As filed with the Securities and Exchange Commission on June 17, 1997
File No. 33-81626
File No. 811-8628
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. _6_ [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. _7_
CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
CITICORP LIFE INSURANCE COMPANY
(Name of Depositor)
800 Silver Lake Boulevard
Dover, DE 19904
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (302) 672-5000
Richard M. Zuckerman, Esq.
Associate General Counsel
Citicorp Life Insurance Company
800 Silver Lake Boulevard
Dover, Delaware 19904
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the registration statement.
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It is proposed that this filling will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on _________________ pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(i)
[ ] on _________________ pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on _________________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for
a previously filed Post-Effective Amendment.
DECLARATION PURSUANT TO RULE 24f-2
The registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
registrant filed a Rule 24f-2 Notice on February 26,1997 for its most recent
fiscal year ended December 31, 1996.
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Cross Reference Sheet
Pursuant to Rules 481(a) and 495(a)
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page ..................... Cover Page
2. Definitions .................... Definitions
3. Synopsis ....................... Expense Tables; Summary
4. Condensed Financial
Information .................. Condensed Financial
Information; Yields and
Total Returns
5. General
(a) Depositor ................ Citicorp Life Insurance Company
(b) Registrant ............... The Separate Account
(c) Portfolio Company ........ The Funds
(d) Fund Prospectus .......... The Funds
(e) Voting Rights ............ Voting Privileges
(f) Administrators ........... N/A
6. Deductions and Expenses
(a) General .................. Charges and Deductions; Summary
(b) Sales Load ............... Charges and Deductions; Summary
(c) Special Purchase Plan .... N/A
(d) Commissions .............. Distribution of the Contracts
(e) Expenses - Registrant .... Charges and Deductions; Summary
(f) Fund Expenses ............ Charges and Deductions
(g) Organizational Expenses .. N/A
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7. Contracts
(a) Persons with Rights ........ Summary; Addition,
Deletion or Substitution
of Investments;
Description of the
Contract; Annuity Payment
Options; Voting
Privileges; Death Benefit
Before the Annuity Income
Date; Modification;
Election of Annuity
Payment Options
(b) (i) Allocation of
Purchase Payments .... Summary; Purchase
Payments; Free-Look
Period; Allocation of
Purchase Payments
(ii) Transfers ............ Summary; Transfer Privileges
(iii) Exchanges ............ Transfers, Assignments
(c) Changes .................... Additions, Deletions or
Substitutions of
Investments; Description
of the Contract;
Modification;
(d) Inquiries .................. Cover page; Inquiries
8. Annuity Period ................. Summary; Annuity Payment Options
9. Death Benefit .................. Death Benefit Before the
Annuity Date
10. Purchases and Contract Value
(a) Purchases ................. Summary; Issuance of a Contract;
Purchase Payments; Free Look Period;
Allocation of Purchase Payments;
Variable Contract Value; Transfer
Privileges
(b) Valuation ................. Definitions; Variable Contract Value;
(c) Daily Calculation ......... Definitions; Variable Contract Value;
(d) Underwriter ............... Issuance of a Contract; Distribution of
the Contracts
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11. Redemptions
(a) - By Owners ............... Summary; Transfer Privilege; Surrenders
and Partial Withdrawals; Annuity
Payments on the Annuity Date; Payments;
Annuity Payment Options; Federal Tax
Matters
- By Annuitant ............ Summary; Transfer Privilege; Surrenders
and Partial Withdrawals; Proceeds on the
Annuity Date; Payments; Annuity Payment
Options; Federal Tax Matters
(b) Texas ORP ................. N/A
(c) Check Delay ............... Purchase Payments
(d) Lapse ..................... N/A
(e) Free Look ................. Summary; Free Look Period
12. Taxes ......................... Summary; Federal Tax Matters
13. Legal Proceedings ............. Legal Proceedings
14. Table of Contents for the
Statement of Additional
Information ................... Statement of Additional Information
Table of Contents
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PART B
Item of Form N-4 Part B Caption
15. Cover Page .................... Cover Page
16. Table of Contents ............. Table of Contents
17. General Information and
History ....................... N/A
18. Services
(a) Fees and Expenses of
Registrant ................ Charges and Deductions (prospectus)
(b) Management Contracts ...... N/A
(c) Custodian ................. N/A
Independent Public
Accountant ................ Experts
(d) Assets of Registrant ...... The Separate Account
(e) Affiliated Persons ....... Citicorp Life Insurance Company
(prospectus)
(f) Principal Underwriter .... Distribution of the Contracts
(prospectus)
19. Purchase of Securities
Being Offered ................. Distribution of the Contracts
(prospectus)
Offering Sales Load ........... N/A
20. Underwriters .................. Distribution of the Contracts
(prospectus)
21. Calculation of Performance
Data .......................... Calculation of Yields and Total Returns;
Yields and Total Returns (prospectus)
22. Annuity Payments .............. Variable Annuity Payments; Annuity
Payment Options (prospectus)
23. Financial Statements .......... Financial Statements
<PAGE>
PART C -- OTHER INFORMATION
Item of Form N - 4 Part C Caption
24. Financial Statements
and Exhibits .................... Financial Statements and
Exhibits
(a) Financial Statements ....... (a) Financial Statements
(b) Exhibits ................... (b) Exhibits
25. Directors and Officers
of the Depositor ................ Directors and Officers of
Citicorp Life Insurance
Company
26. Persons Controlled By or
Under Common Control with the
Depositor or Registrant......... Persons Controlled By or Under Common
Control with the Depositor or Registrant
27. Number of Contractowners ....... Number of owners
28. Indemnification ................ Indemnification
29. Principal Underwriters ......... Principal Underwriter
30. Location of Accounts
and Records .................... Location of Books and Records
31. Management Services ............ Management Services
32. Undertakings ................... Undertakings and Representations
Signature Page ................. Signatures
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PART A
PROSPECTUS
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SUPPLEMENT DATED AUGUST __, 1997 TO PROSPECTUS DATED MAY 1, 1997
Citicorp Life Variable Annuity Separate Account
Citicorp Life Insurance Company
Individual Flexible Premium Deferred Variable Annuity Contracts
The individual flexible premium deferred variable annuity contracts
(the "Contracts") offered by this supplemented prospectus have been amended to
provide a guaranteed minimum income benefit option (the "Guaranteed Minimum
Income Benefit") and to lower the minimum initial and subsequent purchase
payment requirements to $150. The Guaranteed Minimum Income Benefit option
guarantees Owners who elect the option a minimum amount available for payment
under the Contracts' fixed annuity payment options or a lump sum distribution on
the Annuity Income Date provided certain conditions are met. This supplement
describes the Guaranteed Minimum Income Benefit option and the features
associated with that option as they relate to the Contracts described in the
accompanying prospectus.
Once elected, purchase payments and Contract Values may be allocated
under the Guaranteed Minimum Income Benefit option, as designated by you, to
certain specified subaccounts of the Citicorp Life Variable Annuity Separate
Account (the "Separate Account"). The assets of each such subaccount will be
invested in a corresponding portfolio of the Variable Annuity Portfolios, the
Fidelity Variable Insurance Products Fund ("Fidelity VIP"), the Fidelity
Variable Insurance Products Fund II ("Fidelity VIP II"), the AIM Variable
Insurance Funds, Inc. or the MFS Variable Insurance Trust (the "Funds").
The portfolios of the Variable Annuity Portfolios available for
investment under the Guaranteed Minimum Income Benefit option include CitiSelect
VIP Folio 400, CitiSelect VIP Folio 500 and Landmark Small Cap Equity VIP Fund.
The Fidelity VIP Growth, Fidelity VIP Equity Income and Fidelity VIP Overseas
Portfolios of the Fidelity Variable Insurance Products Fund, the Fidelity VIP II
Contrafund and Fidelity VIP II Index 500 Portfolios of the Fidelity Variable
Insurance Products Fund II, the AIM V.I. Capital Appreciation Fund, AIM V.I.
Growth Fund, AIM V.I. International Equity Fund, AIM V.I. Value Fund and AIM
V.I. Growth and Income Fund of the AIM Variable Insurance Funds, Inc. and the
MFS Research Series and MFS Emerging Growth Series of the MFS Variable Insurance
Trust are also available for investment under the Guaranteed Minimum Income
Benefit option. The accompanying prospectuses for the Funds describe the
investment objectives of the available portfolios.
DEFINITIONS
The terms used in the accompanying prospectus shall have the same
meaning in this supplement. Additional terms are set forth below.
Annuity Income Option - An annuity payment option available under the Contract.
Guaranteed Minimum Benefits - For each fixed annuity payment option, the minimum
amount of fixed annuity payments available under the Guaranteed Minimum Income
Benefit option.
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Guaranteed Minimum Benefit Factor - For each fixed annuity payment option, the
Guaranteed Minimum Benefit payable for each $1,000 of the Minimum Benefit
Accumulation Amount applied to that option. If you elect a fixed annuity payment
option with a life annuity feature, we calculate the Guaranteed Minimum Benefit
Factor using an effective annual interest rate of 5%, credited daily. If you
elect a fixed annuity payment option without a life annuity feature, we use an
effective annual interest rate of 3%, credited daily.
