Contract is annuitized under an annuity option providing either a
life annuity or a life annuity with a period certain of at least five years at
the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
Landmark VIP U.S. Government Fund $ 24 $ 74 $ 126 $ 270
Landmark VIP Equity Fund $ 26 $ 79 $ 134 $ 285
Landmark VIP Balanced Fund $ 25 $ 77 $ 132 $ 280
Landmark VIP International Equity $ 30 $ 92 $ 157 $ 330
Fund
CitiSelect VIP Folio 200* $ 28 $ 85 - -
CitiSelect VIP Folio 300* $ 28 $ 85 - -
CitiSelect VIP Folio 400* $ 31 $ 94 - -
CitiSelect VIP Folio 500* $ 31 $ 94 - -
Landmark Small Cap Equity VIP Fund* $ 28 $ 85 - -
Fidelity Growth Portfolio $ 25 $ 77 $ 132 $ 280
Fidelity High Income Portfolio* $ 25 $ 77 - -
Fidelity Equity Income Portfolio* $ 24 $ 74 - -
Fidelity Overseas Portfolio* $ 27 $ 83 - -
Fidelity Contrafund Portfolio* $ 25 $ 78 - -
Fidelity Index 500 Portfolio* $ 21 $ 64 - -
AIM V.I. Capital Appreciation Fund $ 26 $ 79 $ 134 $ 285
AIM V.I. Government Securities Fund* $ 28 $ 86 - -
AIM V.I. Growth Fund* $ 24 $ 74 - -
AIM V.I. International Equity Fund* $ 28 $ 86 - -
AIM V.I. Value Fund* $ 28 $ 86 - -
AIM V.I. Growth and Income Fund* $ 28 $ 86 - -
MFS World Governments Series $ 28 $ 86 $ 147 $ 311
MFS Money Market Series $ 24 $ 74 $ 126 $ 270
MFS Bond Series* $ 28 $ 86 - -
MFS Total Return Series* $ 28 $ 86 - -
MFS Research Series* $ 28 $ 86 - -
MFS Emerging Growth Series* $ 28 $ 86 - -
11
<PAGE>
3. If the Contract is not surrendered or annuitized at the end of the applicable
time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
Landmark VIP U.S. Government Fund $ 24 $ 74 $ 126 $ 270
Landmark VIP Equity Fund $ 26 $ 79 $ 134 $ 285
Landmark VIP Balanced Fund $ 25 $ 77 $ 132 $ 280
Landmark VIP International Equity $ 30 $ 92 $ 157 $ 330
Fund
CitiSelect VIP Folio 200* $ 28 $ 85 - -
CitiSelect VIP Folio 300* $ 28 $ 85 - -
CitiSelect VIP Folio 400* $ 31 $ 94 - -
CitiSelect VIP Folio 500* $ 31 $ 94 - -
Landmark Small Cap Equity VIP Fund* $ 28 $ 85 - -
Fidelity Growth Portfolio $ 25 $ 77 $ 132 $ 280
Fidelity High Income Portfolio* $ 25 $ 77 - -
Fidelity Equity Income Portfolio* $ 24 $ 74 - -
Fidelity Overseas Portfolio* $ 27 $ 83 - -
Fidelity Contrafund Portfolio* $ 25 $ 78 - -
Fidelity Index 500 Portfolio* $ 21 $ 64 - -
AIM V.I. Capital Appreciation Fund $ 26 $ 79 $ 134 $ 285
AIM V.I. Government Securities Fund* $ 28 $ 86 - -
AIM V.I. Growth Fund* $ 24 $ 74 - -
AIM V.I. International Equity Fund* $ 28 $ 86 - -
AIM V.I. Value Fund* $ 28 $ 86 - -
AIM V.I. Growth and Income Fund* $ 28 $ 86 - -
MFS World Governments Series $ 28 $ 86 $ 147 $ 311
MFS Money Market Series $ 24 $ 74 $ 126 $ 270
MFS Bond Series* $ 28 $ 86 - -
MFS Total Return Series* $ 28 $ 86 - -
MFS Research Series* $ 28 $ 86 - -
MFS Emerging Growth Series* $ 28 $ 86 - -
- -------------------
* These subaccounts became available for investment as of the date of this
prospectus.
The examples provided above assume that no transfer charges or premium taxes
have been assessed. The examples also assume that the Annual Contract Fee is $30
and that the average Contract Value is $10,000, which translates the Annual
Contract Fee into an assumed .30% charge for the purposes of the examples based
on a $1,000 investment.
The examples should not be considered a representation of past or future
expenses. The assumed 5% annual rate of return is hypothetical and should not be
considered a representation of past or future annual returns, which may be
greater or less than this assumed rate.
12
<PAGE>
SUMMARY
UNLIKE BANK ACCOUNTS, CONTRACT VALUE IS NOT INSURED. INVESTMENT OF CONTRACT
VALUE INVOLVES CERTAIN RISKS INCLUDING LOSS OF PURCHASE PAYMENTS (PRINCIPAL).
CONTRACT VALUE IS NOT DEPOSITED IN OR GUARANTEED BY ANY BANK AND IS NOT
GUARANTEED BY ANY GOVERNMENT AGENCY.
The Contract
Issuance of a Contract. Contracts may be issued in connection with retirement
plans that may or may not qualify for special federal tax treatment under the
Code. The maximum age for Owners on the Contract date is 90. (See "Issuance of a
Contract.")
Free-Look Period. You have the right to return the Contract within 10 days (or
longer in certain states) after you receive it. We will consider the Contract
received five days after it is mailed to your last known address. The returned
Contract will become void. We will return to you an amount equal to the Contract
Value on the date the Contract is received either at our administrative office
or by the sales representative who sold it, plus any premium taxes deducted.
Where required, we will instead return the greater of the Contract Value or
purchase payment(s) (See "Free-Look Period.")
Purchase Payments. The minimum amount we will accept as an initial purchase
payment is $5,000 for Non-Qualified Contracts and $2,000 for Qualified
Contracts. Subsequent purchase payments may be paid under the Contract at any
time before the Annuity Income Date; however, we reserve the right not to accept
payments of less than $500 for Non-Qualified Contracts and less than $100 for
Qualified Contracts. Our approval is required for payments that exceed
$1,000,000 per Contract Year. (See "Purchase Payments", page 23.)
Allocation of Purchase Payments. Purchase payments under a Contract will be
allocated, as designated by you, to one or more of the subaccounts of the
Separate Account or to the Fixed Account or to both, except that purchase
payments may not be allocated to any subaccount invested in the Landmark VIP
Funds. In states where we must refund purchase payments in the event you
exercise the free-look right, any portion of the initial net purchase payment to
be allocated to a subaccount will be allocated to the subaccount investing in
the MFS Money Market Series (the "Money Market Subaccount") during the
"free-look" period. At the end of that period, the value in the Money Market
Subaccount will be allocated to the subaccounts as selected by you. The assets
of each subaccount will be invested solely in a corresponding portfolio
The Contract Value, except for amounts in the Fixed Account, will vary according
to the investment performance of the portfolio(s) in which the selected
subaccount(s) is invested. Interest will be credited to amounts in the Fixed
Account at a guaranteed minimum rate of 3% per year, or a higher current
interest rate declared by us. (See "Allocation of Purchase Payments.") The Fixed
Account may not be available in all states.
Transfers. On or before the Annuity Income Date, you may transfer all or part
of the value in a subaccount or the Fixed Account to another subaccount or the
Fixed Account subject to certain restrictions. However, transfers to subaccounts
invested in the Landmark VIP Funds are no longer permitted.
The maximum amount that may be transferred from the Fixed Account during any
Contract Year equals the greatest of: (1) 40% of the Fixed Account Value as of
the later of the Contract Date or last Contract Anniversary; (2) the Contract
Value in the Fixed Account attributable to interest earnings; or (3) the
greatest transfer from the Fixed Account during the prior Contract Year. We
reserve the right to defer transfers from the Fixed Account for up to 6 months
following the date of request.
Currently, a $25 fee is assessed on the 19th and each subsequent transfer
during a Contract Year. We reserve the right, however, to charge this fee for
the 13th and each subsequent transfer during a Contract Year. (See "Transfer
Privilege.")
Partial Withdrawal. Before the Annuity Income Date, you may, by written
notice, withdraw part of the surrender value subject to certain limitations. Any
withdrawal request must be in writing and must specify from which Account(s) the
withdrawal will be made. (See "Partial Withdrawals.")
Surrender. Upon written notice before the Annuity Income Date, you may
surrender the Contract and receive its surrender value. (See "Surrender.")
Charges and Deductions
The following charges and deductions are assessed under the Contract:
Surrender Charge (Contingent Deferred Sales Charge). No charge for sales
expenses is deducted from purchase payments at the time purchase payments are
made. However, a surrender charge may be deducted from amounts surrendered or
withdrawn.
13
<PAGE>
A surrender charge also may be deducted from amounts applied to annuity payment
options not providing a life annuity or a life annuity with a period certain of
at least five years. Surrender charges are not deducted upon payment of a death
benefit.
The surrender charge imposed on partial withdrawals, surrenders and upon
application of proceeds to certain annuity options equals a specified percentage
of the purchase payments withdrawn or applied. The surrender charge is
calculated by multiplying the applicable specified percentages by the purchase
payments withdrawn. For purchase payments withdrawn or surrendered within one
year of having been paid, the charge is 7% of the amount of purchase payments
withdrawn or surrendered. For each purchase payment, the surrender charge
decreases each full year that has elapsed since the payment was made. Surrenders
and withdrawals are considered to come first from earnings and then from the
oldest purchase payment, then the next oldest payment, and so forth. No
surrender charge is assessed upon the withdrawal or surrender of earnings or
purchase payments made more than 5 years prior to the withdrawal or surrender.
(See "Charges for Surrender or Partial Withdrawals.")
During each Contract Year, up to 10% of purchase payments less any prior
withdrawal of purchase payments may be withdrawn without a Surrender Charge.
The surrender charge also may be waived in certain circumstances as provided
in the Contract. (See "Waiver of Surrender Charge.")
We reserve the right to assess a processing charge equal to the lesser of $25
or 2% of the amount withdrawn for each withdrawal (including the final
surrender) after the first 12 withdrawals in any Contract Year.
Annual Contract Fee. On the last day of each Contract Year prior to the
Annuity Income Date, or the surrender of the Contract, if earlier, we will
deduct an Annual Contract Fee of $30 from the Contract Value. A pro-rated
portion of the fee is deducted from all active Accounts. (See "Annual Contract
Fee.")
The Annual Contract Fee will be waived in its entirety if, at the time of
deduction, the Contract Value is $25,000 or more. In addition, the Annual
Contract Fee will be waived in its entirety for any Contract Year in which
purchase payments of at least $2,500 ($2,000 for Qualified Contracts), exclusive
of the initial purchase payment, are paid.
Mortality and Expense Risk Charge. We deduct a daily mortality and expense
risk charge to compensate us for assuming certain mortality and expense risks.
The charge is deducted from the assets of the Separate Account at an annual rate
of 1.25% (approximately 0.50% for mortality risk and 0.75% for expense risks).
(See "Mortality and Expense Risk Charge.")
Asset-Based Administration Charge. We deduct a daily administration charge to
compensate us for certain expenses we incur in administration of the Contract
and the Separate Account. The charge is deducted from the assets of the Separate
Account at an annual rate of 0.15%. (See "Asset-Based Administration Charge".)
We do not expect to make a profit from this charge.
Premium Taxes. If state or other premium taxes are applicable to a Contract,
they will be deducted from the Contract Value. Premium taxes will be deducted
from the Contract Value either: (1) at the time the Contract is surrendered; (2)
on the Annuity Income Date; or (3) at such other date as the taxes are assessed.
Annuity Provisions
The Annuity Income Date may be elected by you at the time of application or
anytime thereafter. The Annuity Income Date may not be after the later of: (1)
the first day of the month following the Annuitant's 85th birthday; or (2) ten
years after the Contract Date. If no Annuity Income Date is elected, it will be
the first day of the calendar month following the Annuitant's 65th birthday or
ten years after the Contract Date, if later
On the Annuity Income Date, the Contract Value (adjusted as described below)
will be applied to an Annuity Income Option, unless you choose to receive the
surrender value in a lump sum. The Contract Value is adjusted by deducting
applicable premium tax not yet deducted, and for annuity options other than a
life annuity or a life annuity with a period certain of at least five years,
less any applicable surrender charge. (See "Annuity Payment Options.")
Federal Tax Status
Generally, a distribution (including a surrender, partial withdrawal or death
benefit payment) may result in taxable income. In certain circumstances, a 10%
penalty tax may apply. For a further discussion of the federal income status of
variable annuity contracts, see "Federal Tax Status."
14
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following tables set forth certain information pertaining to the net
assets of the Separate Account, as represented by the accumulation unit values
and number of accumulation units for the period from the commencement of
business through September 30, 1996. This condensed financial information is
derived from the financial statements of the Separate Account and should be read
in conjunction with the financial statements, related notes and other financial
information contained in the Statement of Additional Information
<TABLE>
<CAPTION>
Accumulation Unit Value
----------------------------------------------------------
Subaccount Commencement Date* Year Ending Period Ending
(12/31/95) (9/30/96)
- ---------------------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Landmark VIP U.S. Government Fund 1.00 1.00 1.04
Landmark VIP Equity Fund** 1.00 1.00 1.00
Landmark VIP Balanced Fund 1.00 1.11 1.17
Landmark VIP International Equity 1.00 1.00 1.05
Fund
CitiSelect VIP Folio 200*** - - -
CitiSelect VIP Folio 300*** - - -
CitiSelect VIP Folio 400*** - - -
CitiSelect VIP Folio 500*** - - -
Landmark Small Cap Equity VIP - - -
Fund***
Fidelity Growth Portfolio 1.00 1.31 1.45
Fidelity High Income Portfolio*** - - -
Fidelity Equity Income Portfolio*** - - -
Fidelity Overseas Portfolio*** - - -
Fidelity Contrafund Portfolio*** - - -
Fidelity Index 500 Portfolio*** - - -
AIM V.I. Capital Appreciation Fund 1.00 1.00 1.48
AIM V.I. Government Securities - - -
Fund***
AIM V.I. Growth Fund*** - - -
AIM V.I. International Equity - - -
Fund***
AIM V.I. Value Fund*** - - -
AIM V.I. Growth and Income Fund*** - - -
MFS World Governments Series 1.00 1.00 1.10
MFS Money Market Series** 1.00 1.00 1.00
MFS Bond Series*** - - -
MFS Total Return Series*** - - -
MFS Research Series*** - - -
MFS Emerging Growth Series*** - - -
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Number of Accumulation Units Outstanding
----------------------------------------------------------
Year Ending Period Ending
Subaccount (12/31/95) (9/30/96)
- ---------------------------------------------------------- ---------------------------- -----------------------------
<S> <C> <C>
Landmark VIP U.S. Government Fund 0 65,380
Landmark VIP Equity Fund** 0 0
Landmark VIP Balanced Fund 5,094 35,211
Landmark VIP International Equity 0 43,352
Fund
CitiSelect VIP Folio 200*** - -
CitiSelect VIP Folio 300*** - -
CitiSelect VIP Folio 400*** - -
CitiSelect VIP Folio 500*** - -
Landmark Small Cap Equity VIP - -
Fund***
Fidelity Growth Portfolio 4,565 61,743
Fidelity High Income Portfolio*** - -
Fidelity Equity Income Portfolio*** - -
Fidelity Overseas Portfolio*** - -
Fidelity Contrafund Portfolio*** - -
Fidelity Index 500 Portfolio*** - -
AIM V.I. Capital Appreciation Fund 0 61,936
AIM V.I. Government Securities - -
Fund***
AIM V.I. Growth Fund*** - -
AIM V.I. International Equity - -
Fund***
AIM V.I. Value Fund*** - -
AIM V.I. Growth and Income Fund*** - -
MFS World Governments Series 0 61,437
MFS Money Market Series** 0 0
MFS Bond Series*** - -
MFS Total Return Series*** - -
MFS Research Series*** - -
MFS Emerging Growth Series*** - -
</TABLE>
- ----------------
* The Landmark VIP U.S. Government Fund, Landmark VIP Equity Fund, Landmark
VIP Balanced Fund, Landmark VIP International Equity Fund, Fidelity Growth
Portfolio, AIM V.I. Capital Appreciation Fund, MFS World Governments Series
and MFS Money Market Series subaccounts commenced operations on February
21, 1995. All other subaccounts commenced operations on February 3, 1997.
** As of September 30, 1996, no purchase payments had been allocated to the
subaccounts investing in the the Landmark VIP Equity Fund or the MFS Money
Market Series.