Minimum Benefit Accumulation Amount - The sum of all purchase payments and
transfers allocated under the Guaranteed Minimum Income Benefit option, less any
withdrawals, credited daily with an effective annual interest rate of 5%. If you
elect a fixed annuity payment option without a life annuity feature or a lump
sum distribution, we will credit daily an effective annual interest rate of 3%.
Rider Value - The sum of the Accumulation Units in each subaccount purchased
under the Guaranteed Minimum Income Benefit option multiplied by the
Accumulation Unit value for that subaccount.
Stipulated Premium - The amount scheduled to be paid each Contract Year by the
Owner under the Guaranteed Minimum Income Benefit option.
THE GUARANTEED MINIMUM INCOME BENEFIT OPTION
Election of the Guaranteed Minimum Income Benefit Option. An Owner may elect the
Guaranteed Minimum Income Benefit option at the time of application. With regard
to current Owners, we will notify them that the Guaranteed Minimum Income
Benefit option has become available in their state of residence. Current Owners
will have two months from receipt of such notice to elect the Guaranteed Minimum
Income Benefit option by so specifying on a form we have provided and returning
the form to our administrative office.
Guaranteed Minimum Income Benefit. Owners who elect the Guaranteed Minimum
Income Benefit option will be guaranteed a minimum amount that may be applied
under the Contracts' fixed annuity payment options or a lump sum distribution on
the Annuity Income Date, provided certain conditions are met. On the Annuity
Income Date, Owners who have elected a fixed annuity payment option will also be
guaranteed a minimum payment under that payment option.
The minimum payment under a fixed annuity payment option will be the
greatest of:
1. the Rider Value, less premium taxes, applied to the annuity
payment table stated in the Contract for that fixed annuity
payment option; or
2. the Rider Value, less premium taxes, applied to the most
favorable annuity payment table in other annuity contracts
issued by us on the Annuity Income Date for that fixed annuity
payment option; or
3. the Minimum Benefit Accumulation Amount applied to the
Guaranteed Minimum Benefit Factor for that fixed annuity
payment option.
The Minimum Benefit Accumulation Amount will depend upon the payment
option you select. If you select a fixed annuity payment option with a life
annuity feature, the Minimum Benefit Accumulation Amount will equal the sum of
all purchase payments and transfers allocated to the Guaranteed Minimum
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Income Benefit option, less any withdrawals, credited daily with an effective
annual interest rate of 5%. If you elect a fixed annuity payment option without
a life annuity feature, we instead use an effective annual interest rate of 3%
in determining the Minimum Benefit Accumulation Amount. Under the Minimum
Guaranteed Income Benefit option, an Owner may only elect a fixed annuity
payment option without a life annuity feature where the Annuity Income Date is
at least 20 years after the Contract Date.
Any lump sum distribution will be equal to the greater of: (1) the
Rider Value on the Annuity Income Date; or (2) the Minimum Benefit Accumulation
Amount on the Annuity Income Date based on an effective annual interest rate of
3%, credited daily. Under the Minimum Guaranteed Income Benefit option, an Owner
may only elect a lump sum distribution where the Annuity Income Date is at least
20 years after the Contract Date.
Purchase Payments. The minimum amount we will accept as an initial or subsequent
purchase payment under the Guaranteed Minimum Income Benefit option or the
Contract is $150. This initial payment is due on the Contract Date. Current
Owners who elect the Guaranteed Minimum Income Benefit option may allocate any
initial purchase payment or transfer of Contract value under the Guaranteed
Minimum Income Benefit option at the time they elect the option. Subsequent
purchase payments and transfers under the Guaranteed Minimum Income Benefit
Option may be made at any time during the Annuitant's lifetime and before the
Annuity Income Date.
We also reserve the right to limit an Owner's allocations to the
Guaranteed Minimum Income Benefit option during the first three Contract Years
(the first three years after the election of the Guaranteed Minimum Income
Benefit option for current Owners) to no more than the sum of the Stipulated
Premium payments for those Contract Years, plus $10,000. Thereafter, the sum of
the total allocations received in the current Contract Year and the preceding
two Contracts Years under the Guaranteed Minimum Income Benefit option may not
be greater than the sum of the Stipulated Premium for those Contract Years, plus
$10,000.
The amount of the Stipulated Premium and the allocation of the
Stipulated Premium among the subaccounts is determined by you at the time you
elect the Guaranteed Minimum Income Benefit option. We use the Stipulated
Premium only to determine the maximum amount of aggregate purchase payments and
transfers of Contract value that we will accept under the Guaranteed Minimum
Income Benefit option for a given Contract Year. An Owner may choose to allocate
an amount less than the Stipulated Premium to the Guaranteed Minimum Income
Benefit option in any Contract Year or not to allocate to the option.
We will monitor Owner allocations to the Guaranteed Minimum Income
Benefit option to ensure compliance with the above rules, if necessary. If Owner
allocations exceed those limits, we will contact the Owner and request
additional instructions for allocating such excess payments outside the
Guaranteed Minimum Income Benefit option. We will return the amount of the
excess allocation at the Owner's request or if the Owner fails to provide us
additional allocation instructions.
Allocation of Purchase Payments. At the time of application or election of the
Minimum Guaranteed Income Benefit option, as applicable, you must specify the
allocation of the initial purchase payment among the subaccounts available under
the option. We reserve the right to require each allocation to a subaccount to
be at least $100 and a whole percent of the purchase payment. You may allocate
purchase payments to the subaccounts of the Separate Account that are not
available under the Guaranteed Minimum Income Benefit option as well as to the
Fixed Account. You may also allocate purchase
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payments outside the Guaranteed Minimum Income Benefit option to those
subaccounts that are available under the option.
Under the Guaranteed Minimum Income Benefit option, 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. 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 Contract value among the subaccounts and the
Fixed Account.
Transfers. Before the Annuity Income Date and subject to the restrictions set
forth in the accompanying prospectus, you may transfer amounts under the
Guaranteed Minimum Income Benefit option from a subaccount to another subaccount
available under the option. You may transfer amounts from the Guaranteed Minimum
Income Benefit option to the subaccounts of the Separate Account that are not
available under the Guaranteed Minimum Income Benefit option as well as to the
Fixed Account. You may also transfer amounts from the Guaranteed Minimum Income
Benefit option to those subaccounts that are available under the option. For
purposes of determining the Minimum Benefit Accumulation Amount, we will treat
transfers of amounts from the Guaranteed Minimum Income Benefit option as
partial withdrawals from the option; we will not assess a Surrender Charge in
connection with those transfers.
Transfers will be made based upon your written instructions. The
telephone transfer privilege is not available for transfers involving amounts
under the Minimum Guaranteed Income Benefit option.
Partial Withdrawals and Surrenders. At any time before the Annuity Income Date,
you may make partial withdrawals of the surrender value attributable to amounts
under the Guaranteed Minimum Income Benefit option. In general, a partial
withdrawal will reduce the Minimum Benefit Accumulation Amount by the amount
withdrawn. However, if on the date the partial withdrawal is requested, the
Minimum Benefit Accumulation Amount exceeds the Rider Value and the amount
withdrawn exceeds 5% of the Minimum Benefit Accumulation Amount calculated as of
the first day of the then current Contract Year, the Minimum Benefit
Accumulation Amount will be reduced by an amount representing the percentage
that the partial withdrawal bears to the Rider Value. The amount of the
reduction will equal the amount withdrawn divided by the Rider Value immediately
prior to the partial withdrawal multiplied by the Minimum Benefit Accumulation
Amount.
At any time before the Annuity Income Date, you may surrender the
Contract for its surrender value. The Minimum Benefit Accumulation Amount is not
payable upon surrender prior to the Annuity Income Date selected in accordance
with the requirements under the Guaranteed Minimum Income Benefit option.
Annuity Payments on the Annuity Income Date. Under the Guaranteed Minimum Income
Benefit option, the Annuity Income Date is elected by you at the time of the
application and must be at least 10 years after the Contract Date. You may
change the Annuity Income Date at any time provided you give us at least 30 days
prior written notice. If the Annuity Income Date is less than 20 years after the
Contract Date, any change in the Annuity Income Date must result in an Annuity
Income Date that is at least 2 years from the date of such change and at least
10 years after the Contract Date. Any change to the Annuity Income Date not in
conformity with these requirements may cause the termination of the Guaranteed
Minimum Income Benefit option.
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Any time prior to the Annuity Income Date, you may change the
Annuitant(s) by written notice to us. Changing the Annuity Income Date or the
Annuitant(s) may result in a change to the Guaranteed Minimum Benefits. We will
notify you in writing of any changes resulting from a change in the Annuity
Income Date or the Annuitant(s).
Election of Annuity Payment Options. Under the Minimum Guaranteed Income Benefit
option, you may only elect an annuity payment option providing fixed annuity
payments. If the Annuity Income Date is at least 10, but less than 20, years
after the Contract Date, you may only elect annuity payment options 2, 3 and 4
as specified in the Contract or, if we agree, an alternate annuity payment
option made available by us with a life annuity feature. If the Annuity Income
Date is at least 20 years after the Contract Date, you may elect any annuity
payment option providing for fixed annuity payments or a lump sum distribution.
An annuity payment option is chosen by you at the time you elect the Guaranteed
Minimum Income Benefit option.