*** As of the date of this Prospectus, the CitiSelect VIP Folio 200, the
CitiSelect VIP Folio 300, the CitiSelect VIP Folio 400, the CitiSelect VIP
Folio 500, the Landmark Small Cap Equity VIP Fund, the Fidelity High Income
Portfolio, the Fidelity Equity Income Portfolio, the Fidelity Overseas
Portfolio, the Fidelity Contrafund Portfolio, the Fidelity Index 500
Portfolio, the AIM V.I. Government Securities Fund, the AIM V.I. Growth
Fund, the AIM V.I. International Equity Fund, the AIM V.I. Value Fund, the
AIM V.I. Growth and Income Fund, the MFS Bond Series, the MFS Total Return
Series, the MFS Research Series and the MFS Emerging Growth Series
subaccounts had not yet commenced operations, had no assets or liabilities
and had received no income and incurred no expenses. Accordingly, no
condensed financial information is included for these 19 subaccounts and
these subaccounts are not included in the financial statement. The Landmark
VIP U.S. Government Fund, the Landmark VIP Equity Fund, the Landmark VIP
Balanced Fund and the Landmark VIP International Equity Fund subaccounts
were offered prior to the date of this prospectus as part of the Separate
Account and included in the condensed financial information and financial
statements. However, such subaccounts are no longer available for
investment.
16
<PAGE>
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
Citicorp Life Insurance Company
Citicorp Life Insurance Company (formerly Family Guardian Life Insurance
Company) is a stock life insurance company organized under the laws of the State
of Arizona in 1971. Citicorp Life Insurance Company is a wholly owned subsidiary
of Citibank Delaware which is a wholly owned subsidiary of Citicorp Holdings
Inc., which in turn, is a wholly owned subsidiary of Citicorp, one of the
world's largest bank holding companies. Citicorp Life and its former parent
corporation, Citicorp Mortgage, Inc., a Delaware holding company, were both
acquired by Citicorp in 1973. During 1990, the ownership of Citicorp Life was
transferred to Citibank Delaware.
Pursuant to the 1973 approval by the Board of Governors of the Federal Reserve
System (FRB), Citicorp Life initially limited its activities to the reinsurance
of credit life and disability insurance sold in connection with extensions of
credit by Citicorp. Additional Federal approvals were received in 1976 and 1980,
authorizing Citicorp Life to underwrite group and individual term life and
disability insurance directly related to extensions of credit by the domestic
Citicorp holding company system. Subsequent Delaware and Federal law changes in
1989 and 1991, respectively, now enable Citicorp Life to underwrite and issue
insurance coverages and annuities which are independent of any extension of
credit.
As of December 31, 1995, Citicorp Life Insurance Company had statutory assets
in excess of $523,847,000. Citicorp Life Insurance Company's financial
statements can be found in the Statement of Additional Information and should
only be considered in the context of its ability to meet any obligations it may
have under the Contract.
Citicorp Life Variable Annuity Separate Account
The Separate Account was established by us as a separate account on July 6,
1994. The Separate Account will receive and invest purchase payments made under
the Contracts. In addition, the Separate Account may receive and invest purchase
payments for other variable annuity contracts we may issue in the future.
Although the assets in the Separate Account are our property, the assets in
the Separate Account attributable to the Contracts are not chargeable with
liabilities arising out of any other business that we may conduct. The assets of
the Separate Account are available to cover our general liabilities only to the
extent that the Separate Account's assets exceed the liabilities arising under
the Contracts and any other contracts supported by the Separate Account. We have
the right to transfer to the General Account any assets of the Separate Account
which are in excess of reserves and other contract liabilities. All obligations
arising under the Contracts are our general corporate obligations.
The Separate Account currently is divided into twenty-seven (27) subaccounts
but may, in the future, include additional subaccounts. Each subaccount invests
exclusively in shares of a single corresponding portfolio. The Landmark VIP U.S.
Government Fund, the Landmark VIP Equity Fund, the Landmark VIP Balanced Fund
and the Landmark VIP International Equity Fund subaccounts are closed to new
investment. The income, gains and losses, realized or unrealized, from the
assets allocated to each subaccount are credited to or charged against that
subaccount without regard to income, gains or losses from any other subaccount.
The Separate Account has been registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of a separate account under the federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Separate Account by the SEC. The Separate Account
is also subject to the laws of the State of Arizona which regulate the
operations of insurance companies domiciled in Arizona.
The Funds
The Separate Account invests in shares of the Landmark VIP Funds, the Variable
Annuity Portfolios, the Fidelity Variable Insurance Products Fund, the Fidelity
Variable Insurance Products Fund II, the AIM Variable Insurance Funds, Inc. and
the MFS Variable Insurance Trust. The Funds are management investment companies
of the series type with one or more investment portfolios. Each Fund is
registered with the SEC as an open-end, management investment company. Such
registration does not involve supervision of the management or investment
practices or policies of the Company or the portfolios by the SEC.
The Funds may, in the future, create additional portfolios that may or may not
be available as investment options under the Contracts. Each portfolio has its
own investment objectives and the income and losses for each portfolio are
determined separately for that portfolio.
The investment objectives and policies of each portfolio are summarized
below. There is no assurance that any portfolio will achieve its stated
objectives. More detailed information, including a description of risks and
expenses, may be found in the
17
<PAGE>
prospectuses for the Funds which must accompany or precede this prospectus and
which should be read carefully and retained for future reference.
Landmark VIP Funds. The Landmark VIP Funds currently include four funds
available as investment options under the Contracts. However, as of the date of
this prospectus, the Landmark VIP Funds are no longer available for investment.
The Landmark VIP Funds include the Landmark VIP U.S. Government Fund, the
Landmark VIP Equity Fund, the Landmark VIP Balanced Fund and the Landmark VIP
International Equity Fund.
Landmark VIP U.S. Government Fund. This portfolio seeks current income
as well as preservation of capital by investing, under normal
circumstances, at least 65% of its total assets in obligations issued
or guaranteed as to principal and interest by the U.S. Government or
any of its agencies and instrumentalities and repurchase agreements
involving U.S. Government securities.
Landmark VIP Equity Fund. This portfolio seeks long-term capital
growth. Dividend income, if any, is incidental to the fund's
investment objective of increasing long-term value. Under normal
circumstances, at least 65% of the fund's total assets are invested in
equity securities. Investments are primarily in common stocks of
domestic companies with medium to large market capitalizations, i.e.
$750 million or more, and seasoned management teams. Appreciation may
be sought in other types of securities such as fixed income
securities, convertible and non-convertible bonds, preferred stocks
and warrants.
Landmark VIP Balanced Fund. This portfolio seeks to earn high current
income by investing in a broad range of securities, to preserve
capital, and to provide growth potential with reduced risk. The fund
is invested in a broadly diversified portfolio of income producing
securities, including common stocks, preferred stocks and bonds. Under
normal circumstances, at least 25% of the portfolio's total assets are
invested in fixed income securities.
Landmark VIP International Equity Fund. This portfolio seeks long-term
capital growth. Dividend income, if any, is incidental to the
portfolio's investment objective of increasing long-term value.
Investments are primarily in common stocks in countries other than the
United States. Under normal circumstances, at least 65% of the fund's
assets are invested in equity securities. Appreciation may be sought
in other types of securities such as fixed income securities,
convertible and non-convertible bonds, preferred stocks and warrants.
Citibank, N.A. serves as investment adviser to these portfolios and manages
their assets in accordance with general policies and guidelines established by
the trustees of the Landmark VIP Funds.
Variable Annuity Portfolios. The Variable Annuity Portfolios currently include
five funds, all of which are available as investment options under the
Contracts. The Variable Annuity Portfolios include CitiSelect VIP Folio 200,
CitiSelect VIP Folio 300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500 and
Landmark Small Cap Equity VIP Fund.
CitiSelect VIP Folio 200. This portfolio seeks high total return over
time, consistent with a primary emphasis on income and a secondary
emphasis on capital appreciation by allocating portfolio assets among
a diversified, professionally managed mix of equity, fixed income and
money market securities. Under normal circumstances, 25%-45% of the
portfolio's assets will be invested in equity securities, 35%-55% of
the portfolio's assets will be invested in fixed income securities,
and 10%-30% of the portfolio's assets will be invested in Money Market
securities.
CitiSelect VIP Folio 300. This portfolio seeks high total return over
time, consistent with a balanced emphasis on income and capital
appreciation by allocating portfolio assets among a diversified,
professionally managed mix of equity, fixed income and money market
securities. Under normal circumstances, 40%-60% of the portfolio's
assets will be invested in equity securities, 35%-55% of the
portfolio's assets will be invested in fixed income securities, and
1%-10% of the portfolio's assets will be invested in Money Market
securities.
CitiSelect VIP Folio 400. This portfolio seeks high total return over
time, consistent with a primary emphasis on capital appreciation and a
secondary emphasis on income for risk reduction purposes by allocating
portfolio assets among a diversified, professionally managed mix of
equity, fixed income and money market securities. Under normal
circumstances, 55%-85% of the portfolio's assets will be invested in
equity securities, 15%-35% of the portfolio's assets will be invested
in fixed income securities, and 1%-10% of the portfolio's assets will
be invested in Money Market securities.
CitiSelect VIP Folio 500. This portfolio seeks the highest total
return over time, consistent with a primary emphasis on capital
appreciation and a secondary emphasis on income for risk reduction
purposes by allocating portfolio assets among a diversified,
professionally managed mix of equity, fixed income and money market
securities. Under normal circumstances, 70%-95% of the portfolio's
assets will be invested in equity securities, 5%-20% of the
portfolio's assets will be invested in fixed income securities, and
1%-10% of the portfolio's assets will be invested in Money Market
securities.
18
<PAGE>
Landmark Small Cap Equity VIP Fund. This fund seeks long-term capital
growth by investing in a diversified portfolio of equity securities of
U.S. companies with market capitalization of $750 million or less.
Under normal circumstances, at least 65% of the fund's total assets
will be invested in such companies. Dividend income, if any, is
incidental to this investment objective.
Citibank, N.A. serves as Investment Manager to these portfolios and manages
their assets in accordance with general policies and guidelines established by
the Trustees of the Variable Annuity Portfolios.
With respect to the CitiSelect Portfolios, Citibank, N.A. expects that, in
general, each Fund's assets will be allocated among the equity, fixed income and
money market class as provided above. However, cash flows of a Fund or changes
in market valuations could produce different results. Citibank, N.A. will review
each Fund's asset allocation quarterly and expects, in general, to rebalance the
Fund's investments, if necessary, at that time. Rebalancing may be accomplished
over a period of time and may be limited by tax and regulatory requirements.
Fidelity Variable Insurance Products Fund. The Fidelity Variable Insurance
Products Fund currently has five portfolios, four of which, the Fidelity Growth
Portfolio, the Fidelity High Income Portfolio, the Fidelity Equity Income
Portfolio, and the Fidelity Overseas Portfolio are available as investment
options under the Contracts.
Fidelity Growth Portfolio. This portfolio seeks to achieve capital
appreciation. The portfolio normally purchases common stocks, although
its investments are not restricted to any one type of security.
Capital appreciation may also be found in other types of securities,
including bonds and preferred stocks.
Fidelity High Income Portfolio*. This portfolio seeks to achieve high
current income by investing, under normal circumstances, at least 65%
of its assets in income producing debt securities, preferred stocks
and convertible securities.
The Fidelity High Income Portfolio typically invests in longer term,
lower quality fixed income securities but may invest in common stocks,
other equity securities and debt securities not currently paying
interest but which are expected to do so in the future. In choosing
investments, the Fidelity High Income Portfolio also considers growth
of capital.
Fidelity Equity Income Portfolio. This portfolio seeks reasonable
income by investing, under normal circumstances, at least 65% of its
assets in income producing equity securities. The remainder of the
Fidelity Equity Income Portfolio's assets will tend to be invested in
debt obligations, many of which are expected to be convertible into
common stock. In choosing investments, the portfolio also considers
the potential for capital appreciation.
Fidelity Overseas Portfolio. This portfolio seeks long term growth of
capital by investing, under normal circumstances, at least 65% of its
assets in securities of issuers from at least three different
countries, whose principal activities are outside of North America
(the U.S., Canada, Mexico and Central America). The majority of the
portfolio's assets will be invested in equity securities. However, the
portfolio may also invest in debt securities of any quality.
Fidelity Management & Research Company serves as investment adviser to these
portfolios and manages their assets in accordance with general policies and
guidelines established by the trustees of the Fidelity Variable Insurance
Products Fund.
Fidelity Variable Insurance Products Fund II. The Fidelity Variable Insurance
Products Fund II currently has five portfolios, two of which, the Fidelity
Contrafund Portfolio and the Fidelity Index 500 Portfolio are available as
investment options under the Contracts.
Fidelity Contrafund Portfolio. Under normal circumstances, this
portfolio seeks capital appreciation by investing mainly in common
stocks and securities convertible into common stock believed to be
undervalued by an overly pessimistic public appraisal but has the
flexibility to invest in any type of security that may produce capital
appreciation. The portfolio's investment strategy may lead to
investment in small and mid-sized companies.
Fidelity Index 500 Portfolio. This portfolio seeks to match the total
return of the S&P 500 by investing, under normal circumstances, at
least 80% of its assets (65% if portfolio assets are below $20
million) in equity securities of companies that compose the S&P 500,
while keeping expenses low.
Fidelity Management & Research Company serves as investment adviser to these
portfolios and manages their assets in accordance with general policies and
guidelines established by the trustees of the Fidelity Variable Insurance
Products Fund II.
AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc.
currently has nine portfolios, six of which, the AIM V.I. Capital Appreciation
Fund, the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund, the AIM
V.I. International
19
<PAGE>
Equity Fund, the AIM V.I. Value Fund and the AIM V.I. Growth and Income Fund are
available as investment options under the Contracts.
AIM V.I. Capital Appreciation Fund. This portfolio seeks capital
appreciation through investments in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
AIM V.I. Government Securities Fund. This portfolio seeks to achieve a
high level of current income consistent with reasonable concern for
safety of principal by investing in debt securities issued, guaranteed
or otherwise backed by the United States Government.
AIM V.I. Growth Fund. This portfolio seeks growth of capital
principally through investment in common stocks of seasoned and
bettered capitalized companies considered by A I M Advisors, Inc.
("AIM") to have strong earnings momentum
AIM V.I. International Equity Fund. This portfolio seeks to provide
long-term growth of capital by investing in a diversified portfolio of
international equity securities, the issuers of which are considered
by AIM to have strong earnings momentum.
AIM V.I. Value Fund. This portfolio seeks to achieve long-term growth
of capital by investing primarily in equity securities judged by AIM
to be undervalued relative to the current or projected earnings of the
companies issuing the securities, or relative to current market value
of assets owned by the companies issuing the securities or relative to
the equity market generally. Income is a secondary objective.
AIM V.I. Growth and Income Fund. This portfolio seeks growth of
capital, with current income as a secondary objective. The fund
invests primarily in stocks believed by AIM to have the potential for
above average prospects for both growth of capital and dividend
income.
AIM serves as investment adviser to these portfolios and manages their assets
in accordance with general policies and guidelines established by the directors
of the AIM Variable Insurance Funds, Inc.
MFS Variable Insurance Trust. MFS Variable Insurance Trust currently has
twelve portfolios, six of which, the MFS World Governments Series, the MFS Money
Market Series, the MFS Bond Series, the MFS Total Return Series, the MFS
Research Series and the MFS Emerging Growth Series are available as investment
options under the Contracts.
MFS World Governments Series. This portfolio seeks preservation and
growth of capital, together with moderate current income. Objectives
are achieved through an internationally diversified portfolio
consisting primarily of debt securities (normally at least 80%) and to
a lesser extent equity securities.
MFS Money Market Series. This portfolio seeks as high a level of
current income as is considered consistent with the preservation of
capital and liquidity. Objectives are achieved by investing primarily
(normally at least 80%) in U.S. Government Securities, obligations of
banks, commercial paper and short-term corporate obligations. An
investment in the Money Market Series is neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that
the portfolio will be able to maintain a stable net asset value of $1
per share.
MFS Bond Series*. This portfolio seeks primarily to provide as high a
level of current income as is believed consistent with prudent
investment risk and secondarily to protect capital. Under normal
conditions, at least 65% of the portfolio's total assets will be
invested in convertible and non-convertible debt securities and
preferred stocks, U.S. Government securities, commercial paper,
repurchase agreements and cash or cash equivalents (such as
certificates of deposit and banker's acceptances).
MFS Total Return Series*. This portfolio's primary investment
objective is to provide above average income (compared to a portfolio
invested entirely in equity securities) consistent with the prudent
employment of capital, and secondarily, to provide a reasonable
opportunity for growth of capital and income. Under normal market
conditions, at least 25% of the portfolio's assets will be invested in
fixed income securities and at least 40% and no more than 75% of its
assets will be invested in equity securities.
MFS Research Series*. This portfolio seeks to provide long term growth
of capital and future income by investing a substantial portion of its
total assets in the common stocks or securities convertible into
common stocks of companies believed to possess better than average
prospects for long term growth. A smaller proportion of the MFS
Research Series' assets may be invested in bonds, short term
obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth.
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MFS Emerging Growth Series. This portfolio seeks primarily to provide
long term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the primary investment
objective of long term growth of capital. Under normal circumstances,
at least 80% of the portfolio's total assets will be invested in
common stocks of companies that Massachusetts Financial Services
Company ("MFS") believes are early in their life cycle but which have
the potential to become major enterprises.