Any time prior to the Annuity Income Date, you may change the annuity
payment option upon 30 days prior written notice. Changing the annuity payment
option will result in a change to the Guaranteed Minimum Benefits. We will
notify you in writing of any change resulting from a change in the annuity
payment option.
FEES AND CHARGES
Guaranteed Minimum Income Benefit Charge. We will assess a daily charge equal to
.50% per annum of the average daily net assets of amounts under the Guaranteed
Minimum Income Benefit option for the costs associated with administering the
option.
Other Fees and Charges. Daily deductions from the subaccounts include a 1.25%
per annum deduction for the mortality and expense risk charge and a .15% per
annum deduction for administrative expenses. A maximum surrender charge equal to
7% of purchase payments withdrawn may be assessed in the case of partial
withdrawals and surrenders. An Annual Contract Fee may be assessed under
Contracts with Contract Values below $25,000. The table below supplements the
Expense Table on page six of the accompanying prospectus and sets forth the
various fees and charges associated with investment in the Contract if the
Guaranteed Minimum Income Benefit option is elected. The Table illustrates the
charges deducted at both the Contract and Fund levels.
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EXPENSE TABLE
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The following expense information supplements the expense information
found on pages 6 through 11 of the accompanying prospectus for the Contracts,
which should be read together with this information. This information assumes
the election of the Guaranteed Minimum Income Benefit option and that the entire
Contract Value is Variable Contract Value.
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Separate Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge 1.25%
Administration Charge 0.15%
Guaranteed Minimum Income Benefit Charge 0.50%
-----
Total Separate Account Expenses 1.90%
Examples
An owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets and the election of the Guaranteed Minimum
Income Benefit option.
1. If the Contract is surrendered or annuitized under a fixed annuity payment
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
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 400 $100 $156 --- ---
CitiSelect VIP Folio 500 $100 $156 --- ---
Landmark Small Cap Equity VIP Fund $96 $146 --- ---
Fidelity VIP Growth Portfolio $94 $140 $187 $330
Fidelity VIP Equity Income Portfolio $93 $137 --- ---
Fidelity VIP Overseas Portfolio $97 $147 --- ---
Fidelity VIP II Contrafund Portfolio $95 $141 --- ---
Fidelity VIP II Index 500 Portfolio $90 $128 --- ---
AIM V.I. Capital Appreciation Fund $95 $141 $188 $334
AIM V.I. Growth Fund $95 $143 --- ---
AIM V.I. International Equity Fund $97 $148 --- ---
AIM V.I. Value Fund $95 $141 --- ---
AIM V.I. Growth and Income Fund $95 $143 --- ---
MFS Research Series $97 $149 --- ---
MFS Emerging Growth Series $97 $149 --- ---
2. If the Contract is annuitized under a fixed annuity payment 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
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 400 $36 $109 --- ---
CitiSelect VIP Folio 500 $36 $109 --- ---
Landmark Small Cap Equity VIP Fund $32 $99 --- ---
Fidelity VIP Growth Portfolio $30 $92 $157 $330
Fidelity VIP Equity Income Portfolio $29 $89 --- ---
Fidelity VIP Overseas Portfolio $33 $99 --- ---
Fidelity VIP II Contrafund Portfolio $31 $94 --- ---
Fidelity VIP II Index 500 Portfolio $26 $80 --- ---
AIM V.I. Capital Appreciation Fund $31 $93 $159 $334
AIM V.I. Growth Fund $31 $95 --- ---
AIM V.I. International Equity Fund $33 $100 --- ---
AIM V.I. Value Fund $31 $93 --- ---
AIM V.I. Growth and Income Fund $31 $95 --- ---
MFS Research Series $33 $102 --- ---
MFS Emerging Growth Series $33 $102 --- ---
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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
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 400 $36 $109 --- ---
CitiSelect VIP Folio 500 $36 $109 --- ---
Landmark Small Cap Equity VIP Fund $32 $99 --- ---
Fidelity VIP Growth Portfolio $30 $92 $157 $330
Fidelity VIP Equity Income Portfolio $29 $89 --- ---
Fidelity VIP Overseas Portfolio $33 $99 --- ---
Fidelity VIP II Contrafund Portfolio $31 $94 --- ---
Fidelity VIP II Index 500 Portfolio $26 $80 --- ---
AIM V.I. Capital Appreciation Fund $31 $93 $159 $334
AIM V.I. Growth Fund $31 $95 --- ---
AIM V.I. International Equity Fund $33 $100 --- ---
AIM V.I. Value Fund $31 $93 --- ---
AIM V.I. Growth and Income Fund $31 $95 --- ---
MFS Research Series $33 $102 --- ---
MFS Emerging Growth Series $33 $102 --- ---
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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.
CONDENSED FINANCIAL INFORMATION
Accumulation Unit information that reflects the election of the Guaranteed
Minimum Income Benefit option is not presented because, as of the date of this
supplement, the Guaranteed Minimum Income Benefit option had not yet become
available.
OTHER PROVISIONS RELATED TO THE OPTION
Modification. Upon notice to you, or the Annuitant, we may modify the rider for
the Guaranteed Minimum Income Benefit option if:
1. necessary to comply with any applicable law or regulation issued by a
government agency; or
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2. necessary to add, delete or modify the subaccounts available under the
Guaranteed Minimum Income Benefit option; or
3. necessary to reflect a change in the operation of those subaccounts.
Termination. Once elected, the Guaranteed Minimum Income Benefit option will
remain in force until you terminate the option or surrender the Contract. If,
after you elect the Guaranteed Minimum Income Benefit option, the Rider Value
equals zero, the Guaranteed Minimum Income Benefit option will terminate
automatically. Once terminated, the Guaranteed Minimum Income Benefit option can
not be reinstated. The provisions of the Contract, however, will continue to
apply.
THIS PROSPECTUS SUPPLEMENT MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
THE FUNDS. PLEASE READ THIS SUPPLEMENTED PROSPECTUS AND THE PROSPECTUSES FOR THE
FUNDS BEFORE YOU INVEST.
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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
May 1, 1997
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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 Variable
Annuity Portfolios, the Fidelity Variable Insurance Products Fund ("Fidelity
VIP"), the Fidelity Variable Insurance Products Fund II ("Fidelity VIP II"), the
AIM Variable Insurance Funds, Inc. or the MFS Variable Insurance Trust (the
"Funds").
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 Fidelity VIP Growth,
Fidelity VIP High Income, Fidelity VIP Equity Income and Fidelity VIP Overseas
Portfolios of the Fidelity Variable Insurance Products Fund, the Fidelity VIP II
Contrafund and Fidelity VIP II Index 500 Portfolios of the Fidelity Variable
Insurance Products Fund II, the AIM V.I. Capital Appreciation Fund, AIM V.I.
Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. International Equity
Fund, AIM V.I. Value Fund and AIM 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 38 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.
May 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS ............................................................... 4
EXPENSE TABLES ............................................................ 6
SUMMARY ................................................................... 12
The Contract ............................................................. 12
Charges and Deductions ................................................... 12
Annuity Provisions ....................................................... 13
Federal Tax Status ....................................................... 13
CONDENSED FINANCIAL INFORMATION ........................................... 14
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS ........................... 16
Citicorp Life Insurance Company .......................................... 16
Citicorp Life Variable Annuity Separate Account .......................... 16
The Funds ................................................................ 16
Addition, Deletion or Substitution of Investments ........................ 19
DESCRIPTION OF THE CONTRACT ............................................... 20
Issuance of a Contract ................................................... 20
Purchase Payments ........................................................ 20
Free-Look Period ......................................................... 20
Allocation of Purchase Payments .......................................... 20
Variable Contract Value .................................................. 21
Transfer Privileges ...................................................... 22
Surrenders and Partial Withdrawals ....................................... 23
Death Benefit Before the Annuity Income Date ............................. 24
Annuity Payments on the Annuity Income Date .............................. 24
Payments ................................................................. 25
Modification ............................................................. 25
Owner .................................................................... 25
Reports to Owners ........................................................ 26
Inquiries ................................................................ 26
THE FIXED ACCOUNT ......................................................... 26
Fixed Account Value ...................................................... 26
CHARGES AND DEDUCTIONS .................................................... 27
Surrender Charge (Contingent Deferred Sales Charge) ...................... 27
Annual Contract Fee ...................................................... 27
Asset-Based Administration Charge ........................................ 28
Transfer Processing Fee .................................................. 28
Mortality and Expense Risk Charge ........................................ 28
Fund Expenses ............................................................ 28
Premium Taxes ............................................................ 28
Other Taxes .............................................................. 28
ANNUITY PAYMENT OPTIONS ................................................... 29
Election of Annuity Payment Options ...................................... 29
Fixed Annuity Payments ................................................... 29
Legal Developments Regarding Unisex Actuarial Tables ..................... 29
Variable Annuity Payments ................................................ 29
Description of Annuity Payment Options ................................... 30
2
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
YIELDS AND TOTAL RETURNS .................................................. 30
FEDERAL TAX MATTERS ....................................................... 32
Introduction ............................................................. 32
Tax Status of the Contract ............................................... 32
Taxation of Annuities .................................................... 33
Transfers, Assignments or Exchange of a Contract ......................... 34
Withholding .............................................................. 34
Multiple Contracts ....................................................... 34
Taxation of Qualified Plans .............................................. 35
Possible Charge for the Company's Taxes .................................. 35
Other Tax Consequences ................................................... 35
DISTRIBUTION OF THE CONTRACTS ............................................. 35
LEGAL PROCEEDINGS ......................................................... 36
VOTING PRIVILEGES ......................................................... 36
COMPANY HOLIDAYS .......................................................... 37
FINANCIAL STATEMENTS ...................................................... 37
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS ..................... 38
------------------------
========================
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 A written form satisfactory to us and received by
"written request" 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 The share value of any portfolio as of any Valuation
Share Day reflecting investment performance and decreased by
any expenses and fees assessed against the portfolio.