MFS serves as investment adviser to these portfolios and manages their assets
in accordance with general policies and guidelines established by the trustees
of the MFS Variable Insurance Trust.
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* The portfolios' investment strategy may provide the opportunity of higher
than average yields by investing in securities with higher than average
risk, such as lower and unrated debt and comparable equity instruments.
Please consult each portfolio's Fund prospectus accompanying this
Prospectus for more information about the risk associated with such
investments.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a portfolio that are held in
the Separate Account or that the Separate Account may purchase. If the shares of
a portfolio are no longer available for investment or if, in our judgment,
further investment in any portfolio should become inappropriate, we may redeem
the shares, if any, of that portfolio and substitute shares of another
portfolio. We will not substitute any shares attributable to a Contract's
interest in a subaccount without notice and prior approval of the SEC and state
insurance authorities, to the extent required by the 1940 Act or other
applicable law.
We also reserve the right to establish additional subaccounts of the Separate
Account, each of which would invest in shares of a new corresponding portfolio
having a specified investment objective. We may, in our sole discretion,
establish new subaccounts or eliminate or combine one or more subaccounts if
marketing needs, tax considerations or investment conditions warrant. Any new
subaccounts may be made available to existing Contract Owners on a basis to be
determined by us. Subject to obtaining any approvals or consents required by
applicable law, the assets of one or more subaccounts may be transferred to any
other subaccount if, in our sole discretion, marketing, tax, or investment
conditions warrant.
In the event of any such substitution or change, we may (by appropriate
endorsement, if necessary) change the Contract to reflect the substitution or
change. If we consider it to be in the best interest of Owners and Annuitants,
and subject to any approvals that may be required under applicable law, the
Separate Account may be operated as a management investment company under the
1940 Act, it may be deregistered under that Act if registration is no longer
required, it may be combined with other separate accounts, or its assets may be
transferred to another separate account. In addition, we may, when permitted by
law, restrict or eliminate any voting privileges of Owners or other persons who
have such privileges under the Contracts.
DESCRIPTION OF THE CONTRACT
Issuance of a Contract
In order to purchase a Contract, application must be made to us
through our licensed representative who is also a registered representative of
Citicorp Investment Services, Inc., a registered broker-dealer which has a
selling agreement with The Landmark Funds Broker-Dealer Services, Inc.
or another registered representative Contracts may be sold to or in connection
with retirement plans that do not qualify for special tax treatment as well as
retirement plans that qualify for special tax treatment under the Code. The
maximum age for Owners on the Contract Date is 90.
Purchase Payments
The minimum amount that we will accept as an initial purchase payment is
$5,000 for Non-Qualified Contracts, $2,000 for Qualified Contracts. Subsequent
purchase payments may be paid at any time during the Annuitant's lifetime and
before the Annuity Income Date.
We reserve the right not to accept purchase payments in excess of $1 million
per Contract Year. We also reserve the right not to accept payments of
less than $500 for Non-Qualified Contracts or less than $100 for Qualified
Contracts.
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Under our automatic purchase payment plan, you can select a monthly payment
schedule pursuant to which purchase payment payments will be automatically
deducted from a bank account or other source. We reserve the right not to accept
such monthly payments if less than $500 for Non-Qualified Contracts or less than
$100 for Qualified Contracts.
Free-Look Period
The Contract provides for an initial "free-look" period. You have the right to
return the Contract within 10 days of receiving it. In some jurisdictions, this
period may be longer than 10 days. When we receive the returned Contract at our
administrative office or when the sales representative who sold the Contract
receives it before the end of this period, we will cancel the Contract and
refund to you an amount equal to the Contract Value as of the date the returned
Contract is received plus any premium taxes deducted. This amount may be more or
less than the aggregate amount of purchase payments made up to that time. In
certain jurisdictions, we instead return the greater of the Contract Value plus
any premium tax deducted or aggregate purchase payment(s) less any prior
withdrawals. In those cases, we will allocate initial purchase payments to the
Money Market Subaccount for the free-look period following the Contract Date.
The free-look period begins on the date following your receipt of the Contract.
We will consider the Contract received five days after it is mailed to your last
known address.
Allocation of Purchase Payments
At the time of application, you select the allocation of the initial net
purchase payment among the subaccounts and the Fixed Account. Any allocation
must be for at least $100 and be a whole percentage of a purchase payment.
If the application for a Contract is properly completed and is accompanied
by all the information necessary to process it, including payment of the initial
purchase payment, the initial purchase payment will be allocated, as designated
by you, to one or more of the subaccounts or to the Fixed Account within two
valuation days of receipt of such purchase payment by us at our administrative
office. If the application is not properly completed, we reserve the right to
retain the purchase payment for up to five valuation days while we attempt to
complete the application. If the application is not complete at the end of the
5-day period, we will inform the applicant of the reason for the delay and the
initial purchase payment will be returned immediately, unless the applicant
specifically consents to our retaining the purchase payment until the
application is complete. Once the application is complete, the initial purchase
payment will be allocated as designated by you within two valuation days.
Notwithstanding the foregoing, in jurisdictions where we must refund
the greater of aggregate purchase payments or Contract Value in the event you
exercise the free-look right, any portion of the initial purchase payment to be
allocated to a subaccount will be allocated to the Money Market Subaccount for
the free-look period following the Contract Date. At the end of that period, the
amount in the Money Market Subaccount will be allocated to the subaccounts as
designated by you based on the proportion that the allocation percentage for
each such subaccount bears to the sum of the allocation percentages set forth in
the purchase payment allocation schedule then in effect. However, allocations to
the subaccounts invested in the Landmark VIP Funds are no longer permitted.
Any subsequent purchase payments will be allocated as of the end of the
valuation period in which the subsequent purchase payment is received by us and
will be allocated in accordance with the purchase payment allocation schedule in
effect at the time the purchase payment is received. However, you may direct
individual payments to a specific subaccount or to the Fixed Account (or any
combination thereof) without changing the existing allocation schedule. The
allocation schedule may be changed by you at any time by written notice.
Changing the purchase payment allocation schedule will not change the allocation
of existing Contract Value among the subaccounts or the Fixed Account.
The Contract Values allocated to a subaccount will vary with that subaccount's
investment experience, and you bear the entire investment risk. You should
periodically review your purchase payment allocation schedule in light of market
conditions and your overall financial objectives.
Variable Contract Value
The Variable Contract Value will reflect the investment experience of the
selected subaccounts, any purchase payments paid, any surrenders or partial
withdrawals, any transfers, and any charges assessed in connection with the
Contract. There is no guaranteed minimum Variable Contract Value, and, because a
Contract's Variable Contract Value on any future date depends upon a number of
variables, it cannot be predetermined.
Calculation of Variable Contract Value. The Variable Contract Value is
determined at the end of each valuation period prior to the Annuity Income Date.
The value will be the aggregate of the values attributable to the Contract in
each of the subaccounts,
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determined for each subaccount by multiplying that subaccount's accumulation
unit value for the relevant valuation period by the number of accumulation units
of that subaccount allocated to the Contract.
Determination of Number of Accumulation Units. Prior to the Annuity Income
Date, any amounts allocated or transferred to the subaccounts will be converted
into subaccount accumulation units. The number of accumulation units to be
credited to a Contract is determined by dividing the dollar amount being
allocated or transferred to a subaccount by the accumulation unit value for that
subaccount at the end of the valuation period during which the amount is
allocated or transferred. The number of accumulation units in any subaccount
will be increased at the end of the valuation period by any purchase payments
allocated to the subaccount during the current valuation period and by any
amounts transferred to the subaccount from another subaccount or from the Fixed
Account during the current valuation period.
Any amounts transferred, surrendered or deducted from a subaccount will be
processed by cancelling or liquidating accumulation units. The number of
accumulation units to be cancelled is determined by dividing the dollar amount
being removed from a subaccount by the accumulation unit value for that
subaccount at the end of the valuation period during which the amount was
removed. The number of accumulation units in any subaccount will be decreased at
the end of the valuation period by: (a) any amounts transferred (and any
applicable transfer fee) from that subaccount to another subaccount or to the
Fixed Account; (b) any amounts withdrawn or surrendered during that valuation
period; (c) any surrender charge, Annual Contract Fee or premium tax assessed
upon a partial withdrawal or surrender; and (d) the Annual Contract Fee, if
assessed during that valuation period.
Determination of Accumulation Unit Value. The accumulation unit value for each
subaccount's first Valuation Period was set at $1.00. The accumulation unit
value for a subaccount is calculated for each subsequent Valuation Period by
multiplying that subaccount's accumulation unit value on the preceding Valuation
Day by the net investment factor for that sub-account for the Valuation Period
then ended.
The net investment factor for each subaccount for any Valuation Period is
calculated by dividing (1) by (2) and subtracting (3) from the result, where:
(1) Is the net asset value per share of the corresponding portfolio at the
end of the Valuation Period plus the per share amount of any declared
and unpaid dividends or capital gains accruing to that portfolio plus
(or minus) a per share credit (or charge) for any taxes resulting from
the investment operations of the subaccount.
(2) Is the portfolio's net asset value per share at the beginning of the
Valuation Period; and
(3) Is a factor representing the daily mortality and expense risk charge
and the administration charge deducted from the subaccount.
Transfer Privileges
General. Before the Annuity Income Date and subject to the restrictions
described below, you may transfer all or part of the amount in a subaccount or
the Fixed Account to another subaccount or the Fixed Account. However, transfers
to the subaccounts invested in the Landmark VIP Funds are no longer permitted.
The maximum amount transferable from the Fixed Account during any Contract
Year is limited to the greater of: (1) 40% of the Fixed Account Value as of the
later of the Contract Date or last Contract Anniversary; (2) the Contract Value
in the Fixed Account attributable to interest earnings; and (3) the greatest
transfer from the Fixed Account during the prior Contract Year. We also reserve
the right to defer transfers from the Fixed Account for up to 6 months following
the date of the request.
If the value remaining in any Account after a transfer is less than $100, we
have the right to transfer the entire amount instead of the requested amount. In
the absence of any other directions, such transfer will be allocated in the same
proportion as the transfer request resulting in this action.
Subject to the foregoing restrictions, there currently is no limit on the
number of transfers that can be made among or between subaccounts or to or from
the Fixed Account.
Transfers may be made based upon instructions given by written request or by
telephone. We will only honor telephone transfer requests if we have a currently
valid telephone transfer authorization form on file signed by you. A telephone
transfer authorization form received by us at our administrative office is valid
until it is rescinded or revoked in writing by you or until a subsequently dated
form signed by you is received at our administrative office. You may provide a
telephone transfer authorization with the application or pursuant to a written
request after the Contract Date.
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We employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and if we follow such procedures we will not be liable for
any losses due to unauthorized or fraudulent instructions. We, however, may be
liable for such losses if we do not follow those reasonable procedures. The
procedures we follow for telephone transfers include confirming the correct
name, contract number and social security number code for each telephone
transfer.
We reserve the right to modify, restrict, suspend or eliminate the transfer
privileges (including the telephone transfer facility) at any time, for any
class of Contracts, for any reason. In particular, we reserve the right to not
honor transfers requested by a third party holding a power of attorney from an
Owner where that third party requests simultaneous transfers on behalf of the
Owners of two or more Contracts.
Transfer Fee. Currently, a $25 fee is assessed on the 19th and each subsequent
transfer during a Contract Year. We reserve the right, however, to charge $25
for the 13th and each subsequent transfer during a Contract Year. (See "Charges
and Deductions".)
Dollar-Cost Averaging. If elected at the time of the application and at any
time thereafter by written request, you may systematically or automatically
transfer (on a monthly basis) specified dollar amounts from the Money Market
Subaccount or the Fixed Account, but not from both Accounts at the same time, to
other subaccounts for any period of time greater than six months. This is known
as the dollar-cost averaging method of investment. The fixed dollar amount will
purchase more accumulation units of a subaccount when their value is lower and
fewer units when their value is higher. Over time, the cost per unit averages
out to be less than if all purchases of units had been made at the highest value
and greater than if all purchases had been made at the lowest value. The
dollar-cost averaging method of investment reduces the risk of making purchases
only when the price of accumulation units is high. It does not assure a profit
or protect against a loss in declining markets.
The minimum transfer amount to a subaccount for dollar-cost averaging is $100
per month (or the equivalent). Each transfer from the Money Market Subaccount
must be equal to or less than 1/6 of the Money Market Subaccount value at the
time the automatic transfers begin. The maximum per transfer amount for transfer
from the Fixed Account is 1/30 of the Fixed Account value at the time the
automatic transfers begin. Once elected, dollar-cost averaging remains in effect
for a Contract until the Contract Value in the Money Market Subaccount or the
Fixed Account is inadequate to execute the requested transfers or until you
cancel the election by providing us with at least 6 days prior written notice.
You may exercise your right to cancel the election at any time. There is no
additional charge for using dollar-cost averaging. However, automatic transfers
will be treated as any other transfer in determining the number of transfers in
any Contract Year. We reserve the right to discontinue offering the dollar-cost
averaging facility at any time and for any reason.
Surrenders and Partial Withdrawals
Surrender. At any time before the Annuity Income Date, you may surrender the
Contract for its surrender value. The surrender value will be determined as of
the end of the Valuation Period during which written notice requesting surrender
is received at our administrative office. The surrender value will be paid in a
lump sum. A surrender may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
Partial Withdrawals. At any time before the Annuity Income Date, you may make
partial withdrawals of the surrender value. Partial withdrawal requests must be
in writing and specify from which Account(s) the withdrawal is to be made. The
amount withdrawn must equal at least $500 except for systematic withdrawals.
When a withdrawal is made, you will receive the amount requested to be withdrawn
less any applicable surrender charge. If a partial withdrawal request would
reduce the Contract Value to less than $2,000, we may pay the full surrender
value and terminate the Contract. We will withdraw the amount requested from the
Contract Value as of the end of the Valuation Period during which written notice
requesting the partial withdrawal is received. (See "Surrender Charge.")
A partial withdrawal may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
We currently do not impose a processing charge for withdrawals, however, we
reserve the right to assess a processing charge equal to the lesser of $25 or 2%
of the amount withdrawn for the 13th and each subsequent withdrawal during a
Contract Year. The processing charge will be in addition to any applicable
surrender charge. This charge will be deducted from the Account from which the
withdrawal is made and will reduce the Account value available for withdrawal
accordingly. If a withdrawal is made from more than one Account at the same
time, the processing charge would be deducted pro-rata from the remaining
Contract Value in such Account(s).
Surrender and Partial Withdrawal Restrictions. Your right to make surrenders
and partial withdrawals is subject to any restrictions imposed by applicable law
or employee benefit plan. We may defer payments from the Fixed Account for up to
six months.
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Restrictions on Distributions from Certain Types of Contracts. There are
certain restrictions on surrenders of and partial withdrawals from Contracts
used as funding vehicles for Code Section 403(b) retirement programs. Section
403(b)(11) of the Code restricts the distribution under Section 403(b) annuity
contracts of: (i) elective contributions made in years beginning after December
31, 1988; (ii) earnings on those contributions; and (iii) earnings in such years
on amounts held as of the last year beginning before January 1, 1989.
Distributions of those amounts may only occur upon the death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Systematic Withdrawals. You may elect in writing at the time of the
application or any time after the first Contract Anniversary to receive periodic
partial withdrawals under our systematic withdrawal plan. Under the systematic
withdrawal plan, we will make partial withdrawals on a monthly, quarterly,
semi-annual or annual basis from designated Accounts as specified by you.
Withdrawals from an Account must be at least $50 each.
The withdrawals may be requested on the following basis: (1) as a specified
dollar amount; and (2) as a specified whole percent of Contract Value.
Participation in the systematic withdrawal plan will terminate on the earliest
of the following events: (1) the value in an Account from which partial
withdrawals are being made becomes zero; (2) a termination date specified by you
is reached; or (3) you request that your participation in the plan cease.
Withdrawals under the systematic withdrawal plan are subject to a surrender
charge. (See "Surrender Charge").
Systematic withdrawals may have adverse federal income tax consequences and
you should, therefore, consult with your tax adviser before electing to
participate in the plan. We reserve the right to discontinue offering the
systematic withdrawal plan at any time.
Death Benefit Before the Annuity Income Date
Death of the Owner. Upon receipt of due proof of your death (or in the case of
Joint Owners, the death of the first Joint Owner to die) while the Contract is
in force and before the Annuity Income Date, we will pay the Beneficiary the
Death Benefit. In the case of Joint Owners, the surviving Joint Owner will be
the primary beneficiary. You may specify the manner in which the Death Benefit
is to be paid. If you do not specify how the Death Benefit is to be paid, the
Beneficiary may elect the manner in which the Death Benefit is to be
distributed.
In either case, the Death Benefit under a Non-Qualified Contract must be
distributed in full within 5 years after the deceased Owner's death unless:
1. The benefit is paid as a life annuity or an annuity with a period
certain not exceeding the Beneficiary's life expectancy with payments
beginning within one year of the deceased Owner's death; or
2. The Beneficiary is the surviving spouse of the deceased Owner, in
which case he or she may continue this Contract as the Owner.
If the Beneficiary is not a natural person, the benefit must be distributed
within 5 years of your death. Similar rules apply to Qualified Contracts.
Death Benefit. If you die prior to age 75, the Death Benefit will be the
greatest of:
1. The Contract Value on the date we receive due proof of your death;
2. The Contract Value on the most recent 5th Contract Anniversary
immediately preceding the date of death, increased by the dollar
amount of any purchase payments and reduced by the dollar amount of
any withdrawals made since that Contract Anniversary; or
3. 100% of all purchase payments made less the dollar amount of any
purchase payment withdrawals since the date this Contract was issued.
If you die on or after your 75th birthday, the Death Benefit will equal the
greater of:
1. The Contract Value on the date we receive due proof of your death; or
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2. The Death Benefit on your 75th birthday, less the dollar amount of any
subsequent withdrawals.
3. 100% of all purchase payments made less the dollar amount of any
purchase payment withdrawals since the date this Contract was issued.
If the Death Benefit is paid immediately in one lump sum, the Contract will
end on the date of payment. If the Death Benefit is not taken immediately in one
lump sum, the Death Benefit will become the new Contract Value. Any resulting
increase in the Contract Value will be allocated to each Account in proportion
to the distribution of the Contract Value on the date we receive due proof of
your death.
If you die (or in the case of Joint Owners, the first Owner to die) prior to
the Annuity Income Date and there are two or more Beneficiaries, each
Beneficiary will receive an equal share of the Death Benefit unless you specify
otherwise in writing. If a named Beneficiary dies before you, the interest of
that Beneficiary will end on his or her death. If no Beneficiary is named or no
Beneficiary survives you, the commuted value of the Death Benefit will be paid
to your estate.
Death of the Annuitant Prior to the Annuity Income Date: If the Annuitant dies
prior to the Annuity Income Date, you may designate a new Annuitant. If no new
Annuitant is named within 30 days after the death of the Annuitant, you will
become the Annuitant under the Contract. If you are the Annuitant, upon receipt
of due proof of your death, we will pay the Beneficiary the Death Benefit, as
described above.
Annuity Payments on the Annuity Income Date
The Annuity Income Date may be elected by you at the time of the application
or any time thereafter. The Annuity Income Date may not be after the later of
the first day of the month following the Annuitant's 85th birthday or 10 years
after the Contract Date. You may change the Annuity Income Date at any time
provided you give us 30 days prior written notice. If no Annuity Income Date is
elected, it will be the first day of the calendar month following the
Annuitant's 65th birthday or ten years after the Contract Date, if later.
On the Annuity Income Date, the Contract Value, less any applicable prior
undeducted premium taxes, will be applied under the life income annuity payment
option with ten years guaranteed, unless you elect to have the proceeds paid
under another payment option or to receive the surrender value in a lump sum.
(See "Annuity Payment Options.") Unless you instruct us otherwise, amounts in
the Fixed Account will be used to provide a fixed-annuity payment option and
amounts in the Separate Account will be used to provide a variable annuity
payment option.
Any time prior to the Annuity Income Date, you may designate or change the
payee (Annuitant) to receive payments under the applicable annuity payment
option.
Payments
Any surrender, partial withdrawal, or death benefit will usually be paid
within seven days of receipt of a written request, any information or
documentation reasonably necessary to process the request, and (in the case of a
Death Benefit) receipt and filing of due proof of death. However, payments may
be postponed if:
1. the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on the exchange is restricted as
determined by the SEC; or
2. the SEC permits by an order the postponement for the protection of
Contract Owners; or
3. the SEC determines that an emergency exists that would make the
disposal of securities held in the subaccount or the determination of
the value of the subaccount's net assets not reasonably practicable.
If a recent check or draft has been submitted, we have the right to delay
payment until we have assured ourselves that the check or draft has been
honored.
We have the right to defer payment of any surrender or partial withdrawal or
transfer from the Fixed Account for up to six months from the date of receipt of
written notice for such a surrender or transfer. If payment is not made within
10 days after receipt of documentation necessary to complete the transaction,
interest will be added to the amount paid from the date of receipt of
documentation at the minimum rate required by law or the Current Fixed Account
Interest Rate, if greater.
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Modification
Upon notice to you, or the Annuitant, we may modify the Contract if:
1. necessary to permit the Contract or the Separate Account to comply
with any applicable law or regulation issued by a government agency;
or
2. necessary to reflect a change in the operation of the Separate Account
or a subaccount; or
3. necessary to add, delete or modify an Account; or
4. necessary to add, modify or delete subaccounts or portfolios.
In the event of most such modifications, we will make appropriate endorsement
to the Contract.
Owner
You are the Owner of the Contract. You are also the Annuitant unless a
different Annuitant is named. Any Joint Owner must be your spouse unless we
agree otherwise. For Qualified Contracts, the Owner must be the Annuitant and
Joint Owners are not permitted. Before the Annuity Income Date you have all the
rights under the Contract, subject to the rights of any assignee of record. This
includes the right to:
1. Transfer values between Accounts and designate or change the
allocation of purchase payments to each Account;
2. Name and/or change the Beneficiaries, Owner or Annuitant;
3. Surrender the Contract in whole or in part for cash;
4. Assign the Contract Value, in whole or in part;
5. Designate and change the Annuity Income Date; and
6. Elect or change the Annuity Payment Option.
All elections, authorizations and change requests must be made to us in
writing. Upon receipt by us, any change will be effective as of the date it was
signed by you, except that any values or amounts payable under the Contract will
be determined as of the Valuation Day on or next following the date of receipt.
Payment made or action taken by us prior to the time written notice is received
will discharge our liability under this Contract to the extent of such action or
payment. The consent of any irrevocable Beneficiary is required to exercise any
right. If Joint Owners are named, both must consent to any change.
Reports to Owners
At least annually, we will mail to each Owner, at such Owner's last known
address of record, a report setting forth the Contract Value, subaccount values,
and Fixed Account Value, as well as your current purchase payment allocation
directions. We will also provide you with shareholder reports of the Funds as
well as other notices, reports or documents as required by law.
Inquiries
Inquiries regarding a Contract may be made by writing to us at our
administrative office.
THE FIXED ACCOUNT
You may allocate some or all of the purchase payments and transfer some or all
of the Contract Value to the Fixed Account, which is part of our General Account
and pays interest at declared rates guaranteed for one year. Our General Account
supports our insurance and annuity obligations. Since the Fixed Account is part
of the General Account, we assume the risk of investment gain or loss on this
amount. All assets in the General Account are subject to our general liabilities
from business operations. The Fixed Account may not be available in all states.
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The Fixed Account has not been, and is not required to be, registered with the
SEC under the Securities Act of 1933, and neither the Fixed Account nor our
General Account has been registered as an investment company under the 1940 Act.
Therefore, neither our General Account, the Fixed Account, nor any interests
therein are generally subject to regulation under the 1933 Act or the 1940 Act.
The disclosures relating to the Fixed Account which are included in this
prospectus are for your information and have not been reviewed by the SEC.
However, such disclosures may be subject to certain generally applicable
provisions of federal securities laws relating to the accuracy and completeness
of statements made in prospectuses.
Fixed Account Value
The Fixed Account Value is credited with interest, as described below. The
Fixed Account Value reflects interest credited, the allocation of purchase
payments, transfers of Contract Value from the Fixed Account, surrenders and
partial withdrawals from the Fixed Account and charges assessed in connection
with the Contract. The Fixed Account Value is guaranteed to accumulate at a
minimum effective annual interest rate of 3%.
Beginning on the date we issue the Contract, we will credit any portion of the
initial purchase payment allocated to the Fixed Account with a specified
interest rate, known as the Initial Fixed Account Interest Rate. We may declare
different initial interest rates for each subsequent purchase payment or
transfer into the Fixed Account. We will guarantee the initial rate credited for
one year from the date the purchase payment is received or transfer is
effective. Thereafter, the interest rate earned will be the applicable Current
Fixed Account Interest Rate as we may declare.
The Current Fixed Account Interest Rate is a rate we establish from time to
time for all amounts under the Contract that have been allocated to the Fixed
Account for more than one year. We may change the Current Fixed Account Interest
Rate from time to time to reflect prevailing market conditions but not more
often than once every twelve months. The Initial Fixed Account Interest Rate and
the Current Fixed Account Interest Rate will vary but will always be equal to or
greater than an effective annual rate of 3%.
The maximum amount transferable from the Fixed Account during any Contract
Year is limited to the greatest of: (1) 40% of the Fixed Account Value as of the
later of the Contract Date or last Contract Anniversary; (2) the Contract Value
in the Fixed Account attributable to interest earnings; and (3) the greatest
transfer from the Fixed Account during the prior Contract Year. If the value
remaining in the Fixed Account after a transfer is less than $100, we have the
right to transfer the entire amount instead of the requested amount. We also
reserve the right to defer transfers from the Fixed Account for up to 6 months
following the date of the request.
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
General. No charge for sales expenses is deducted from purchase payments at
the time purchase payments are paid. However, a surrender charge may be deducted
upon surrender or partial withdrawal of purchase payments. A surrender charge
also may be deducted from amounts applied to annuity options not providing a
life annuity or a life annuity with a period certain of at least five years.
Surrender charges are not deducted upon payment of a death benefit or from
withdrawals or surrender of earnings under the Contract. (See "Annuity Payments
on the Annuity Income Date".)
In the event surrender charges are not sufficient to cover sales expenses, the
loss will be borne by us; conversely, if the amount of such charges proves more
than enough to cover such expenses, the excess will be retained by us. We do not
currently believe that the surrender charges imposed will cover the expected
costs of distributing the Contracts. Any shortfall will be made up from our
general assets which may include amounts derived from the mortality and expense
risk charge.
Charge for Partial Withdrawal or Surrender. A charge is imposed on partial
withdrawals and surrenders equal to a specified percentage of the purchase
payments withdrawn. The surrender charge is calculated by multiplying the
applicable percentages specified in the table below by the purchase payments
withdrawn. The number of years since the date of a purchase payment being
withdrawn will determine the surrender charge percentage that will apply to that
purchase payment. The surrender charge is calculated using the assumption that
all earnings are withdrawn first and then all purchase payments are withdrawn on
a first-in-first-out basis.
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Number of Years Since Charge as Percentage
Date of Purchase Payment of Purchase Payment Withdrawn
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5+ 0%
Any applicable surrender charge is deducted from the amount withdrawn.
Amounts Not Subject to Surrender Charge. During each Contract Year, up to 10%
of all purchase payments not previously withdrawn, less any prior withdrawal of
purchase payments, may be withdrawn without the imposition of a surrender
charge. Purchase payments surrendered or withdrawn in excess of this 10% will be
assessed a surrender charge. This right is not cumulative from Contract Year to
Contract Year.
Waiver of Surrender Charge. Where allowed by state law, upon written notice
from you prior to your 80th birthday, the surrender charge will be waived on any
partial withdrawal or surrender after you are: (1) diagnosed as having a
terminal illness; or (2) confined to a hospital, nursing home or long term care
facility for at least 30 consecutive days, provided (a) confinement is for
medically necessary reasons at the recommendation of a physician; (b) the
hospital, nursing home or long term care facility is licensed or otherwise
recognized and operating as such by the proper authority in the state where it
is located, the Joint Commission on Accreditation of Hospitals or Medicare; and
(c) the withdrawal or surrender request is received by us no later than 91 days
after the last day of your confinement.
Annual Contract Fee
On the last day of each Contract Year prior to the Annuity Income Date, we
deduct from the Contract Value an Annual Contract Fee of $30 to reimburse us for
administrative expenses relating to the Contract. The fee will be charged by
reducing the value of all active Accounts on a pro-rata basis. With respect to
each subaccount, we deduct this fee by cancelling accumulation units. The number
of accumulation units deducted from each subaccount will be determined by
dividing the pro-rata portion of the fee applicable to that subaccount by the
accumulation unit value of that subaccount on the date the fee is assessed. We
do not expect to make a profit on this fee. The Annual Contract Fee also is
deducted upon surrender of a Contract if other than on the last day of each
Contract Year. We do not deduct the Annual Contract Fee under Contracts with a
Contract Value of $25,000 or more on the date of deduction. In addition, we do
not deduct the Annual Contract Fee under Contracts for which purchase payments
of at least $2,500 ($2,000 for Qualified Contracts), exclusive of the initial
purchase payment, are received during the Contract Year.
Asset-Based Administration Charge
We deduct a daily administration charge to compensate us for certain expenses
we incur in administration of the Contract and the Separate Account. The charge
is deducted from the assets of the Separate Account at an annual rate of 0.15%.
We do not expect to make a profit from this charge.
Transfer Processing Fee
We reserve the right to charge $25 for the 13th and each subsequent transfer
during a Contract Year. Currently, no fee is assessed until the 19th transfer
during the Contract Year. For the purpose of assessing such a transfer fee, each
transfer from any Account, including monthly transfers under the dollar-cost
averaging facility, would be considered to be one transfer, regardless of the
number of subaccounts into which value is transferred. The transfer fee would be
deducted from the Account from which the transfer is made and will reduce the
Account Value available for transfer accordingly. If a transfer is made from
more than one Account at the same time, separate transfer fees would be deducted
from the remaining Contract Value in each Account.
Mortality and Expense Risk Charge
To compensate us for assuming mortality and expense risks, we deduct a daily
mortality and expense risk charge from the assets of the Separate Account. The
charge is at a daily rate of 0.0034462%. If applied on an annual basis this rate
would be 1.25% (approximately 0.50% for mortality risk and 0.75% for expense
risk).
The mortality risk we assume is that Annuitants may live for a longer period
of time than estimated when the guarantees in the Contract were established.
Because of these guarantees, each payee is assured that longevity will not have
an adverse effect on
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the annuity payments received. The mortality risk that we assume also includes a
guarantee to pay a Death Benefit if an Owner dies before the Annuity Income
Date. The expense risk that we assume is the risk that the administrative fees
and transfer fees (if imposed) may be insufficient to cover actual future
expenses.
If the mortality and expense risk charge is insufficient to cover the actual
cost of the mortality and expense risks undertaken by us, we will bear the
shortfall. Conversely, if the charge proves more than sufficient, the excess
will be profit to us and will be available for any proper corporate purpose
including, among other things, payment of sales expenses.
Fund Expenses
Because the Separate Account purchases shares or units of the Landmark VIP
Funds, the Variable Annuity Portfolios, the Fidelity Variable Insurance Products
Fund, the Fidelity Variable Insurance Products Fund II, the AIM Variable
Insurance Funds, Inc. and the MFS Variable Insurance Trust, the net assets of
each subaccount of the Separate Account will reflect the investment advisory
fees and other operating expenses incurred by the corresponding portfolio of the
relevant Fund. See the accompanying current Prospectuses for the Funds.
Premium Taxes
Various states and other governmental entities may levy a premium tax,
currently ranging up to 3.5%, on annuity contracts issued by insurance
companies. Premium tax rates are subject to change from time to time by
legislative and other governmental action. In addition, other government units
within a state may levy such taxes.
The timing of tax levies varies from one taxing authority to another. If
premium taxes are applicable to a Contract, we will deduct such premium taxes
against Contract Value in a manner determined by us in compliance with
applicable state law. Premium taxes deducted from Contract Value currently are
assessed either: (1) at the time the Contract is surrendered; (2) on the Annuity
Income Date; or (3) at such other date as the taxes are assessed.
Other Taxes
Currently, no charge is made against the Separate Account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the Separate Account or the Contracts. We may, however, make
such a charge in the future from surrender value, death benefits or annuity
payments, as appropriate. Such taxes may include taxes (levied by any government
entity) which we determine to have resulted from: (1) the establishment or
maintenance of the Separate Account; (2) receipt by us of purchase payments; (3)
issuance of the Contracts; or (4) the payment of annuity payments.
ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
On the Annuity Income Date, the Contract Value less any premium tax previously
unpaid and less any applicable surrender charge will be applied under an annuity
payment option. (See "Annuity Payments on the Annuity Income Date.") If an
election of an annuity payment option is not on file at our administrative
office on the Annuity Income Date, the proceeds will be paid as a life income
annuity with payments for ten years guaranteed. The value of each subaccount
will be applied to provide a variable annuity and the value of the Fixed Account
will be applied to provide a fixed dollar annuity. An annuity payment option may
be elected, revoked, or changed by you at any time before the Annuity Income
Date upon 30 days prior written notice. You may elect to apply any portion of
the Contract Value less any premium tax previously unpaid to provide either
variable annuity payments or fixed annuity payments or a combination of both.
The annuity payment options available are described below. In addition, you may
elect any other method of payment that is mutually agreeable to you and us.
We reserve the right to refuse the election of an annuity payment option other
than paying the Contract Value, less any applicable surrender charge and premium
tax previously unpaid, in a lump sum if the total amount applied to an annuity
payment option would be less than $2,000. If the amount of any annuity payment
for each affected Account would be or becomes less than $50.00, we may reduce
the frequency of payments to an interval that would result in payments of at
least $50.00.