4
<PAGE>
Net Investment Factor An index used to measure the investment performance of
a subaccount from one Valuation Period to the next.
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" and Citicorp Life Insurance Company.
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 transfer in any Contract Year) $25**
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)
CitiSelect VIP Folio 200
------------------------
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers and reimbursements) 0.95%
CitiSelect VIP Folio 300
------------------------
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers and reimbursements) 0.95%
CitiSelect VIP Folio 400
------------------------
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers and reimbursements) 1.25%
CitiSelect VIP Folio 500
------------------------
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers and reimbursements) 1.25%
- -------------
* 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.
6
<PAGE>
Landmark Small Cap Equity VIP Fund
----------------------------------
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.15%
Total Annual Fund Expenses (after fee waivers and reimbursements) 0.90%
Fidelity VIP Growth Portfolio
-----------------------------
Management Fees 0.61%
Other Expenses 0.08%
Total Annual Fund Expenses 0.69%
Fidelity VIP High Income Portfolio
----------------------------------
Management Fees 0.59%
Other Expenses 0.12%
Total Annual Fund Expenses 0.71%
Fidelity VIP Equity Income Portfolio
------------------------------------
Management Fees 0.51%
Other Expenses 0.07%
Total Annual Fund Expenses 0.58%
Fidelity VIP Overseas Portfolio
-------------------------------
Management Fees 0.76%
Other Expenses 0.17%
Total Annual Fund Expenses 0.93%
Fidelity VIP II Contrafund Portfolio
------------------------------------
Management Fees 0.61%
Other Expenses 0.13%
Total Annual Fund Expenses 0.74%
Fidelity VIP II Index 500 Portfolio
-----------------------------------
Management Fees (after fee waivers and reimbursement) 0.13%
Other Expenses 0.15%
Total Annual Fund Expenses (after fee waivers and reimbursements) 0.28%
AIM V.I. Capital Appreciation Fund
----------------------------------
Management Fees 0.64%
Other Expenses 0.09%
Total Annual Fund Expenses 0.73%
AIM V.I. Government Securities Fund
-----------------------------------
Management Fees 0.50%
Other Expenses 0.41%
Total Annual Fund Expenses 0.91%
AIM V.I. Growth Fund
--------------------
Management Fees 0.65%
Other Expenses 0.13%
Total Annual Fund Expenses 0.78%
7
<PAGE>
AIM V.I. International Equity Fund
----------------------------------
Management Fees 0.75%
Other Expenses 0.21%
Total Annual Fund Expenses 0.96%
AIM V.I. Value Fund
-------------------
Management Fees 0.64%
Other Expenses 0.09%
Total Annual Fund Expenses 0.73%
AIM V.I. Growth and Income Fund
-------------------------------
Management Fees 0.65%
Other Expenses 0.13%
Total Annual Fund Expenses 0.78%
MFS World Governments Series
----------------------------
Management 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 0.50%
Other Expenses (after fee reduction) 0.10%
Total Annual Fund Expenses (after fee reduction) 0.60%
MFS Bond Series
---------------
Management 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 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Research Series
-------------------
Management 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 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 1996 expenses for the Separate Account and fiscal year 1996
expenses for the Fidelity VIP Growth, Fidelity VIP High Income, Fidelity VIP
Equity Income and Fidelity VIP Overseas Portfolios of the Fidelity Variable
Insurance Products Fund, the Fidelity VIP II Contrafund and Fidelity VIP II
Index 500 Portfolios of the Fidelity Variable Insurance Products Fund II, the
AIM V.I. Capital Appreciation, AIM V.I. Government Securities, AIM V.I. Growth,
AIM V.I. International Equity,
8
<PAGE>
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 of the MFS Variable Insurance Trust. 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--3.41% and 4.16%;
CitiSelect VIP Folio 300--2.91% and 3.66%; CitiSelect VIP Folio 400--3.11% and
3.86%; CitiSelect VIP Folio 500--3.72% and 4.47% and Landmark Small Cap Equity
VIP Fund--1.75% and 2.50%, respectively. The MFS Investment Advisor has agreed
to bear, subject to reimbursement, expenses such that the "Other Expenses" of
the MFS Bond Series, the MFS Money Market Series and all other Series do not
exceed, on an annualized basis 0.40%, 0.10% and 0.25% respectively of the
average daily net assets. Absent such fee waivers and reimbursements, "Other
Expenses" and "Total Annual Fund Expenses" incurred for fiscal year 1996 were:
MFS World Governments Series 1.28% and 2.03%; MFS Money Market Series 27.24% and
27.74%; MFS Bond Series 8.85% and 9.45%; MFS Total Return Series 1.35% and
2.10%; MFS Research Series 0.73% and 1.48% and MFS Emerging Growth Series 0.41%
and 1.16%, respectively. The Investment Advisor for the Fidelity VIP II Index
500 Portfolio also voluntarily agreed to reimburse a portion of the fund's
operating expenses during the period. Absent this reimbursement, the "Management
Fees", "Other Expenses" and "Total Annual Fund Expenses" incurred for fiscal
year 1996 would have been 0.28%, 0.15% and 0.43%, respectively. There can be no
assurance that the fee waivers and reimbursements reflected in the table will
continue at their reflected levels. For a more complete description of the
various costs and expenses see "Charges and Deductions" and the prospectuses for
the Funds.
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
- ---------------------------------------- ------ ------- ------- --------
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 VIP Growth Portfolio $90 $125 $162 $279
Fidelity VIP High Income Portfolio* $90 $126 -- --
Fidelity VIP Equity Income Portfolio* $88 $122 -- --
Fidelity VIP Overseas Portfolio* $92 $132 -- --
Fidelity VIP II Contrafund Portfolio* $90 $127 -- --
Fidelity VIP II Index 500 Portfolio* $86 $113 -- --
AIM V.I. Capital Appreciation Fund $90 $126 $164 $283
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 -- --
9
<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
- ---------------------------------------- ------ ------- ------- --------
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 VIP Growth Portfolio $25 $77 $131 $279
Fidelity VIP High Income Portfolio* $25 $77 -- --
Fidelity VIP Equity Income Portfolio* $24 $73 -- --
Fidelity VIP Overseas Portfolio* $27 $84 -- --
Fidelity VIP II Contrafund Portfolio* $25 $78 -- --
Fidelity VIP II Index 500 Portfolio* $21 $64 -- --
AIM V.I. Capital Appreciation Fund $25 $78 $133 $283
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 -- --
10
<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
- ---------------------------------------- ------ ------- ------- --------
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 VIP Growth Portfolio $25 $77 $131 $279
Fidelity VIP High Income Portfolio* $25 $77 -- --
Fidelity VIP Equity Income Portfolio* $24 $73 -- --
Fidelity VIP Overseas Portfolio* $27 $84 -- --
Fidelity VIP II Contrafund Portfolio* $25 $78 -- --
Fidelity VIP II Index 500 Portfolio* $21 $64 -- --
AIM V.I. Capital Appreciation Fund $25 $78 $133 $283
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 February 3, 1997.
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.
----------------
11
<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.")
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. 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.
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. 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.
12
<PAGE>
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 taxes 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."
----------------
13
<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 December 31, 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
Accumulation Unit Value
-------------------------------------
Commencement Year Ending Year Ending
Subaccount Date* (12/31/95) (12/31/96)
- ---------------------------------------- ------------ ----------- -----------
CitiSelect VIP Folio 200** -- -- --
CitiSelect VIP Folio 300** -- -- --
CitiSelect VIP Folio 400** -- -- --
CitiSelect VIP Folio 500** -- -- --
Landmark Small Cap Equity VIP Fund** -- -- --
Fidelity VIP Growth Portfolio 1.00 1.31 1.48
Fidelity VIP High Income Portfolio** -- -- --
Fidelity VIP Equity Income Portfolio** -- -- --
Fidelity VIP Overseas Portfolio** -- -- --
Fidelity VIP II Contrafund Portfolio** -- -- --
Fidelity VIP II Index 500 Portfolio** -- -- --
AIM V.I. Capital Appreciation Fund 1.00 1.00 1.49
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 1.12
MFS Money Market Series 1.00 1.00 1.06
MFS Bond Series** -- -- --
MFS Total Return Series** -- -- --
MFS Research Series** -- -- --
MFS Emerging Growth Series** -- -- --
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<PAGE>
Number of Accumulation Units
Outstanding
------------------------------
Year Ending Year Ending
Subaccount (12/31/95) (12/31/96)
- ---------------------------------------- ----------- -----------
CitiSelect VIP Folio 200** -- --
CitiSelect VIP Folio 300** -- --
CitiSelect VIP Folio 400** -- --
CitiSelect VIP Folio 500** -- --
Landmark Small Cap Equity VIP Fund** -- --
Fidelity VIP Growth Portfolio 4,565 98,550
Fidelity VIP High Income Portfolio** -- --
Fidelity VIP Equity Income Portfolio** -- --
Fidelity VIP Overseas Portfolio** -- --
Fidelity VIP II Contrafund Portfolio** -- --
Fidelity VIP II Index 500 Portfolio** -- --
AIM V.I. Capital Appreciation Fund 0 77,611
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 65,848
MFS Money Market Series 0 47,376
MFS Bond Series** -- --
MFS Total Return Series** -- --
MFS Research Series** -- --
MFS Emerging Growth Series** -- --
- -------------
* The Fidelity VIP 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 December 31, 1996, 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 VIP High Income Portfolio,
the Fidelity VIP Equity Income Portfolio, the Fidelity VIP Overseas
Portfolio, the Fidelity VIP II Contrafund Portfolio, the Fidelity VIP II
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
statements.