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Fixed Annuity Payments
Fixed annuity payments are periodic payments from us to the designated payee,
the amount of which is fixed and guaranteed by us. The amount of each payment
depends only on the form and duration of the annuity payment option chosen, the
age of the Annuitant, the sex of the Annuitant (if applicable), the amount
applied to purchase the annuity payments and the applicable annuity purchase
rates in the Contract. The annuity purchase rates in the Contract are based on a
minimum guaranteed interest rate of 3.0%. We may, in our sole discretion, make
annuity payments in an amount based on a higher interest rate.
Legal Developments Regarding Unisex Actuarial Tables
In 1983, the United States Supreme Court held in Arizona Governing Committee
v. Norris that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. In addition, legislative,
regulatory, or decisional authority of some states may prohibit use of
sex-distinct mortality tables under certain circumstances. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the impact of these authorities on any employment-related insurance or
benefits program before purchasing the Contract.
Variable Annuity Payments
The dollar amount of the first monthly variable annuity payment is determined
by dividing the Value of the Accounts to be applied to a variable annuity on the
Annuity Income Date by 1,000 and multiplying the result by the appropriate
factor in the annuity tables provided in the Contract. The appropriate factor is
based on annual net investment return of 3.0%. The amount of each payment will
depend on the age of the Annuitant(s) at the time the first payment is due, and
the sex of the Annuitant(s), if applicable, unless otherwise required by law.
The net investment performance of a subaccount is translated into a variation
in the amount of variable annuity payments through the use of annuity units. The
amount of the first variable annuity payment associated with each subaccount is
applied to purchase subaccount annuity units at the annuity unit value for the
subaccount on the Annuity Income Date. The number of annuity units of each
subaccount attributable to a Contract then remains fixed. Each subaccount has a
separate subaccount annuity unit value that changes with each valuation period
in substantially the same manner as do accumulation units of the subaccount.
The dollar value of each variable annuity payment after the first is equal to
the sum of the amounts determined by multiplying the number of subaccount
annuity units under a Contract for a particular subaccount by the annuity unit
value for the subaccount for the valuation period which ends no earlier than the
fifth Valuation Day preceding the date of each such payment. If the net
investment return of the subaccount for a payment period is equal to the
pro-rated portion of the 3.0% annual assumed investment rate, the variable
annuity payment attributable to that subaccount for that period will equal the
payment for the prior period. To the extent that such net investment return
exceeds an annualized rate of 3.0% for a payment period, the payment for that
period will be greater than the payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 3.0%, the
payment for that period will be less than the payment for the prior period.
Once every three months, after the Annuity Income Date, the Annuitant may
elect, in writing, to transfer among the selected subaccount(s) on which
variable annuity payments are based. If such a transfer is elected, the number
of annuity units will change and be determined by "a" times "b," less any
applicable fees, divided by "c" where:
"a" is the number of annuity units being transferred;
"b" is the subaccount annuity unit value from which the transfer is made;
and
"c" is the annuity unit value of the subaccount to which the transfer is
made.
Thereafter, the number of annuity units will remain fixed until transferred.
After the Annuity Income Date, no transfers may be made between the subaccounts
and the Fixed Account. In addition, transfers to the subaccounts investing in
the Landmark VIP Funds are no longer permitted.
Description of Annuity Payment Options
Option 1: Income for a Fixed Period. We will make annuity payments to
a payee each month for a fixed number of years. The number of years
must be at least 5 and no more than 30. If the Annuitant dies before
the end of the designated period, payments will continue to be made to
the person(s) named by the Annuitant to receive such guaranteed
payments for the
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remainder of the fixed period. If no such person is named or none
survive the Annuitant, the remainder of the guaranteed payments will
be paid to the Annuitant's estate. This option is available only as a
fixed dollar annuity and if the Contract has been in force for 5
years, unless we agree otherwise.
Option 2: Life Annuity. We will make annuity payments to a payee each
month as long as the Annuitant is alive. When the Annuitant dies, all
payments will cease.
Option 3: Life Annuity with Period Certain. We will make annuity
payments to a payee each month as long as the Annuitant is alive. If
the Annuitant dies prior to the end of the guaranteed period, payments
will continue to be made to the person(s) named by the Annuitant to
receive such guaranteed payments for the remainder of the fixed
period. If no such person is named or none survive the Annuitant, the
remainder of the guaranteed payments will be paid to the Annuitant's
estate.
Option 4: Joint and Survivor Annuity. We will make annuity payments to
a payee each month for the joint lifetime of the Annuitant and another
person. At the death of either, payments will continue to be made to
the payee. When the survivor dies, all payments will cease.
The amount of each payment will be determined from the tables in the Contract
that apply to the particular option using the Annuitant's age and sex (if
applicable). Age will be determined from the last birthday at the due date of
the first payment.
Note Carefully: Under annuity payment options 2 and 4 it would be possible for
only one annuity payment to be made if the Annuitant(s) were to die before the
due date of the second annuity payment; only two annuity payments if the
Annuitant(s) were to die before the due date of the third annuity payment; and
so forth.
Alternate Payment Option. In lieu of one of the above options, the Contract
Value, less any applicable surrender charge and premium taxes previously unpaid,
or Death Benefit, as applicable, may be applied to any other payment option made
available by us or requested and agreed to by us
YIELDS AND TOTAL RETURNS
From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the subaccounts of the Separate Account.
These figures are based on historical earnings and do not indicate or project
future performance. We also may, from time to time, advertise or include in
sales literature subaccount performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance appears in the Statement of Additional
Information.
Effective yields and total returns for the subaccounts are based on the
investment performance of the corresponding portfolio. The performance of a
portfolio in part reflects its expenses. See the prospectuses for the
portfolios.
The yield of the Money Market Subaccount refers to the annualized income
generated by an investment in the subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the subaccount is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a subaccount (except the Money Market Subaccount) refers to the
annualized income generated by an investment in the subaccount over a specified
30-day or one-month period. The yield is calculated by assuming that the income
generated by the investment during that 30-day or one-month period is generated
each period over a 12-month period and is shown as a percentage of the
investment.
The total return of a subaccount refers to return quotations assuming an
investment under a Contract has been held in the subaccount for various periods
of time. For periods prior to the date the Separate Account commenced
operations, performance information will be calculated based on the performance
of the corresponding portfolios and the assumption that the subaccounts were in
existence for the same periods as those indicated for the portfolios, with the
level of Contract charges that were in effect at the inception of the
subaccounts. When a subaccount or portfolio has been in operation for one, five,
and ten years, respectively, the total return for these periods will be
provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which
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total return quotations are provided. Average annual total return information
shows the average annual percentage change in the value of an investment in the
subaccount from the beginning date of the measuring period to the end of that
period. This standardized version of average annual total return reflects all
historical investment results, less all charges and deductions applied against
the subaccount (including any surrender charge that would apply if an Owner
terminated the Contract at the end of each period indicated, but excluding any
deductions for premium taxes).
In addition to the standard version described above, total return performance
information computed on two different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the surrender charge. In addition, we may from time to time
disclose cumulative total return for Contracts funded by subaccounts.
From time to time, yields, standard average annual total returns, and
non-standard total returns for the portfolios may be disclosed, including such
disclosures for periods prior to the date the Separate Account commenced
operations.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.
In advertising and sales literature, the performance of each subaccount may
be compared with the performance of other variable annuity issuers in general or
to the performance of particular types of variable annuities investing in mutual
funds, or investment portfolios of mutual funds with investment objectives
similar to the subaccount. Lipper Analytical Services, Inc. ("Lipper"), Variable
Annuity Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar")
are independent services which monitor and rank the performance of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers as
well as variable annuity issuers. VARDS rankings compare only variable annuity
issuers. The performance analyses prepared by Lipper, VARDS and Morningstar each
rank such issuers on the basis of total return, assuming reinvestment of
distributions, but do not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration. In
addition, VARDS prepares risk rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to which
funds provide the highest total return within various categories of funds
defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for the expense of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
We may also report other information including the effect of tax-deferred
compounding on a subaccount's investment returns, or returns in general, which
may be illustrated by tables, graphs, or charts. All income and capital gains
derived from subaccount investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the subaccount investment
experience is positive.
FEDERAL TAX MATTERS
The Following Discussion is General and
Is Not Intended as Tax Advice
Introduction
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by us. Any person concerned about
these tax implications should consult a competent tax advisor before initiating
any transaction. This discussion is based upon our understanding of the present
federal income tax laws, as they are currently interpreted by the Internal
Revenue Service ("IRS"). No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and used
in connection with plans qualifying for favorable tax treatment. The Qualified
Contract is designed for use by individuals whose purchase payments are
comprised solely of proceeds
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from and/or contributions under retirement plans which are intended to qualify
as plans entitled to special income tax treatment under Sections 403(b), or 408
of the Code. The ultimate effect of federal income taxes on the amounts held
under a Contract, or annuity payments, and on the economic benefit to you, the
Annuitant, or the Beneficiary depends on the type of retirement plan, on the tax
and employment status of the individual concerned, and on the Company's tax
status. In addition, certain requirements must be satisfied in purchasing a
Qualified Contract with proceeds from a tax-qualified plan and receiving
distributions from a Qualified Contract in order to continue receiving favorable
tax treatment. Therefore, purchasers of Qualified Contracts should seek
competent legal and tax advice regarding the suitability of a Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of a Contract. The following discussion assumes that Qualified
Contracts are purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special federal income tax treatment.
Tax Status of the Contract
Diversification Requirements. Section 817(h) of the Code provides that
separate account investment underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Separate
Account, through each underlying portfolio, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various subaccounts may be
invested. Although we do not have direct control over the portfolios in which
the Separate Account invests, we believe that each portfolio in which the
Separate Account owns shares will meet the diversification requirements, and
therefore, the Contract will be treated as an annuity contract under the Code.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incident of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance will
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets.
These differences could result in an owner being treated as the owner of the
assets of the Separate Account. In addition, we do not know what standards will
be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. We therefore reserve the right to
modify the Contract as necessary to attempt to prevent the contract owner from
being considered the owner of any portion of the assets of the Separate Account.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any owner dies on or after the
Annuity Income 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 that owner's death; and (b) if any owner dies prior to the Annuity
Income Date, the entire interest in the Contract will be distributed within five
years after the date of the owner's death. These requirements will be considered
satisfied as to any portion of the owner's interest which is payable to or for
the benefit of a "designated beneficiary" and which is distributed over the life
of such beneficiary or over a period not extending beyond the life expectancy of
that beneficiary, provided that such distributions begin within one year of that
owner's death. The owner's "designated beneficiary" is the individual designated
by the owner as a beneficiary and to whom ownership of the contract passes by
reason of death of the owner. However, if the owner's "designated beneficiary"
is the surviving spouse of the deceased owner, the Contract may be continued
with the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.
Other rules may apply to Qualified Contracts.
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.
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Taxation of Annuities
In General. Section 72 of the Code governs taxation of annuities in general.
We believe that an owner who is a natural person is not taxed on increases in
the value of a Contract until distribution occurs by withdrawing all or part of
the Contract Value (e.g., partial withdrawals and surrenders) or as annuity
payments under the payment option elected. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Contract Value (and
in the case of a Qualified Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or payment option) is taxable
as ordinary income.
The owner of any annuity contract who is not a natural person generally must
include in income any increase in the excess of the contract value over the
"investment in the contract" during the taxable year. There are some exceptions
to this rule, and a prospective owner that is not a natural person may wish to
discuss these with a competent tax advisor.
The following discussion generally applies to Contracts owned by natural
persons.
Partial Withdrawals. In the case of a partial withdrawal from a Qualified
Contract, under Section 72(e) of the Code, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the portion,
if any, of any purchase payments paid by or on behalf of the individual under a
Contract which was not excluded from the individual's gross income. For
Contracts issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from Qualified Contracts.
In the case of a partial withdrawal (including systematic withdrawals) from a
Non-Qualified Contract, under Section 72(e), any amounts received are generally
first treated as taxable income to the extent that the contract value
immediately before the partial withdrawal exceeds the "investment in the
contract" at that time. Any additional amount withdrawn is not taxable.
In the case of a full surrender under a Qualified or Non-Qualified Contract,
the amount received generally will be taxable only to the extent it exceeds the
"investment in the contract."
Exchanges. Section 1035 of the Code generally provides that no gain or loss
shall be recognized on the exchange of one annuity contract for another. If the
surrendered contract was issued prior to August 14, 1982, the tax rules formerly
provided that the surrender was taxable only to the extent the amount received
exceeds the owner's investment in the contract will continue to apply to amounts
allocable to investments in that contract prior to August 14, 1982. In contrast,
contracts issued after January 19, 1985 in a Code Section 1035 exchange are
treated as new contracts for purposes of the penalty and distribution-at-death
rules. Special rules and procedures apply to Section 1035 transactions.
Prospective owners wishing to take advantage of Section 1035 should consult
their tax adviser.
Annuity Payments. Although tax consequences may vary depending on the payment
option elected under an annuity contract, under Code Section 72(b), generally
(prior to recovery of the investment in the contract) gross income does not
include that part of any amount received as an annuity under an annuity contract
that bears the same ratio to such amount as the investment in the contract bears
to the expected return at the annuity starting date. For variable annuity
payments, the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the "investment in the contract" by the
total number of expected periodic payments. However, the entire distribution
will be taxable once the recipient has recovered the dollar amount of his or her
"investment in the contract." For fixed annuity payments, in general, there is
no tax on the portion of each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value of the annuity
payments for the term of the payments; however, the remainder of each annuity
payment is taxable until the recovery of the investment in the contract, and
thereafter the full amount of each annuity payment is taxable. If death occurs
before full recovery of the investment in the contract, the unrecovered amount
may be deducted on the Annuitant's final tax return.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a Contract
because of the death of an owner. Generally, such amounts are includible in the
income of the recipient as follows: (i) if distributed in a lump sum, they are
taxed in the same manner as a full surrender of the contract or (ii) if
distributed under a payment option, they are taxed in the same way as annuity
payments. For these purposes, the investment in the Contract is not affected by
the owner's death. That is, the investment in the Contract remains the amount of
any purchase payments paid which were not excluded from gross income.
Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant to
a Non-Qualified Contract, there may be imposed a federal penalty tax equal to
10% of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
1. made on or after the taxpayer reaches age 59 1/2;
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2. made on or after the death of the holder (or if the holder is not an
individual, the death of the primary annuitant);
3. attributable to the taxpayer's becoming disabled;
4. a part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;
5. made under certain annuities issued in connection with structured
settlement agreements; and
6. made under an annuity contract that is purchased with a single
purchase payment when the Annuity Income Date is no later than a year
from purchase of the annuity and substantially equal periodic payments
are made, not less frequently than annually, during the annuity
payment period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. As of the date of this
prospectus, Congress is not entertaining legislation that would change the
taxation of annuities; there is always the possibility that the tax treatment of
annuities could change by legislation or other means (such as IRS regulations,
revenue rulings, judicial decisions, etc.). Moreover, it is also possible that
any change could be effective prior to the date of the change.
Transfers, Assignments or Exchanges of a Contract
A transfer of ownership of a Contract, the designation of an annuitant, payee
or other beneficiary who is not also the owner, the selection of certain Annuity
Income Dates or the exchange of a Contract may result in certain tax
consequences to the owner that are not discussed herein. An owner contemplating
any such transfer, assignment, or exchange of a Contract should contact a
competent tax advisor with respect to the potential tax effects of such a
transaction.
Withholding
Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding. Certain states also
require withholding of state income tax whenever federal income tax is withheld.
Multiple Contracts
All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by us (or our affiliates) to the same owner during any
calendar year are treated as one annuity Contract for purposes of determining
the amount includible in gross income under Section 72(e). The effects of this
rule are not yet completely clear; however, it could affect the time when income
is taxable and the amount that might be subject to the 10% penalty tax described
above. In addition, the Treasury Department has specific authority to issue
regulations that prevent the avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. There may also be other situations
in which the Treasury may conclude that it would be appropriate to aggregate two
or more annuity contracts purchased by the same owner. Accordingly, you should
consult a competent tax advisor before purchasing more than one annuity contract
in any calendar year.
Taxation of Qualified Plans
The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract Owners, the
Annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but we shall not be bound by the terms and conditions of such
plans to the extent such terms contradict the Contract, unless we consent. Some
retirement plans are subject to distribution and other requirements that are not
incorporated
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<PAGE>
into our Contract administration procedures. Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts comply with applicable law.
Brief descriptions follow of the various types of qualified retirement plans in
connection with a Contract. We will amend the Contract as necessary to conform
it to the requirements of the Code.
Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA". These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible, and on the
time when distributions may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into an IRA. Sales of the Contract for use with IRAs may be subject to special
requirements of the Internal Revenue Service. Employers may establish Simplified
Employee Pension (SEP) Plans to provide IRA contributions on behalf of their
employees.
Tax Sheltered Annuities. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the purchase payments paid, within certain limits, on a Contract
that will provide an annuity for the employee's retirement. These purchase
payments may be subject to FICA (social security) tax.
Restrictions Under Qualified Plans. Other restrictions with respect to the
election, commencement or distribution of benefits may apply under Qualified
Contracts or under the terms of the plan in respect of which Qualified Contracts
are issued.
Possible Charge for the Company's Taxes
At the present time, we make no charge to the subaccounts for any Federal,
state, or local taxes that we incur which may be attributable to such
subaccounts or the Contracts. We, however, reserve the right in the future to
make a charge for any such tax or other economic burden resulting from the
application of the tax laws that we determine to be properly attributable to the
subaccounts or to the Contracts.
Other Tax Consequences
As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in the Prospectus. Further, the
Federal income tax consequences discussed herein reflect our understanding of
current law and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each owner or
recipient of the distribution. A competent tax advisor should be consulted for
further information.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be offered to the public on a continuous basis. We do not
anticipate discontinuing the offering of the Contracts, but reserve the right to
do so. Applications for Contracts are solicited by agents who are licensed by
applicable state insurance authorities to sell our variable annuity contracts
and who are also registered representatives of Citicorp Investment Services,
Inc. which entered into a selling agreement with The Landmark Funds
Broker-Dealer Services, Inc. Citicorp Investment Services, Inc. is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc.
The Landmark Funds Broker-Dealer Services, Inc. acts as the principal
underwriter, as defined in the 1940 Act, of the Contracts for the Separate
Account pursuant to an Underwriting Agreement with us. The Landmark Funds
Broker-Dealer Services, Inc. is not obligated to sell any specific number of
Contracts. The Landmark Funds Broker-Dealer Services, Inc.'s principal business
address is 6 St. James Avenue, Suite 900, Boston, Massachusetts 02116.
We may pay sales commissions to broker-dealers up to an amount equal to 6.5%
of the purchase payments paid under a Contract. These broker-dealers are
expected to compensate sales representatives in varying amounts from these
commissions. We also may pay other distribution expenses such as production
incentive bonuses, agent's insurance and pension benefits, and agency expense
allowances. These distribution expenses do not result in any additional charges
under the Contracts that are not described under "Charges and Deductions."
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LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or the
assets of the Separate Account are subject. The Company is not involved in any
litigation that is of material importance in relation to its total assets or
that relates to the Separate Account.
VOTING PRIVILEGES
In accordance with our view of current applicable law, we will vote portfolio
shares held in the Separate Account at regular and special shareholder meetings
of the portfolios in accordance with instructions received from persons having
voting interests in the corresponding subaccounts. If, however, the 1940 Act or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, or we otherwise determine that we are allowed to vote the
shares in our right, we may elect to do so.
The number of votes that an Owner or Annuitant has the right to instruct will
be calculated separately for each subaccount of the Separate Account, and may
include fractional votes. Prior to the Annuity Income Date, an Owner holds a
voting interest in each subaccount to which the Contract Value is allocated.
After the Annuity Income Date, the Annuitant has a voting interest in each
subaccount from which variable annuity payments are made.
For each Owner, the number of votes attributable to a subaccount will be
determined by dividing the Contract Value attributable to that Owner's Contract
in that subaccount by the net asset value per share of the portfolio in which
that subaccount invests. For each Annuitant, the number of votes attributable to
a subaccount will be determined by dividing the liability for future variable
annuity payments to be paid from that subaccount by the net asset value per
share of the portfolio in which that subaccount invests. This liability for
future payments is calculated on the basis of the mortality assumptions, the
3.0% assumed investment rate used in determining the number of annuity units of
that subaccount credited to the Annuitant's Contract and annuity unit value of
that subaccount on the date that the number of votes is determined. As variable
annuity payments are made to the Annuitant, the liability for future payments
decreases as does the number of votes.
The number of votes available to an Owner or Annuitant will be determined as
of the date coincident with the date established by the portfolio for
determining shareholders eligible to vote at the relevant meeting of the
portfolio's shareholders. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established
for the portfolio. Each Owner or Annuitant having a voting interest in a
subaccount will receive proxy materials and reports relating to any meeting of
shareholders of the portfolio in which that subaccount invests.
Portfolio shares as to which no timely instructions are received and shares
held by us in a subaccount as to which no Owner or Annuitant has a beneficial
interest will be voted in proportion to the voting instructions which are
received with respect to all Contracts participating in that subaccount. Voting
instructions to abstain on any item to be voted upon will be applied to reduce
the total number of votes eligible to be cast on a matter.
COMPANY HOLIDAYS
We are closed on the following holidays: New Years Day, Civil Rights Day
(Martin Luther King Day), President's Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Thanksgiving Day, Day After Thanksgiving and Christmas Day.
Holidays which fall on a Saturday will be recognized on the previous Friday.
Holidays which fall on a Sunday will be recognized on the following Monday.
FINANCIAL STATEMENTS
The audited Statutory Financial Statements of the Company as of December 31,
1995 and 1994 and for the years ended December 31, 1995, 1994, and 1993 as well
as the Independent Auditors' Report appear in the Statement of Additional
Information to Post-Effective Amendment No. 2 to the Separate Account's
registration statement filed on April 29, 1996 with the SEC and are incorporated
by reference in the Statement of Additional Information to this registration
statement. The financial statements for the Separate Account as of December 31,
1995 as well as the Auditor's Report also appear in the Statement of Additional
Information to Post-Effective Amendment No. 2 to the Separate Account's
registration statement filed on April 29, 1996 with the SEC and are incorporated
by reference in the Statement of Additional Information to this registration
statement.
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The unaudited statutory financial statements of the Company as of September
30, 1996 are contained in the Statement of Additional Information dated the same
date as this prospectus. The unaudited financial statements of the Separate
Account as of September 30, 1996 are also contained in this Statement of
Additional Information.
YOUR RIGHT TO LOOK TO A DELAWARE BANK OR TRUST COMPANY FOR PAYMENT ON ANY
INSURANCE POLICY IS LIMITED BY LAW. INSURANCE POLICIES ISSUED BY THE
SUBSIDIARIES OR DIVISIONS OF DELAWARE BANKS OR TRUST COMPANIES ARE NOT DIRECT
LIABILITIES OF SUCH BANKS OR TRUST COMPANIES. ONLY THE ASSETS OF THE INSURANCE
DIVISION OR SUBSIDIARY ISSUING A POLICY ARE APPLICABLE TO THE PAYMENT AND
SATISFACTION OF SUCH POLICY OR CLAIMS MADE THEREUNDER.
INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK OR
TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS 3
The Contract 3
Incontestability 3
Misstatement of Age or Sex 3
Participation 3
Assignment 3
DISTRIBUTION OF THE CONTRACTS 3
CALCULATION OF YIELDS AND TOTAL RETURNS 3
Money Market Subaccount Yields 3
Other Subaccount Yields 4
Average Annual Total Returns 5
Effect of the Annual Contract Fee on Performance Data 12
VARIABLE ANNUITY PAYMENTS 12
Assumed Investment Rate 12
Amount of Variable Annuity Payments 12
Annuity Unit Value 13
LEGAL MATTERS 13
EXPERTS 13
OTHER INFORMATION 14
FINANCIAL STATEMENTS 14
39
<PAGE>
If you would like a free copy of the Statement of Additional Information for
this prospectus, please fill out this form and mail it to Citicorp Life
Insurance Company, 800 Silver Lake Boulevard, P.O. Box 7031, Dover, Delaware
19903.
Please send a copy of the Statement of Additional Information pertaining
to the Citicorp Life Insurance Company Variable Annuity and the Citicorp
Life Variable Annuity Separate Account to:
Name:_______________________________________________________________
Mailing Address:____________________________________________________
____________________________________________________
____________________________________________________
40
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PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
Citicorp Life Insurance Company
800 Silver Lake Boulevard
P.O. Box 7031
Dover, DE 19903
(800) 497-4857
CITICORP LIFE VARIABLE
ANNUITY SEPARATE ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
February 3, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Citicorp Life Insurance Company
800 Silver Lake Boulevard
P.O. Box 7031
Dover, DE 19903
(800) 497-4857
CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
This Statement of Additional Information contains information in addition to
the information described in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") offered by Citicorp Life Insurance
Company ("we", "our" and "us"). This Statement of Additional Information is not
a prospectus, and it should be read only in conjunction with the prospectuses
for the Contract, the Landmark VIP Funds, the Variable Annuity Portfolios, the
Fidelity Variable Insurance Products Fund, the Fidelity Variable Insurance
Products Fund II, the AIM Variable Insurance Funds, Inc. and the MFS Variable
Insurance Trust. The Prospectus for the Contract is dated the same as this
Statement of Additional Information. You may obtain a copy of the prospectuses
by writing or calling us at our address or phone number shown above.
February 3, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS 3
The Contract 3
Incontestability 3
Misstatement of Age or Sex 3
Participation 3
Assignment 3
DISTRIBUTION OF THE CONTRACTS 3
CALCULATION OF YIELDS AND TOTAL RETURNS 3
Money Market Subaccount Yields 3
Other Subaccount Yields 4
Average Annual Total Returns 5
Effect of the Annual Contract Fee on Performance Data 12
VARIABLE ANNUITY PAYMENTS 12
Assumed Investment Rate 12
Amount of Variable Annuity Payments 12
Annuity Unit Value 13
LEGAL MATTERS 13
EXPERTS 13
OTHER INFORMATION 14
FINANCIAL STATEMENTS 14
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ADDITIONAL CONTRACT PROVISIONS
The Contract
The application, endorsements and all other attached papers are part of the
Contract. The statements made in the application are deemed representations and
not warranties. We will not use any statement in defense of a claim or to void
the Contract unless it is contained in the application.
Incontestability
We will not contest the Contract.
Misstatement of Age or Sex
If the age or sex (if applicable) of the payee has been misstated, the amount
which will be paid is that which the proceeds would have purchased at the
correct age and sex (if applicable).
Participation
The Contract does not participate in our divisible surplus.
Assignment
Upon written notice to us, you may assign your rights under this Contract. We
assume no responsibility for the validity of any such assignment. Assignments
will not apply to any payments or actions taken prior to the time it is recorded
by us.
DISTRIBUTION OF THE CONTRACTS
The Landmark Funds Broker-Dealer Services, Inc. acts as the principal
underwriter and distributor of the Contract, pursuant to an Underwriting
Agreement with us. Applications for the Contracts are solicited by agents who
are licensed by applicable state insurance authorities to sell our variable
annuity contracts and who are also licensed representatives of Citicorp
Insurance Services, Inc. which entered into a selling agreement with the
Landmark Funds Broker-Dealer Services, Inc.
The Landmark Funds Broker-Dealer Services, Inc. is an indirect wholly owned
subsidiary of Citicorp and an affiliate of Citicorp Life Insurance Company. For
fiscal year 1995, no underwriting commissions were paid to, or retained by, The
Landmark Funds Broker-Dealer Services, Inc.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, we may disclose yields, total returns, and other
performance data pertaining to the Contracts for a subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC. Because of the fees and
charges assessed under the Contract, the yield for each subaccount will be lower
than the yield for the investment portfolio supporting that subaccount. The
calculation of yields, total returns and other performance data do not reflect
the effect of any premium tax that may be applicable. Most states and political
subdivisions do not assess premium taxes; however, where state premium taxes are
assessed, we will deduct the amount of the tax due from each payment at rates
ranging from a minimum of 0.5% to a maximum of 3.5% of such payment at the time
annuity payments begin. Premium taxes levied by political subdivisions,
generally at rates of less than 1.00%, will be deducted in the same manner.
Money Market Subaccount Yields
From time to time, advertisements and sales literature may quote the current
annualized yield of the Money Market Subaccount for a seven-day period in a
manner which does not take into consideration any realized or unrealized gains
or losses on shares of the MFS Money Market Series or on that portfolio's
securities
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Contract having a balance of 1 unit of the
Money Market Subaccount at the beginning of the period, dividing such net change
in subaccount value by the value of the hypothetical account at the beginning of
the period to determine the base period return, and annualizing this quotient on
a 365-day basis. The net change in subaccount value reflects: 1) net income from
the portfolio attributable
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to the hypothetical account; and 2) charges and deductions imposed under the
Contract which are attributable to the hypothetical account. The charges and
deductions include the per unit charges for the hypothetical account for: 1) the
annual contract fee; 2) the mortality and expense risk charge; and (3) the
asset-based administration charge. For purposes of calculating current yields
for a Contract, an average per unit contract fee is used based on the $30 annual
contract fee deducted at the end of each Contract Year. Current Yield is
calculated according to the following formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the MFS Money Market Series
(exclusive of realized gains or losses on the sale of
securities and unrealized appreciation and depreciation) for
the seven-day period attributable to a hypothetical account
having a balance of 1 subaccount unit.
ES = per unit expenses attributable to the hypothetical account
for the seven-day period.
UV = the unit value for the first day of the seven-day period.
The seven-day Effective Yield is calculated by compounding the unannualized
base period return according to the following formula:
Effective Yield = (1 + ((NCS-ES)/UV)) 365/7 - 1
Where:
NCS = the net change in the value of the MFS Money Market Series
(exclusive of realized gains or losses on the sale of
securities and unrealized appreciation and depreciation) for
the seven-day period attributable to a hypothetical account
having a balance of 1 subaccount unit.
ES = per unit expenses attributable to the hypothetical account
for the seven-day period.
UV = the unit value for the first day of the seven-day period.
Based on the method of calculation described above, the Current Yield and
Effective Yield on amounts held in the MFS Money Market Subaccount for the
seven-day period ending September 30, 1996 were:
Current Yield - 3.29%
Effective Yield - 3.34%
The current and effective yields on amounts held in this subaccount normally
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market Subaccount's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the MFS
Money Market Series, the types and quality of portfolio securities held by the
MFS Money Market Series and the MFS Money Market Series' operating expenses.
Yields on amounts held in the Money Market Subaccount may also be presented for
periods other than a seven-day period.
Yield calculations do not take into account the surrender charge under the
Contract equal to a maximum of 7% of the amount of purchase payments withdrawn
for certain withdrawals. During each Contract Year, up to 10% of all purchase
payments, less any prior withdrawal of purchase payments, may be withdrawn
without the imposition of a surrender charge.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the current
annualized yield of the Bond Subaccount for a Contract for 30-day or one-month
periods. The annualized yield generated by the Bond Subaccount refers to income
generated by the subaccount during a 30-day or one-month period and is assumed
to be generated each 30-day or one month period over a 12-month period.
4
<PAGE>
The yield is computed by: 1) dividing the net investment income of the
portfolio attributable to the subaccount units less subaccount expenses for the
period; by 2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by 3)
compounding that yield for a six-month period; and by 4) multiplying that result
by 2. Expenses attributable to the subaccount include the annual contract fee,
the asset-based administration charge and the mortality and expense risk charge.
The yield calculation assumes a contract fee of $30 per year per Contract
deducted at the end of each Contract Year for Contracts with less than $25,000
of Contract Value. For purposes of calculating the 30-day or one-month yield, an
average contract fee based on the average Contract Value in the Separate Account
is used to determine the amount of the charge attributable to the subaccount for
the 30-day or one-month period. The 30-day or one-month yield is calculated
according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV)) + 1)6 - 1)
Where:
NI = net income of the portfolio for the 30-day or one-month
period attributable to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month
period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in
the 30-day or one-month period.
Based on the method of calculation described above, for the thirty-day period
ending September 30, 1996, the yield for the Bond Subaccount was:
Yield = N/A
The yield on the amounts held in the Bond Subaccount normally fluctuates over
time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. The Bond
Subaccount's actual yield is affected by the types and quality of securities
held by the MFS Bond Series and that portfolio's operating expenses.
Yield calculations do not take into account the surrender charge under
the Contract equal to a maximum of 7% of the amount of purchase payments
withdrawn for certain withdrawals. During each Contract Year, up to 10% of all
purchase payments, less any prior withdrawal of purchase payments, may be
withdrawn without the imposition of a surrender charge.
Average Annual Total Returns
From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the subaccounts for various periods of
time.
When a subaccount or portfolio has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Average annual total returns for other periods of time may, from time
to time, also be disclosed.
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment as of the last day of each
of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using subaccount unit
values which we calculate on each Valuation Day based on the performance of the
subaccount's underlying portfolio, the deductions for the mortality and expense
risk charge, the deductions for the asset-based administration charge and the
annual contract fee. The calculation assumes that the contract fee is $30 per
year per Contract deducted at the end of each Contract Year for Contracts with
less than $25,000 of Contract Value. For purposes of calculating average annual
total return, an average per-dollar per-day contract fee attributable to the
hypothetical account for the period is used. The calculation also assumes
surrender of the Contract at the end of the period for the return quotation.
Total returns will therefore reflect a deduction of the surrender charge for any
period less than five years since the date of the purchase payment being
withdrawn. The total return is calculated according to the following formula:
TR = ((ERV/P)1/N) - 1
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<PAGE>
Where:
TR = the average annual total return net of subaccount
recurring charges.