----------------
15
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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, 1996, Citicorp Life Insurance Company had statutory
assets in excess of $580,635,000. 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-three (23)
subaccounts but may, in the future, include additional subaccounts. Each
subaccount invests exclusively in shares of a single corresponding portfolio.
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 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
16
<PAGE>
prospectuses for the Funds which must accompany or precede this prospectus and
which should be read carefully and retained for future reference.
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. Each CitiSelect VIP Folio is a total return
fund that allocates its investments among three primary classes of
assets--equity, fixed income and money market securities. Each Portfolio's asset
mix is designed to offer a different level of potential return within a
corresponding level of risk.
CitiSelect VIP Folio 200. This portfolio seeks as high a total return over
time as is consistent with a primary emphasis on a combination of fixed
income and money market securities and a secondary emphasis on equity
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 as high a total return over
time as is consistent with a balanced emphasis on equity and fixed income
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 as high a total return over
time as is consistent with a primary emphasis on equity securities, and a
secondary emphasis on fixed income 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 as high a total return over
time as is consistent with a dominant emphasis on equity securities and a
small allocation to fixed income 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.
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 Growth
Portfolio, the High Income Portfolio, the Equity Income Portfolio, and the
Overseas Portfolio are available as investment options under the Contracts.
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.
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 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
High Income Portfolio also considers growth of capital.
17
<PAGE>
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 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.
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
Contrafund Portfolio and the Index 500 Portfolio are available as investment
options under the Contracts.
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.
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 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 seeks to achieve its
objective by generally investing at least 65% of its net assets in stocks
of companies believed by AIM to have the potential for above average growth
in revenues and earnings.
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.
18
<PAGE>
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.
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.
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.
- ----------------
* The portfolios' investment strategy may provide the opportunity for 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.
19
<PAGE>
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.
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
20
<PAGE>
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.
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, 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:
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(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.
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.
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
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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.
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.
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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
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
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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.
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:
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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.
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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.
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.
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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.
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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".)
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.
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
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to that subaccount by the accumulation unit value of that subaccount on the date
the fee is assessed. 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%.
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 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.
Fund Expenses
Because the Separate Account purchases shares or units of 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.
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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.
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.
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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.
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 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.
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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.
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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 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.
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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 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
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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.
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
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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;
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
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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 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.
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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.
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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.
----------------
36
<PAGE>
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, 1996 and 1995 and for the years ended December 31, 1996, 1995, and 1994 as
well as the Independent Auditors' Report appear in the Statement of Additional
Information bearing the same date as this prospectus.
The Statement of Additional Information also contains financial statements
for the Separate Account as of December 31, 1996.
------------------------
------------------------
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.
------------------------
------------------------
37
<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
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:
(Please Print or Type)
Name: --------------------------------------------------------------------------
Mailing Address: ---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
38
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
SUPPLEMENT DATED AUGUST __, 1997 TO
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1997
Citicorp Life Variable Annuity Separate Account
Citicorp Life Insurance Company
Individual Flexible Premium Deferred Variable Annuity Contracts
Effective August __, 1997, the section of the Statement of Additional
Information captioned Average Annual Total Returns is amended to include the
following:
From time to time we may quote average annual total returns and
cumulative total returns for subaccounts that reflect the election of the
Guaranteed Minimum Income Benefit option. Such performance information will be
calculated in exactly the same way as the standardized average annual total
returns and standardized cumulative total returns described in the accompanying
prospectus but for the inclusion of the Guaranteed Minimum Income Benefit
Charge.
Based on the method of calculation described in the accompanying
prospectus and the election of the Guaranteed Minimum Income Benefit option, the
Standardized Average Annual Total Returns for the subaccounts available under
the option for the period ending December 31, 1996 would have been:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount Standardized
Average Annual Total Return Table
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the For the
Subaccount one-year 5-year period
(date of inception of corresponding portfolio) period period from
ending ending inception to
12/31/96 12/31/96 12/31/96
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE ANNUITY PORTFOLIOS
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 Fund (11/25/96) N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 9.00% N/A 16.61%
Growth Fund (5/05/93) 9.47% N/A 12.48%
International Equity Fund (5/05/93) 11.29% N/A 11.18%
Value Fund (5/05/93) 6.62% N/A 15.16%
Growth and Income Fund (5/02/94) 11.19% N/A 15.12%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 6.34% 12.85% 12.50%
Equity Income Portfolio (10/9/86) 5.94% 15.61% 11.14%
Overseas Fund (1/28/87) 4.89% 6.96% 5.71%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 12.37% N/A 24.07%
Index 500 Portfolio (8/27/92) 13.25% N/A 13.99%
- ----------------------------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 13.40% N/A 16.39%
Emerging Growth Series (7/24/95) 8.48% N/A 17.55%
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Based on the method of calculation described in the accompanying
prospectus and the election of the Guaranteed Minimum Income Benefit option, the
Cumulative Total Returns for the subaccounts available under the option for the
period ending December 31, 1996 would have been:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount Standardized
Cumulative Total Return Table
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the For the
Subaccount one-year 5-year period
(date of inception of corresponding portfolio) period period from
ending ending inception to
12/31/96 12/31/96 12/31/96
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE ANNUITY PORTFOLIOS
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 Fund (11/25/96) N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 9.00% N/A 74.97%
Growth Fund (5/05/93) 9.47% N/A 53.79%
International Equity Fund (5/05/93) 11.29% N/A 47.38%
Value Fund (5/05/93) 6.62% N/A 67.62%
Growth and Income Fund (5/02/94) 11.19% N/A 45.62%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 6.34% 82.99% 233.97%
Equity Income Portfolio (10/9/86) 5.94% 106.52% 194.82%
Overseas Fund (1/28/87) 4.89% 39.97% 73.63%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 12.37% N/A 53.76%
Index 500 Portfolio (8/27/92) 13.25% N/A 76.70%
- ----------------------------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 13.40% N/A 24.35%
Emerging Growth Series (7/24/95) 8.48% N/A 26.24%
- ----------------------------------------------------------------------------------------------------
</TABLE>
From time to time we may also quote average annual total returns and
cumulative total returns for subaccounts that reflect the election of the
Guaranteed Minimum Income Benefit option and do not reflect the surrender charge
or the Annual Contract Fee. Such performance information will be calculated in
exactly the same way as the Non-Standardized Average Annual Total Returns and
Non-Standardized Cumulative Total Returns described in the accompanying
prospectus but for the inclusion of the Guaranteed Minimum Income Benefit
Charge.
Based on the method of calculation described in the accompanying
prospectus and the election of the Guaranteed Minimum Income Benefit option, the
Non-Standardized Average Annual Total Returns for the subaccounts under the
option for the period ending December 31, 1996 would have been:
-2-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount Non-Standardized
Average Annual Total Return Table
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the For the
Subaccount one-year 5-year period
(date of inception of corresponding portfolio) period period from
ending ending inception to
12/31/96 12/31/96 12/31/96
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE ANNUITY PORTFOLIOS
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 Fund (11/25/96) N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 16.35% N/A 17.82%
Growth Fund (5/05/93) 15.85% N/A 13.74%
International Equity Fund (5/05/93) 17.77% N/A 12.42%
Value Fund (5/05/93) 12.83% N/A 16.44%
Growth and Income Fund (5/02/94) 17.67% N/A 17.26%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 12.53% 12.97% 12.63%
Equity Income Portfolio (10/9/86) 12.11% 15.74% 11.27%
Overseas Fund (1/28/87) 11.00% 7.08% 5.83%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 18.92% N/A 27.72%
Index 500 Portfolio (8/27/92) 19.85% N/A 14.84%
- ----------------------------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 20.01% N/A 21.11%
Emerging Growth Series (7/24/95) 14.80% N/A 22.30%
- ----------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
Based on the method of calculation described in the accompanying
prospectus and the election of the Guaranteed Minimum Income Benefit option, the
Non-Standardized Cumulative Total Returns for the subaccounts under the option
for the period ending December 31, 1996 would have been:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount Non-Standardized
Cumulative Total Return Table
- ----------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the For the
Subaccount one-year 5-year period
(date of inception of corresponding portfolio) period period from
ending ending inception to
12/31/96 12/31/96 12/31/96
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE ANNUITY PORTFOLIOS
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 Fund (11/25/96) N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 15.35% N/A 82.24%
Growth Fund (5/05/93) 15.85% N/A 60.18%
International Equity Fund (5/05/93) 17.77% N/A 53.51%
Value Fund (5/05/93) 12.83% N/A 74.59%
Growth and Income Fund (5/02/94) 17.67% N/A 52.94%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 12.53% 84.02% 237.80%
Equity Income Portfolio (10/9/86) 12.11% 107.68% 198.20%
Overseas Fund (1/28/87) 11.00% 40.75% 75.56%
- ----------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 18.92% N/A 62.90%
Index 500 Portfolio (8/27/92) 19.85% N/A 82.48%
- ----------------------------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 20.01% N/A 31.66%
Emerging Growth Series (7/24/95) 14.80% N/A 33.66%
- ----------------------------------------------------------------------------------------------------
</TABLE>
-4-
<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
May 1, 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 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.
May 1, 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
------------------------
------------------------
2
<PAGE>
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 1996 and 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
3
<PAGE>
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 December 31, 1996 were:
Current Yield - 3.17%
Effective Yield - 3.22%
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 December 31, 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
5
<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
December 31, 1996 were:
<TABLE>
<CAPTION>
Subaccount Standardized
Average Annual Total Return Table
- ------------------------------------------------------------------------------------------------
For the
For the For the period
one-year 5-year from
period period inception
Subaccount ending ending to
(date of inception of corresponding portfolio) 12/31/96 12/31/96 12/31/96
- -------------------------------------------------------- -------- -------- ---------
<S> <C> <C> <C>
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 Fund (11/25/96) ....... N/A N/A N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) ................. 9.55% N/A 17.11%
Government Securities Fund (5/05/93) ................ -4.69% N/A 1.98%
Growth Fund (5/05/93) ............................... 10.03% N/A 13.05%
International Equity Fund (5/05/93) ................. 11.85% N/A 11.75%
Value Fund (5/05/93) ............................... 7.17% N/A 15.74%
Growth and Income Fund (5/02/94) .................... 11.76% N/A 15.71%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) .......................... 6.88% 13.42% 13.08%
High Income Portfolio (9/19/85) ..................... 6.24% 13.23% 10.31%
Equity Income Portfolio (10/9/86) ................... 6.48% 16.20% 11.71%
Overseas Fund (1/28/87) ............................ 5.42% 7.50% 6.25%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) ...................... 12.94% N/A 24.71%
Index 500 Portfolio (8/27/92) ....................... 13.83% N/A 14.57%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) .................. -3.07% N/A 3.88%
Money Market Series (1/03/95) ....................... -2.59% N/A 0.07%
Bond Series (10/24/95) .............................. -4.88% N/A -1.92%
Total Return Series (1/03/95) ....................... 6.56% N/A 15.65%
Research Series (7/26/95) ........................... 13.98% N/A 16.98%
Emerging Growth Series (7/24/95) .................... 9.03% N/A 18.15%
</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 December 31, 1996 were:
<TABLE>
<CAPTION>
Subaccount Standardized
Cumulative Total Return Table
- ------------------------------------------------------------------------------------------------
For the
For the For the period
one-year 5-year from
period period inception
Subaccount ending ending to
(date of inception of corresponding portfolio) 12/31/96 12/31/96 12/31/96
- -------------------------------------------------------- -------- -------- ---------
<S> <C> <C> <C>
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 Fund (11/25/96) ....... N/A N/A N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) ................. 9.55% N/A 78.26%
Government Securities Fund (5/05/93) ................ -4.69% N/A 7.46%
Growth Fund (5/05/93) ............................... 10.03% N/A 56.68%
International Equity Fund (5/05/93) ................. 11.85% N/A 50.15%
Value Fund (5/05/93) ................................ 7.17% N/A 70.77%
Growth and Income Fund (5/02/94) .................... 11.76% N/A 47.61%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) .......................... 6.88% 87.71% 251.83%
High Income Portfolio (9/19/85) ..................... 6.24% 86.09% 202.78%
Equity Income Portfolio (10/9/86) ................... 6.48% 111.85% 210.59%
Overseas Fund (1/28/87) ............................. 5.42% 43.58% 82.63%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) ...................... 12.94% N/A 55.33%
Index 500 Portfolio (8/27/92) ....................... 13.83% N/A 80.65%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) .................. -3.07% N/A 10.19%
Money Market Series (1/03/95) ....................... -2.59% N/A 0.14%
Bond Series (10/24/95) .............................. -4.88% N/A -2.28%
Total Return Series (1/03/95) ....................... 6.56% N/A 33.65%
Research Series (7/26/95) ........................... 13.98% N/A 25.26%
Emerging Growth Series (7/24/95) .................... 9.03% N/A 27.17%
</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 December 31, 1996 were:
<TABLE>
<CAPTION>
Subaccount Non-Standardized
Average Annual Total Return Table
- ----------------------------------------------------------------------------------------
For the
For the For the period
one-year 5-year from
period period inception
Subaccount ending ending to
(date of inception of corresponding portfolio 12/31/96 12/31/96 12/31/96
- ------------------------------------------------ -------- -------- ---------
<S> <C> <C> <C>
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 Fund (11/25/96) ......................... N/A N/A N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) ......... 15.93% N/A 18.42%
Government Securities Fund (5/05/93) ........ 0.86% N/A 3.13%
Growth Fund (5/05/93) ....................... 16.44% N/A 14.32%
International Equity Fund (5/05/93) ......... 18.37% N/A 13.00%
Value Fund (5/05/93) ........................ 13.41% N/A 17.04%
Growth and Income Fund (5/02/94) ............ 18.27% N/A 17.86%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) .................. 13.10% 13.55% 13.20%
High Income Portfolio (9/19/85) ............. 12.43% 13.35% 10.43%
Equity Income Portfolio (10/9/86) ........... 12.68% 16.33% 11.83%
Overseas Fund (1/28/87) ..................... 11.57% 7.62% 6.37%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) .............. 19.52% N/A 28.37%
Index 500 Portfolio (8/27/92) ............... 20.46% N/A 15.42%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) .......... 2.57% N/A 5.89%
Money Market Series (1/03/95) ............... 3.09% N/A 3.01%
Bond Series (10/24/95) ...................... 0.66% N/A 2.88%
Total Return Series (1/03/95) ............... 12.77% N/A 19.05%
Research Series (7/26/95) ................... 20.62% N/A 21.73%
Emerging Growth Series (7/24/95) ............ 15.38% N/A 22.92%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Subaccount Non-Standardized
Cumulative Total Return Table
- ------------------------------------------------------------------------------------------------
For the
For the For the period
one-year 5-year from
period period inception
Subaccount ending ending to
(date of inception of corresponding portfolio 12/31/96 12/31/96 12/31/96
- -------------------------------------------------------- -------- -------- ---------
<S> <C> <C> <C>
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 Fund (11/25/96) ....... N/A N/A N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) ................. 15.93% N/A 85.67%
Government Securities Fund (5/05/93) ................ 0.86% N/A 11.93%
Growth Fund (5/05/93) ............................... 16.44% N/A 63.19%
International Equity Fund (5/05/93) ................. 18.37% N/A 56.39%
Value Fund (5/05/93) ................................ 13.41% N/A 77.87%
Growth and Income Fund (5/02/94) .................... 18.27% N/A 55.03%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) .......................... 13.10% 88.75% 255.84%
High Income Portfolio (9/19/85) ..................... 12.43% 87.12% 206.59%
Equity Income Portfolio (10/9/86) ................... 12.68% 113.02% 214.13%
Overseas Fund (1/28/87) ............................. 11.57% 44.38% 84.65%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) ...................... 19.52% N/A 64.56%
Index 500 Portfolio (8/27/92) ....................... 20.46% N/A 86.56%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) .................. 2.57% N/A 15.71%
Money Market Series (1/03/95) ....................... 3.09% N/A 6.09%
Bond Series (10/24/95) .............................. 0.66% N/A 3.43%
Total Return Series (1/03/95) ....................... 12.77% N/A 41.59%
Research Series (7/26/95) ........................... 20.62% N/A 32.62%
Emerging Growth Series (7/24/95) .................... 15.38% N/A 34.64%
</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
<TABLE>
<S> <C> <C>
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
</TABLE>
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, L.L.P. 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, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, and the financial statements for the Separate Account
as of December 31, 1996, 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, 1996 and 1995 and for the years ended December 31, 1996, 1995, and 1994, as
well as the Independent Auditor's Report which appear in this Statement of
Additional Information should be considered only as bearing on our ability to
meet our obligations under the contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account. This Statement of Additional Information also contains audited
financial statements for the Separate Account as of December 31, 1996.