ERV = the ending redeemable value (net of any applicable
surrender charge) of the hypothetical account at the end of
the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
6
<PAGE>
Based on the method of calculation described above, the Standardized Average
Annual Total Returns for the Subaccounts for the periods ending September 30,
1996 were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Subaccount Standardized
Average Annual Total Return Table
- ---------------------------------------------------------------------------------------------------------------------
For the period
For the For the 5-year from inception
Subaccount (date of inception of corresponding portfolio) one-year period period ending to 9/30/96
ending 9/30/96 9/30/96
- ---------------------------------------------------------------- ----------------- ---------------- -----------------
LANDMARK VIP FUNDS
<S> <C> <C> <C>
U.S. Government Fund (3/10/95) -3.31% N/A -0.90%
Balanced Fund (3/10/95) 5.18% N/A 6.65%
Equity Fund (3/10/95) 12.72% N/A 12.74%
International Equity Fund (3/10/95) -3.28% N/A -0.15%
VARIABLE ANNUITY PORTFOLIOS
CitiSelectSM VIP Folio 200 (11/25/96) N/A N/A N/A
CitiSelectSM VIP Folio 300 (11/25/96) N/A N/A N/A
CitiSelectSM VIP Folio 400 (11/25/96) N/A N/A N/A
CitiSelectSM VIP Folio 500 (11/25/96) N/A N/A N/A
Landmark Small Cap Equity VIP 60.96% N/A 66.76%
Fund (11/25/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 4.51% N/A 18.37%
Government Securities Fund (5/05/93) -3.21% N/A 1.60%
Growth Fund (5/05/93) 4.25% N/A 12.97%
International Equity Fund (5/05/93) 8.64% N/A 10.98%
Value Fund (5/05/93) -1.50% N/A 14.83%
Growth and Income Fund (5/02/94) 6.29% N/A 14.90%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 0.44% 15.25% 13.35%
High Income Portfolio (9/19/85) 6.88% 13.92% 10.48%
Equity Income Portfolio (10/9/86) 6.08% 15.94% 11.44%
Overseas Fund (1/28/87) 2.94% 6.70% 6.05%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 4.34% N/A 23.19%
Index 500 Portfolio (8/27/92) 12.02% N/A 13.54%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) -1.93% N/A 3.53%
Money Market Series (1/03/95) -2.44% N/A -0.25%
Bond Series (10/24/95) N/A N/A -6.66%
Total Return Series (1/03/95) 7.32% N/A 14.70%
Research Series (7/26/95) 15.50% N/A 16.50%
Emerging Growth Series (7/24/95) 19.88% N/A 24.66%
- --------------------------------------------------------------------------------------------------------------------
a. For this subaccount, the information is so-called "synthetic" performance data. As of 9/30/96, the underlying
portfolio for this subaccount either had less than one year of actual performance data, or had not commenced
operations, so no historical performance data exists for the actual portfolio in which this subaccount will
invest. However, the investment advisor for this portfolio manages another comparable mutual fund portfolio
(Landmark Small Cap Equity Fund); although this comparable portfolio is not the actual portfolio in which the
Separate Account will invest, it has the same investment objectives, and uses the same investment strategies and
techniques as are contemplated for the actual portfolio in which the Separate Account will invest. The figures
represent what the investment performance of this subaccount would have been IF this subaccount had been in
existence since the inception of the comparable portfolio and IF this subaccount had been invested in that
portfolio. Since the subaccount will not invest in this comparable portfolio, these are not actual performance
figures for the applicable subaccount. These are "synthetic" average annual total return figures which represent
the performance of the comparable portfolio (which is NOT available under the Contract).
The data presented may not necessarily be an indicator of future performance. The "synthetic" data is based on
the actual performance and expenses of the comparable portfolio, adjusted to reflect the Surrender Charge,
Mortality and Expense Risk Charge, Administrative Expense Charge and the Annual Contract Fee.
</TABLE>
7
<PAGE>
We may disclose cumulative total returns in conjunction with the standard
formats described above. The cumulative total returns will be calculated using
the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of subaccount recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
8
<PAGE>
Based on the method of calculation described above, the Cumulative
Total Returns for the Subaccounts for the periods ending September 30, 1996
were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Subaccount Standardized
Cumulative Total Return Table
- ---------------------------------------------------------------------------------------------------------------------
For the period
For the For the 5-year from inception
Subaccount (date of inception of corresponding portfolio) one-year period period ending to 9/30/96
ending 9/30/96 9/30/96
- ---------------------------------------------------------------- ----------------- ---------------- -----------------
LANDMARK VIP FUNDS
<S> <C> <C> <C>
U.S. Government Fund (3/10/95) -3.31% N/A -1.40%
Balanced Fund (3/10/95) 5.18% N/A 10.60%
Equity Fund (3/10/95) 12.72% N/A 20.64%
International Equity Fund (3/10/95) -3.28% N/A -0.23%
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 300 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 400 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 500 (11/25/96) N/A N/A N/A
Landmark Small Cap Equity VIP 60.96% N/A 92.39%
Fund (11/25/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 4.51% N/A 77.65%
Government Securities Fund (5/05/93) -3.21% N/A 5.56%
Growth Fund (5/05/93) 4.25% N/A 51.54%
International Equity Fund (5/05/93) 8.64 N/A 42.64%
Value Fund (5/05/93) -1.50% N/A 60.23%
Growth and Income Fund (5/02/94) 6.29% N/A 39.89%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 0.44% 103.32% 249.28%
High Income Portfolio (9/19/85) 6.88% 91.85% 200.38%
Equity Income Portfolio (10/9/86) 6.08% 109.48% 194.97%
Overseas Fund (1/28/87) 2.94% 38.31% 76.60%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 4.34% N/A 43.82%
Index 500 Portfolio (8/27/92) 12.02% N/A 68.23%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) -1.93% N/A 8.31%
Money Market Series (1/03/95) -2.44% N/A -0.44%
Bond Series (10/24/95) N/A N/A -6.26%
Total Return Series (1/03/95) 7.32% N/A 27.00%
Research Series (7/26/95) 15.50% N/A 19.81%
Emerging Growth Series (7/24/95) 19.88% N/A 29.96%
- ---------------------------------------------------------------- ----------------- ---------------- -----------------
a. This is "synthetic" data. See footnote "a" of the "Subaccount Standardized Average Annual Total Return Table."
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
From time to time, sales literature or advertisements may also quote average
annual total returns and cumulative total returns that do not reflect the
surrender charge or the Annual Contract Fee. These are calculated in exactly the
same way as the standardized average annual total returns and standardized
cumulative total returns described above, except that the ending redeemable
value of the hypothetical account for the period is replaced with an ending
value for the period that does not take into account any charges on amounts
surrendered or withdrawn or the payment of the annual contract fee.
9
<PAGE>
Based on this non-standardized method of calculation, the
Non-Standardized Average Total Returns and Non-Standardized Cumulative Total
Returns for the Subaccounts for the periods ending September 30, 1996 were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Subaccount Non-Standardized
Average Annual Total Return Table
- ---------------------------------------------------------------------------------------------------------------------
For the period For the 5-year For the period
Subaccount (date of inception of corresponding portfolio) one-year period period ending from inception
ending 9/30/96 9/30/96 to 9/30/96
- ---------------------------------------------------------------- ----------------- ---------------- -----------------
LANDMARK VIP FUNDS
<S> <C> <C> <C>
U.S. Government Fund (3/10/95) 2.23% N/A 2.70%
Balanced Fund (3/10/95) 11.21% N/A 10.53%
Equity Fund (3/10/95) 19.18% N/A 16.84%
International Equity Fund (3/10/95) 2.26% N/A 3.48%
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 300 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 400 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 500 (11/25/96) N/A N/A N/A
Landmark Small Cap Equity VIP 70.18% N/A 74.20%
Fund (11/25/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 10.50% N/A 19.67%
Government Securities Fund (5/05/93) 2.34% N/A 2.72%
Growth Fund (5/05/93) 10.22% N/A 14.22%
International Equity Fund (5/05/93) 14.87% N/A 12.21%
Value Fund (5/05/93) 4.14% N/A 16.10%
Growth and Income Fund (5/02/94) 12.38% N/A 17.14%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 6.19% 15.27% 13.37%
High Income Portfolio (9/19/85) 13.01% 13.94% 10.50%
Equity Income Portfolio (10/9/86) 12.16% 15.96% 11.47%
Overseas Fund (1/28/87) 8.83% 6.72% 6.07%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 10.32% N/A 27.20%
Index 500 Portfolio (8/27/92) 18.44% N/A 14.33%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) 3.69% N/A 5.65%
Money Market Series (1/03/95) 3.16% N/A 3.00%
Bond Series (10/24/95) N/A N/A 0.07%
Total Return Series (1/03/95) 13.47% N/A 18.44%
Research Series (7/26/95) 22.12% N/A 22.12%
Emerging Growth Series (7/24/95) 26.75% N/A 30.65%
- ---------------------------------------------------------------------------------------------------------------------
a. This is "synthetic" data. See footnote "a" of the "Subaccount Standardized Average Annual Total Return Table."
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Subaccount Non-Standardized
Cumulative Total Return Table
- ---------------------------------------------------------------------------------------------------------------------
For the period
For the For the 5-year from inception
Subaccount (date of inception of corresponding portfolio) one-year period period ending to 9/30/96
ending 9/30/96 9/30/96
- ---------------------------------------------------------------- ----------------- ---------------- -----------------
LANDMARK VIP FUNDS
<S> <C> <C> <C>
U.S. Government Fund (3/10/95) 2.23% N/A 4.26%
Balanced Fund (3/10/95) 11.21% N/A 16.96%
Equity Fund (3/10/95) 19.18% N/A 27.57%
International Equity Fund (3/10/95) 2.26% N/A 5.50%
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 300 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 400 (11/25/96) N/A N/A N/A
CitiSelect VIP Folio 500 (11/25/96) N/A N/A N/A
Landmark Small Cap Equity VIP 70.18% N/A 103.42%
Fund (11/25/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 10.50% N/A 84.42%
Government Securities Fund (5/05/93) 2.34% N/A 9.58%
Growth Fund (5/05/93) 10.22% N/A 57.32%
International Equity Fund (5/05/93) 14.87% N/A 48.07%
Value Fund (5/05/93) 4.14% N/A 66.33%
Growth and Income Fund (5/02/94) 12.38% N/A 46.55%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 6.19% 103.54% 250.02%
High Income Portfolio (9/19/85) 13.01% 92.05% 201.09%
Equity Income Portfolio (10/9/86) 12.16% 109.70% 195.60%
Overseas Fund (1/28/87) 8.83% 38.46% 76.96%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 10.32% N/A 52.09%
Index 500 Portfolio (8/27/92) 18.44% N/A 73.05%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) 3.69% N/A 13.47%
Money Market Series (1/03/95) 3.16% N/A 5.28%
Bond Series (10/24/95) N/A N/A 0.06%
Total Return Series (1/03/95) 13.47% N/A 34.29%
Research Series (7/26/95) 22.12% N/A 26.68%
Emerging Growth Series (7/24/95) 26.75% N/A 37.42%
- ---------------------------------------------------------------- ----------------- ---------------- -----------------
a. This is "synthetic" data. See footnote "a" of the "Subaccount Standardized Average Annual Total Return Table."
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
11
<PAGE>
In advertising and sales literature, the performance of each subaccount may be
compared to the performance of other variable annuity issuers in general or to
the performance of particular types of variable annuities investing in mutual
funds, or mutual fund portfolios with investment objectives similar to each of
the subaccounts. Lipper Analytical Services, Inc. ("Lipper") and the Variable
Annuity Research Data Services ("VARDS") are independent services which monitor
and rank the performance of variable annuity issuers in each of the major
categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS rankings compare only variable annuity issuers. The performance
analyses prepared by Lipper and VARDS each rank such issuers on the basis of
total return, assuming reinvestment of distributions, but do not take sales
charges, redemption fees, or certain expense deductions at the separate account
level into consideration. In addition, VARDS prepares risk adjusted rankings,
which consider the effects of market risk on total return performance. This type
of ranking provides data as to which funds provide the highest total return
within various categories of funds defined by the degree of risk inherent in
their investment objectives.
Advertising and sales literature may also compare the performance of each
subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deductions" for the expenses of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
Comparison may also report other information including the effect of
tax-deferred compounding on a subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from subaccount investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the underlying
portfolio's investment experience is positive.
Effect of the Annual Contract Fee on Performance Data
The Contract provides for a $30 annual contract fee to be deducted annually at
the end of each Contract Year from the Accounts based on the proportion of the
Contract Value invested in each such Account. For purposes of reflecting the
contract fee in yield and total return quotations, the annual charge is
converted into a per-dollar per-day charge based on the average Contract Value
of all Contracts on the last day of the period for which quotations are
provided. The per-dollar per-day average charge will then be adjusted to reflect
the basis upon which the particular quotation is calculated. This fee is waived
for Contracts having a Contract Value of at least $25,000 or if, during the
Contract Year, purchase payments of at least $2,500 ($2,000 for Qualified
Contracts), exclusive of the initial purchase payment, are paid.
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable annuity payments which
follows is based on an assumed investment rate of 3.0% per year. The assumed net
investment rate is used merely in order to determine the first monthly payment
per thousand dollars of applied value. This rate does not bear any relationship
to the actual net investment experience of the Separate Account or of any
subaccount.
Amount of Variable Annuity Payments
The amount of the first variable annuity payment is determined by dividing the
Contract Value on the Annuity Income Date by 1,000 and multiplying the result by
the appropriate factor in the annuity tables provided in the Contract. These
tables are based upon the 1983 IAM Tables (promulgated by the Society of
Actuaries). The appropriate factor is based on the annual net investment return
of 3.0%. The amount of each payment will depend on the age of the Annuitant(s)
at the time the first payment is due, and the sex of the Annuitant(s), unless
otherwise required by law.
The dollar amount of the second and subsequent variable annuity payments will
vary and is determined by multiplying the number of subaccount annuity units by
the subaccount annuity unit value as of a date no earlier than the fifth
Valuation Day preceding the date the payment is due. The number of such units
will remain fixed during the annuity period, assuming you or the Annuitant, if
you are deceased, make no exchanges of annuity units for annuity units of
another subaccount or to provide a fixed annuity payment. Once every 3 months
after annuity payments have commenced, the Annuitant may elect in writing, to
transfer among any subaccounts. After the Annuity Income Date, no transfers may
be made between the subaccounts and the Fixed Account.
The annuity unit value will increase or decrease from one payment to the next
in proportion to the net investment return of the subaccount or subaccounts
supporting the variable annuity payments, less an adjustment to neutralize the
3.0% assumed net invest-
12
<PAGE>
ment rate referred to above. Therefore, the dollar amount of annuity payments
after the first will vary with the amount by which the net investment return of
the appropriate subaccounts is greater or less than 3.0% per year. For example,
for a Contract using only one subaccount to generate variable annuity payments,
if that subaccount has a cumulative net investment return of 5% over a one year
period, the first annuity payment in the next year will be approximately 2%
greater than the payment on the same date in the preceding year. If such net
investment return is 1% over a one year period, the first annuity payment in the
next year will be approximately 2 percentage points less than the payment on the
same date in the preceding year. (See also "Variable Annuity Payments" in the
Prospectus.)
Fixed annuity payments are determined at annuitization by multiplying the
values allocated to the Fixed Account by a rate to be determined by Citicorp
Life which is no less than the rate specified in the annuity tables in the
Contract. The annuity payment will remain level for the duration of the annuity.
The annuity payments will be made on the fifteenth day of each month. The
annuity unit value used in calculating the amount of the variable annuity
payments will be based on an annuity unit value determined as of the close of
business on a day no earlier than the fifth Valuation Day preceding the date of
the annuity payment.
Annuity Unit Value
The annuity unit value is calculated at the same time that the value of an
accumulation unit is calculated and is based on the same values for portfolio
shares and other assets and liabilities. (See "Variable Contract Value" in the
Prospectus.) The annuity unit value for each subaccount's first valuation period
was set at $1.00. The annuity unit value for a subaccount is calculated for each
subsequent Valuation Period by multiplying the subaccount annuity unit value on
the preceding day by the product of 1 times 2 where:
(1) is the subaccount's net investment factor on the Valuation
Day the Annuity Unit Value is being calculated; and
(2) is 0.999919 (which is the daily factor that will produce the
3.0% annual investment rate assumed in the
annuity tables), adjusted by the number of days since the
previous Valuation Day.
The following illustration shows, by use of hypothetical example, the method
of determining the annuity unit value.
Illustration of Calculation of Annuity Unit Value
1. Net Investment Factor for period................ 1.003662336
2. Adjustment for 3% Assumed Investment
Rate............................................ 0.999919016
3. 2x1............................................. 1.003581055
4. annuity unit value, beginning of
valuation period................................ 10.743769
5. annuity unit value, end of valuation
period (3x4).................................... 10.782243
LEGAL MATTERS
All matters relating to Arizona law pertaining to the Contracts, including the
validity of the Contracts and our authority to issue the Contracts, have been
passed upon by Richard M. Zuckerman, Associate General Counsel of the Company.
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws.