14
<PAGE>
CITICORP LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of Citibank Delaware)
Statutory Financial Statements
December 31, 1996, 1995, and 1994
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
Citicorp Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and capital and surplus of Citicorp Life Insurance Company (a
wholly owned subsidiary of Citibank Delaware) as of December 31, 1996 and 1995,
and the related statutory statements of operations, capital and surplus, and
cash flow for each of the years in the three-year period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Arizona, which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of accounting
and generally accepted accounting principles, although not reasonably
determinable, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Citicorp Life Insurance Company as of December 31, 1996 and 1995, or the
results of its operations or its cash flows for the years then ended.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the admitted assets, liabilities, and capital and
surplus of Citicorp Life Insurance Company as of December 31, 1996 and 1995, and
the results of its operations and its cash flow for each of the years in the
three-year period ended December 31, 1996.
/s/KPMG Peat Marwick LLP
Chicago, Illinois
April 18, 1997
1
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets,
Liabilities, and Capital and Surplus
December 31, 1996 and 1995
<TABLE>
<CAPTION>
========================================================================================================
Admitted Assets 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and investments--other than investments in insurance affiliates:
Bonds $296,552,241 277,368,210
Mutual Funds -- 7,448,559
Mortgage loans 1,499,111 2,035,095
Cash on hand and on deposit 2,079,352 1,198,000
Short-term investments 161,562,000 69,364,672
Real estate 26,556,748 27,059,121
Investments in insurance affiliates 53,657,060 93,757,664
Total cash and investments 541,906,512 478,231,321
Net deferred and uncollected premiums 1,652,620 1,979,440
Due from reinsurers 19,788,541 24,789,763
Accrued investment income 5,718,087 6,030,469
Other assets 2,972,118 5,355,915
Separate account assets 8,597,937 7,460,197
Total admitted assets $580,635,815 523,847,105
========================================================================================================
========================================================================================================
Liabilities and Capital and Surplus
- --------------------------------------------------------------------------------------------------------
Liabilities:
Future policy benefit reserves:
Life insurance $ 6,504,204 6,950,287
Accident and health insurance 1,267,906 1,288,580
Policyholder account balances--annuities 75,883,346 58,390,582
Policy and contract claim reserves:
Life insurance 5,969,586 6,657,389
Accident and health insurance 19,577,316 16,508,481
General expenses due or accrued 180,250 718,168
Federal income taxes due to parent 35,614,548 33,158,718
Asset valuation reserve 14,138,247 23,525,005
Interest maintenance reserve 9,027,467 10,330,687
Stockholder dividends payable -- 16,000,000
Other liabilities 1,292,411 927,815
Separate account liabilities 601,103 11,236
- --------------------------------------------------------------------------------------------------------
Total liabilities 170,056,384 174,466,948
- --------------------------------------------------------------------------------------------------------
Commitments and contingencies
Capital and surplus:
Capital stock--$1 par value per share; 5,000,000 shares
authorized; 2,500,000 shares issued and outstanding 2,500,000 2,500,000
Surplus:
Paid-in 3,399,878 1,899,878
Assigned--separate account 7,996,834 7,448,961
Unassigned 396,682,719 337,531,318
- --------------------------------------------------------------------------------------------------------
Total capital and surplus 410,579,431 349,380,157
- --------------------------------------------------------------------------------------------------------
Total liabilities and capital and surplus $580,635,815 523,847,105
========================================================================================================
See accompanying notes to statutory financial statements.
</TABLE>
2
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
=============================================================================================================
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations:
Annuities $ 21,559,834 17,404,560 41,271,181
Life insurance 28,870,474 35,711,063 41,648,452
Accident and health insurance 48,512,593 51,595,154 48,487,209
- -------------------------------------------------------------------------------------------------------------
Total premium and annuity considerations 98,942,901 104,710,777 131,406,842
Net investment income (including dividends from
subsidiaries of $74.3 and $5.7 million in 1996
and 1994, respectively) 102,762,955 23,484,474 26,200,378
Amortization of interest maintenance reserve 1,300,049 1,493,637 1,606,337
Commissions and expense allowances on reinsurance
ceded 256,312 308,635 365,414
Net gain from operations in separate accounts 547,873 -- --
Other (12,409) 4,085 14,428
- -------------------------------------------------------------------------------------------------------------
Total revenues 203,797,681 130,001,608 159,593,399
- -------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other policy benefits:
Annuities 1,527,015 1,327,395 441,851
Life insurance 15,268,489 17,389,922 21,544,399
Accident and health insurance 22,187,628 18,609,868 9,871,951
Surrenders 5,219,710 4,902,176 1,013,546
Change in future policy benefits:
Annuities 17,492,764 13,160,867 40,220,967
Life insurance (446,083) (1,245,900) (1,046,509)
Accident and health insurance (20,674) (8,009) 512,640
Other operating costs and expenses:
Commissions 8,829,493 11,117,619 8,010,231
General insurance expenses 15,992,174 18,718,836 25,580,133
Net transfers to separate accounts 589,552 10,282 --
Other 324,674 (5,905) 7,821
- -------------------------------------------------------------------------------------------------------------
Total benefits and expenses 86,964,742 83,977,151 106,157,030
- -------------------------------------------------------------------------------------------------------------
Income from operations before federal income
tax expense and net realized capital gains (losses) 116,832,939 46,024,457 53,436,369
Federal income tax expense 14,240,457 15,481,637 20,974,659
- -------------------------------------------------------------------------------------------------------------
Income from operations before net realized capital gains (losses) 102,592,482 30,542,820 32,461,710
Net realized capital gains (losses), net of IMR transfer 101,296 (626,923) 378,038
- -------------------------------------------------------------------------------------------------------------
Net income $102,693,778 29,915,897 32,839,748
=============================================================================================================
</TABLE>
See accompanying notes to statutory financial statements.
3
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Capital and Surplus
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
============================================================================================================
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital and surplus at beginning of year $349,380,157 319,456,225 306,151,851
Net income 102,693,778 29,915,897 32,839,748
Net unrealized gain (loss) from revaluation of investments (45,000,202) 15,824,719 (5,634,043)
Change in asset valuation reserve 9,386,758 (7,188,498) 1,091,197
Dividends on common stock -- (16,000,000) (15,000,000)
Change in nonadmitted assets 67,901 (77,147) 7,472
Surplus paid in 1,500,000 -- --
Change in unassigned surplus--separate account (7,448,961) 7,448,961 --
- ------------------------------------------------------------------------------------------------------------
Capital and surplus at end of year $410,579,431 349,380,157 319,456,225
============================================================================================================
</TABLE>
See accompanying notes to statutory financial statements.
4
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
============================================================================================================
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in) operating activities:
Premiums and annuity considerations $ 99,269,724 105,047,103 131,744,746
Net investment income received 104,780,308 30,896,829 21,535,075
Other income received (12,409) 4,085 14,428
Allowances and reserve adjustments received on
reinsurance ceded 256,312 308,635 365,414
Life and accident and health claims, and other
benefits paid (41,824,703) (37,762,652) (32,488,486)
Commissions, other expenses, and taxes paid (25,359,582) (29,416,131) (33,700,097)
Federal income taxes paid (11,210,540) (33,773,867) --
Net transfer to separate accounts (589,552) (10,282) --
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 125,309,558 35,293,720 87,471,080
- ------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities:
Proceeds from investments sold, matured, or repaid:
Bonds 74,104,424 56,095,825 134,432,477
Stocks 1,755,839 10,670 --
Mortgage loans 535,983 213,130 354,743
Other 772 18,303 (8,568)
Separate account capitalization -- (7,000,000) --
Cost of investments acquired (long-term only):
Cost of bonds acquired (94,496,685) (56,547,871) (161,869,207)
Cost of stocks acquired--affiliates (6,500,000) -- --
Tax on capital gains (losses) (626,923) (748,898) --
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (25,226,590) (7,958,841) (27,090,555)
- ------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities:
Surplus paid in 1,500,000 -- --
Other cash provided 30,952,803 2,831,771 2,931,659
Dividends paid to stockholder (16,000,000) (15,000,000) --
Change in due from reinsurers 5,001,222 (7,867,886) (1,957,516)
Other cash used (28,458,313) (3,450,732) (1,887,886)
- ------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (7,004,288) (23,486,847) (913,743)
- ------------------------------------------------------------------------------------------------------------
Net change in cash on hand and on deposit and
short-term investments 93,078,680 3,848,032 59,466,782
Cash on hand and on deposit and short-term
investments, beginning of year 70,562,672 66,714,640 7,247,858
Cash on hand and on deposit and short-term
investments, end of year $163,641,352 70,562,672 66,714,640
============================================================================================================
</TABLE>
See accompanying notes to statutory financial statements.
5
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1996 and 1995
================================================================================
(1) BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Citicorp Life Insurance Company (the Company) is a wholly owned subsidiary
of Citibank Delaware (the Parent), which is a second tier wholly owned
subsidiary of Citicorp. The Company issues and assumes term life insurance,
credit life, credit accident and health, credit involuntary unemployment,
single and flexible premium deferred annuity policies, and variable
deferred annuity policies. The Company also writes and assumes mortgage
disability policies. The Company is licensed to issue insurance in 46
states and the District of Columbia. The majority of the Company's business
is generated through customers of Citicorp and its subsidiaries. At
December 31, 1996, the Company has two wholly owned insurance company
subsidiaries, First Citicorp Life Insurance Company and Citicorp Assurance
Co. (CAC), both of which are accounted for on the statutory equity method.