EXPERTS
The statutory financial statements of Citicorp Life Insurance Company as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, and the financial statements for the Separate Account
as of December 31, 1995, have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
The report of KPMG Peat Marwick LLP covering the financial statements of
Citicorp Life Insurance Company contains an explanatory paragraph which states
that the financial statements are presented in conformity with accounting
practices prescribed or permitted by the Department of Insurance of the State of
Arizona. These practices differ in some respects from generally accepted
accounting principles. The financial statements do not include any adjustments
that might result from the differences.
13
<PAGE>
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act
of 1933, as amended, with respect to the Contracts discussed in this Statement
of Additional Information. Not all the information set forth in the registration
statement, amendments and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
The audited Statutory Financial Statements of the Company as of December 31,
1995 and 1994 and for the years ended December 31, 1995, 1994, and 1993, as well
as the Independent Auditor's Report appear in the Statement of Additional
Information to Post-Effective Amendment No. 2 to the Separate Account's
registration statement filed on April 29, 1996 with the SEC and are incorporated
by reference in this Statement of Additional Information. The financial
statements for the Separate Account as of December 31, 1995 as well as the
Auditor's Report also appear in the Statement of Additional Information to
Post-Effective Amendment No. 2 to the Separate Account's registration statement
filed on April 29, 1996 with the SEC and are incorporated by reference in this
Statement of Additional Information.
The unaudited statutory financial statements of the Company as of September
30, 1996 are contained in this Statement of Additional Information. The
unaudited financial statements of the Separate Account as of September 30, 1996
are also contained in this Statement of Additional Information.
14
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
Statutory Statement of Admitted Assets, Liabilities, and Capital and Surplus
(Unaudited)
September 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
Admitted Assets
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash and investments - other than investments in insurance affiliates:
Bonds $296,055,234
Mortgage loans 1,518,942
Cash on hand and on deposit 2,901,741
Short-term investments 151,413,622
Real estate 26,682,341
Investments in insurance affiliates 45,143,660
- -----------------------------------------------------------------------------------------------------------
Total cash and investments 523,715,540
Net deferred and uncollected premiums 1,670,113
Due from reinsurers 16,460,138
Accrued investment income 4,558,690
Other assets 2,688,472
Separate account assets 8,173,627
- -----------------------------------------------------------------------------------------------------------
Total admitted assets $557,266,580
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Liabilities and Capital and Surplus
- -----------------------------------------------------------------------------------------------------------
Liabilities:
Future policy benefits:
Life insurance and annuities 78,839,887
Accident and health insurance 1,351,375
Supplementary contracts without life contingencies 10,210
Policy and contract claims:
Life insurance 5,673,749
Accident and health insurance 18,104,963
General expenses due and accrued 1,275,682
Federal income taxes accrued 31,258,048
Asset valuation reserve 23,525,005
Interest maintenance reserve 10,076,120
Other liabilities 442,732
Separate account liabilities 390,631
- -----------------------------------------------------------------------------------------------------------
Total liabilities 170,948,402
- -----------------------------------------------------------------------------------------------------------
Commitments and contingencies
Capital and surplus:
Capital stock - $1 par value per share; 5,000,000 shares 2,500,000
authorized; 2,500,000 shares issued and outstanding
Surplus:
Paid-in 3,399,878
Assigned - separate account 7,448,560
Unassigned 372,969,740
- -----------------------------------------------------------------------------------------------------------
Total capital and surplus 386,318,178
- -----------------------------------------------------------------------------------------------------------
Total liabilities and capital and surplus $557,266,580
- -----------------------------------------------------------------------------------------------------------
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
Statutory Statement of Operations
(Unaudited)
For the Period Ended September 30, 1996
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Revenues:
<S> <C>
Premiums and annuity considerations:
Life insurance and annuities $ 41,453,262
Accident and health insurance 34,904,568
Net investment income 105,635,920
Amortization of interest maintenance reserve 1,120,228
Commissions and expense allowances on reinsurance ceded 197,759
Other (10,947)
- ------------------------------------------------------------------------------------------------------------
Total revenues 183,300,790
- ------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other policy benefits:
Life insurance and annuities 26,424,503
Accident and health insurance 5,242,003
Surrenders 3,157,140
Change in future policy benefits:
Life insurance and annuities 13,499,018
Accident and health insurance 62,795
Other (1,644)
Other operating costs and expenses:
Commissions 7,432,921
General insurance expenses 10,820,500
Other 327,837
Net transfers to separate accounts 383,410
- ------------------------------------------------------------------------------------------------------------
Total benefits and expenses 67,348,483
- ------------------------------------------------------------------------------------------------------------
Income from operations before federal income
tax expense and net realized capital gains 115,952,307
Federal income tax expense 19,826,521
- ------------------------------------------------------------------------------------------------------------
Income from operations before net realized capital gains 96,125,786
Net realized capital gains 0
- ------------------------------------------------------------------------------------------------------------
Net income $ 96,125,786
- ------------------------------------------------------------------------------------------------------------
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
Statutory Statement of Capital and Surplus
(Unaudited)
For the Period Ended September 30, 1996
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Capital and surplus at beginning of year $ 349,380,153
Net income 96,125,786
Net unrealized gain (loss) from revaluation of investments (53,962,564)
Change in non-admitted assets
67,037
Dividends on common stock 0
Additional paid in capital 1,500,000
Adjustment for separate accounts seed money (7,126,269)
Change in surplus in separate accounts 334,035
- ------------------------------------------------------------------------------------------------------------
Capital and surplus at end of period $ 386,318,178
- ------------------------------------------------------------------------------------------------------------
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
Statutory Statement of Cash Flow
(Unaudited)
For the Period Ended September 30, 1996
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Cash provided:
<S> <C>
From operations:
Premiums and annuity considerations $ 76,667,157
Allowances and reserve adjustments received on
reinsurance ceded 197,759
Net investment income received 108,107,679
Other income received (10,947)
Life and accident and health claims, and other
benefits paid (34,210,804)
Commissions, other expenses , and taxes paid (17,453,237)
Net transfers to separate accounts (383,410)
Federal income taxes paid (21,765,790)
- ------------------------------------------------------------------------------------------------------------
Net cash from operations 111,148,407
- ------------------------------------------------------------------------------------------------------------
Proceeds from investments sold, matured or repaid:
Bonds 44,404,341
Stocks 1,600,000
Mortgage loans 516,152
Other 730
- ------------------------------------------------------------------------------------------------------------
Total investment proceeds 46,521,223
- ------------------------------------------------------------------------------------------------------------
Tax on capital gains 0
Other cash provided 12,963,956
- ------------------------------------------------------------------------------------------------------------
Total cash provided 170,633,586
- ------------------------------------------------------------------------------------------------------------
Cash applied:
Cost of investments acquired - bonds 63,280,030
Cost of investments acquired - stocks 6,620,267
Cash dividends paid to stockholder 16,000,000
Other cash applied, net 980,590
- ------------------------------------------------------------------------------------------------------------
Total cash applied 86,880,887
- ------------------------------------------------------------------------------------------------------------
Net change in cash on hand and on deposit and
short-term investments 83,752,699
Cash on hand and on deposit and short-term
investments, beginning of year 70,562,664
- ------------------------------------------------------------------------------------------------------------
Cash on hand and on deposit and short-term
investments, end of period $ 154,315,363
- ------------------------------------------------------------------------------------------------------------
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF NET ASSETS (Unaudited)
September 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Landmark AIM MFS
Landmark U.S. Landmark Landmark Cap. Fidelity World
Equity Gov't. International Balanced Apprec. Growth Gov't.
------------ ----------- ------------ ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets:
Investments in Landmark VIP
Funds, AIM Variable Insurance
Funds, Inc., Fidelity
Investments Variable
Insurance Products Fund,
and MFS Variable Insurance
Trust, at Market Value
(See Schedule of Investments) $1,285,107 1,119,294 4,300,624 1,219,279 91,920 89,851 67,765
Payable to Citicorp Life
Insurance Company -- 37 18 50 193 74 37
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Net Assets $1,285,107 1,119,257 4,300,606 1,219,229 91,727 89,777 67,728
========== ========== ========== ========== ========== ========== ==========
Total Net Assets Represented By:
Variable Annuity Cash Value
Invested in Separate Account -- 68,142 45,723 41,166 91,727 89,777 67,728
Citicorp Life Insurance Co. Equity 1,285,107 1,051,115 4,254,883 1,178,063 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Net Assets
Represented $1,285,107 1,119,257 4,300,606 1,219,229 91,727 89,777 67,728
========== ========== ========== ========== ========== ========== ==========
Total Units Held -- 65,380 43,352 35,211 61,936 61,743 61,437
Accumulated Unit Value $ -- 1.04 1.05 1.17 1.48 1.45 1.10
Cost of Investments $1,013,226 1,101,560 4,100,875 1,062,084 88,842 86,867 66,061
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (Unaudited)
For the Nine Months Ended September 30, 1996
Landmark AIM MFS
Landmark U.S. Landmark Landmark Cap. Fidelity World
Equity Gov't. International Balanced Apprec. Growth Gov't.
---------- ----------- ------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 997 -- 4,020 1,030 -- 429 --
Expenses:
Mortality & Expense Risk Fees -- 244 88 158 211 297 243
Daily Administrative Charges -- 29 10 19 25 32 28
-------- -------- -------- -------- -------- -------- --------
Total Expenses -- 273 98 177 236 329 271
-------- -------- -------- -------- -------- -------- --------
Net Investment Income (Loss) 997 (273) 3,922 853 (236) 100 (271)
-------- -------- -------- -------- -------- -------- --------
Realized and Unrealized Gain
on Investments:
Realized Gain on Sale of -- 2 3 19 (9) 38 4
Investments
Net Unrealized Gain on Investments 136,589 (16,242) 127,768 69,703 3,078 2,113 1,704
-------- -------- -------- -------- -------- -------- --------
Net Gain on Investments 136,589 (16,240) 127,771 69,722 3,069 2,151 1,708
-------- -------- -------- -------- -------- -------- --------
Increase in Net Assets Resulting
From Operations $137,586 (16,513) 131,693 70,575 2,833 2,251 1,437
======== ======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
For the Nine Months Ended September 30, 1996
Landmark AIM MFS
Landmark U.S. Landmark Landmark Cap. Fidelity World
Equity Gov't. International Balanced Apprec. Growth Gov't.
---------- ----------- ------------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income (Loss) $ 997 (273) 3,922 853 (236) 100 (271)
Realized Gain on Sale of -- 2 3 19 (9) 38 4
Investments
Change in Unrealized Appreciation
of Investments 136,589 (16,242) 127,768 69,703 3,078 2,113 1,704
---------- ---------- ---------- ---------- ---------- ---------- ----------
Increase in Net Assets Resulting
From Operations 137,586 (16,513) 131,693 70,575 2,833 2,251 1,437
---------- ---------- ---------- ---------- ---------- ---------- ----------
Capital Transactions:
Contract Deposits -- 66,291 45,994 34,368 88,894 81,572 66,291
Annual Administrative Fees -- -- -- (14) -- (16) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Increase in Net Assets Resulting
From Capital Transactions -- 66,291 45,994 34,354 88,894 81,556 66,291
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Increase in Net Assets 137,586 49,778 177,687 104,929 91,727 83,807 67,728
Net Assets, at Beginning of Period 1,147,521 1,069,479 4,122,919 1,114,300 -- 5,970 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Assets, at End of Period $1,285,107 1,119,257 4,300,606 1,219,229 91,727 89,777 67,728
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
1. History
The Variable Annuity Separate Account (the "Account") is a separate investment
account maintained under the provisions of Arizona Insurance Law by Citicorp
Life Insurance Company (the "Company"), a subsidiary of Citibank Delaware. The
Account operates as a unit investment trust registered under the Investment
Company act of 1940, as amended, and supports the operations of the Company's
individual flexible premium deferred variable annuity contracts (the
"contracts"). The Account invests in portfolios of the Landmark VIP Funds, the
AIM Variable Insurance Funds, Inc., the Fidelity Investments Variable Insurance
Products Fund and the MFS Variable Insurance Trust (the "Funds"). The available
portfolios of the Landmark VIP Funds include the Landmark VIP Equity Fund, the
Landmark VIP U.S. Government Fund, the Landmark VIP International Equity Fund
and the Landmark VIP Balanced Fund. The AIM V.I. Capital Appreciation Fund of
the AIM Variable Insurance Funds, Inc., the Growth Portfolio of the Fidelity
Investments Variable Insurance Products Fund, the MFS Money Market Series and
the MFS World Governments Series of the MFS Variable Insurance Trust are also
available for investment.
The account had no assets or operations until June 5, 1995, when the initial
investment was made. On June 12, 1995 the Company transferred $7,000,000 from
its general funds to provide initial capital in the Landmark Variable Insurance
Products Funds.
The assets of the Account are the property of the Company. The portion of the
Account's assets applicable to the contracts are not chargeable with liabilities
arising out of any other business conducted by the Company.
In addition to the Account, a contract owner may also allocate funds to the
General Account, which is part of the Company's general account. Amounts
allocated to the General Account are credited with a guaranteed rate for one
year. Because of exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933 and the
General Account has not been registered as an investment company under the
Investment Company Act of 1940.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Account in preparation of the financial statements in conformity with generally
accepted accounting principles.
A. Investment Valuation - The investment in the Fund is stated at market
value which is the net asset value of each of the respective series as
determined at the close of business on the last working day of the
period by the Fund.
B. Accounting for Investments - Investment transactions are accounted for
on the trade date. Dividend income is recorded on the ex-dividend
date.
C. Federal Income Taxes - The Company is taxed under federal law as a
life insurance company. The Account is part of the Company's total
operations and is not taxed separately. Under existing law, no taxes
are payable on investment income and realized capital gains of the
Account.
3. Contract Charges
Daily charges for mortality and expense risks assumed by the Company are
assessed through the daily unit value calculation and are equivalent on an
annual basis to 1.25% of the value of the contracts.
An annual contract fee of $30 is assessed against each contract on its
anniversary date by surrendering units. Daily charges for administrative
expenses are assessed through the daily unit value calculation and are
equivalent on an annual basis to 0.15% of the value of the contracts.
The contracts provide that in the event that a contract owner withdraws all or a
portion of the contract value within five contract years there will be assessed
a deferred sales charge. The deferred sales charge is based on a table of
charges of which the maximum charge is currently 7% of the contract value.
During each contract year, up to 10% of purchase payments less any prior
withdrawal of purchase payments may be withdrawn without a deferred sales
charge.
Premium taxes may be applicable, depending on the laws of various jurisdictions.
Various states and other governmental entities levy a premium tax on annuity
contracts issued by insurance companies.
F-8
<PAGE>
4. Purchases of Investments
For the nine months ended September 30, 1996, investment activity in the
Funds was as follows:
<TABLE>
<CAPTION>
Cost of Proceeds
Shares of Purchases From Sales
------------ ------------
<S> <C> <C>
Landmark VIP Funds:
Landmark VIP Equity Fund $ 13,226 $ -
Landmark VIP U.S. Government Fund 101,794 236
Landmark VIP International Equity Fund 100,952 81
Landmark VIP Balanced Fund 57,134 172
AIM Variable Insurance Funds, Inc.:
AIM V.I. Captial Appreciation Fund 88,894 193
Fidelity Investments Variable Insurance Products Fund:
Growth Portfolio 82,009 283
MFS Variable Insurance Trust:
MFS World Governments Series 66,291 234
MFS Money Market Series 5,000 5,000
</TABLE>
5. Net Increase in Accumulation Units
For the nine months ended September 30, 1996, transactions in accumulation units
of the Account were as follows:
<TABLE>
<CAPTION>
Landmark AIM MFS
Landmark U.S. Landmark Landmark Cap. Fidelity World
Equity Gov't. International Balanced Apprec. Growth Gov't.
------------ ------------ ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Units Purchased - 65,380 43,352 30,129 61,936 57,189 61,437
Units Withdrawn - - - (12) - (11) -
Units Transferred Between - - - - - - -
Funds
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net Increase - 65,380 43,352 30,117 61,936 57,178 61,437
Units, at Beginning of - - - 5,094 - 4,565 -
Period
------------ ------------ ------------ ------------ ------------ ------------ ------------
Units, at End of Period - 65,380 43,352 35,211 61,936 61,743 61,437
============ ============ ============ ============ ============ ============ ============
</TABLE>
SCHEDULE OF INVESTMENTS
September 30, 1996
Number Market
of Shares Value Cost
------------ ------------ ----------
Landmark VIP Funds:
Landmark VIP Equity Fund 99,698 $1,285,107 $1,013,226
Landmark VIP U.S. Government Fund 108,669 1,119,294 1,101,560
Landmark VIP International Equity Fund 404,194 4,300,624 4,100,875
Landmark VIP Balanced Fund 104,123 1,219,279 1,062,084
AIM Variable Insurance Funds, Inc.:
AIM V.I. Capital Appriciation Fund 4,773 91,920 88,842
Fidelity Investments Variable Insurance
Products Fund:
Growth Portfolio 2,945 89,851 86,867
MFS Variable Insurance Trust:
MFS World Governments Series 6,554 67,765 66,061
F-9