On January 1, 1996, the credit involuntary unemployment business which had
been assumed by FG Casualty Company, a wholly owned subsidiary of the
Company and FG Insurance Corporation, an affiliate of the Company, prior to
1996 was transferred to CAC. CAC was dividended to the Company and became a
wholly owned subsidiary during 1996. During the first quarter of 1996, FG
Casualty Company and FG Insurance Corporation were sold to an unrelated
third party.
The accompanying statutory financial statements have been prepared in
accordance with insurance accounting practices prescribed or permitted by
the Department of Insurance of the State of Arizona, which vary in some
respects from generally accepted accounting principles (GAAP) as discussed
more fully in note 12. The preparation of statutory financial statements
requires management to make estimates and assumptions which affect the
reported amounts of assets and liabilities as of the date of the financial
statements. Actual results could differ from these estimates. The
significant statutory accounting policies are as follows:
The significant statutory accounting policies are as follows:
o Revenue and Expenses--Life premiums are reflected as earned on the
policy anniversary date. Annuity considerations are reported as income
when received. Accident and health premiums are reported as revenue
when due and earned on a pro rata basis over the period covered by the
policy. Deferred life premiums represent modal premiums (other than
annual) to be billed in the year subsequent to the commencement of the
policy year. Uncollected premiums represent premiums due less accident
and health premiums over 90 days past due. Expenses, including
acquisition costs related to acquiring new business and interest
credited to policyholder account balances, are charged to operations
as incurred. Investment income is recognized as earned.
o Policy Reserves--The liability for future life policy benefits is
based on statutory mortality and interest requirements without
consideration of withdrawals. The mortality table and interest
assumptions currently being used on the majority of new ordinary and
group life policies are the 1980 Commissioners Standard Ordinary (CSO)
table, with 4.5% to 5.25% interest on a Commissioners Reserve
Valuation Method (CRVM) basis. With respect to in-force ordinary life
and group policies, the mortality table and interest assumptions are
from the 1980 CSO table with 4.5% to 6% interest. The Company utilizes
the 1980 CSO table with 5.5% to 6% interest for most credit life
policies. Life reserves are generally calculated on either a net level
or CRVM reserve basis.
(Continued)
6
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
For deferred annuities, policyholder account balances are computed on the
Commissioners Annuity Reserve Valuation Method (CARVM) using appropriate
issue-year interest rates ranging from 5.5% to 6.5%.
Future policy benefits on accident and health insurance are based on
unearned premiums computed on a pro rata basis. The Company provides a
liability for accident and health claims which represents an estimate of
the ultimate cost of unpaid claims incurred through December 31 of each
year. Management believes this liability will be adequate to cover such
costs; however, the ultimate liability may be more or less than the
estimated liability.
o Investments--Bonds and stocks are valued as prescribed by the National
Association of Insurance Commissioners (NAIC). Bonds and short-term
investments, which consist primarily of U.S. Treasury, corporate, and
mortgage-backed securities, are generally carried at amortized cost,
preferred stocks are generally carried at cost, and common stocks of
unaffiliated companies are generally carried at fair value.
Investments in common stock of insurance affiliates are recorded at
their underlying statutory book value with changes in book value
reflected in surplus. Mortgage loans are stated at the unpaid
principal balance and represent first liens on residential properties
located in the United States. Real estate is carried at cost less
accumulated depreciation of $5,201,971 and $4,699,598 in 1996 and
1995, respectively, which is calculated on a straight-line basis over
the estimated life of the property (50 years).
Life insurance companies are required to establish an Asset Valuation
Reserve (AVR) and an Interest Maintenance Reserve (IMR). The AVR
provides for a standardized statutory investment valuation reserve for
bonds, preferred stocks, short-term investments, mortgage loans,
common stocks, real estate, and other invested assets for the purpose
of stabilizing surplus against the effect of fluctuations in the value
of investments and is recorded as a direct charge to surplus in
accordance with statutory accounting practices. The IMR is designed to
defer net realized capital gains and losses resulting from changes in
the level of interest rates in the market and to amortize them into
income over the remaining life of the bond or mortgage loan sold. The
IMR represents the unamortized portion of such net unrealized capital
gains and losses not yet taken into income.
o Capital Gains and Losses--The cost of investments sold is generally
determined on the first-in, first-out method and includes the effects
of any related amortization of premium or accretion of discount.
Realized investment gains and losses are reported net of income taxes
of $52,836, $626,923, and $(378,038) in 1996, 1995, and 1994,
respectively, and are included in the determination of net income.
Realized investment gains exclude $(3,171), $1,791,210, and $347,398,
which were transferred to the IMR in 1996, 1995, and 1994,
respectively, net of federal income taxes.
o Separate Account Assets and Liabilities--The assets and liabilities of
the Separate Account represent segregated funds administered and
invested by the Company for purposes of funding variable annuity
contracts for the exclusive benefit of variable annuity
contractholders. The Company receives administrative fees from the
Separate Account and retains varying amounts of withdrawal charges to
cover expenses in the event of early withdrawals by contractholders.
The assets and liabilities of the Separate Account are carried at fair
value. During 1995, the Company transferred $7,000,000 from its
general funds to provide initial capital in the Separate Account. In
1996, the Company has reflected the net gain from operations of the
Separate Account, which consists of investment income less
contractholder reserves and expenses, in the statement of
(Continued)
7
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
operations. Prior to 1996, the net gain from operations of the
Separate Account was recorded as an adjustment to surplus.
o Nonadmitted Assets--Assets included in the statutory statements of
admitted assets, liabilities, and capital and surplus are at "admitted
asset values." Nonadmitted assets, principally capitalized
expenditures for furniture and equipment, are excluded from the
accompanying statutory financial statements through a charge against
unassigned surplus.
o Federal Income Taxes--Federal income taxes are charged to operations
based on income that is currently taxable. No charge to operations is
made or liability established for the tax effects of temporary
differences between the financial reporting and tax basis of assets
and liabilities.
o Fair Value Disclosures--Fair value estimates are made at a specific
point in time, based on relevant market information and information
about the financial instrument. These estimates do not reflect any
premium or discount that could result from offering for sale at one
time the Company's entire holdings of a particular financial
instrument. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in
assumptions could significantly affect the estimates and such
estimates should be used with care. The following methods and
assumptions were used to estimate the fair market value of each class
of financial instrument for which it was practicable to estimate fair
value:
Investment securities--Fixed maturities are based on market prices
obtained from a pricing service which approximates fair value.
Mortgage loans--First mortgages on real estate are carried at the
unpaid principal balance. As discussed in note 3, the Company bears no
credit risk as all mortgage loans were purchased, with recourse, from
an affiliate. The carrying value of mortgage loans approximates fair
value.
Policyholder account balances--The liability for policyholder account
balances is related to investment-type annuity contracts for which
crediting rates are subject to adjustment annually, based on interest
rates currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued. The
carrying value approximates fair value at December 31, 1996 and 1995.
Cash and short-term investments--The carrying amount is a reasonable
estimate of fair value.
o Cash and cash equivalents--For purposes of reporting cash flows, cash
and cash equivalents represent demand deposits and highly liquid
short-term investments, which include U.S. Treasury bills, commercial
paper, and repurchase agreements with original or remaining maturities
of 90 days or less when purchased.
o Reclassifications--Certain reclassifications have been made to the
1995 and 1994 information to conform with the 1996 presentation.
(2) REINSURANCE
Insurance is assumed from other companies in areas where the Company had or
has limited authority to write business. Normally, a commission based on
net written premiums is charged by the ceding company under the terms of
the agreement.
(Continued)
8
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
The effect of reinsurance on premiums for the years ended December 31, 1996,
1995, and 1994 is as follows:
================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------
Direct premiums:
Annuities $21,559,834 17,404,560 41,271,181
Life 7,908,778 11,180,195 12,859,822
Accident and health 5,266,759 9,039,109 7,821,980
Premiums assumed--life 24,051,178 25,020,842 30,079,934
Premiums assumed--accident and health 43,414,326 42,608,235 40,739,855
Premiums ceded--life (3,089,484) (489,974) (1,291,304)
Premiums ceded--accident and health (168,490) (52,190) (74,626)
- --------------------------------------------------------------------------------
Net premiums earned $98,942,901 104,710,777 131,406,842
================================================================================
Reserve credits taken with respect to risks ceded to other companies
amounted to approximately $1,252,712, $1,345,978, and $1,426,500 at
December 31, 1996, 1995, and 1994, respectively. The Company remains
contingently liable with respect to any reinsurance ceded and would become
actually liable if the assuming company was unable to meet its obligations
under the reinsurance treaty.
The Company received approximately 96%, 98%, and 98% of its assumed
premiums from three unrelated insurance companies in 1996, 1995, and 1994,
respectively.
(3) INVESTMENTS
Major categories of net investment income for the years ended December 31,
1996, 1995, and 1994 consist of the following:
================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------
Bonds $19,749,865 19,038,491 16,143,573
Stocks (subsidiaries) 74,289,520 -- 5,700,000
Mortgage loans 125,648 166,072 151,631
Real estate 2,866,044 3,126,593 3,087,442
Short-term investments 6,856,874 2,382,964 2,066,640
Other 114,269 2,614 27,157
- --------------------------------------------------------------------------------
Total investment revenue 104,002,220 24,716,734 27,176,443
Investment expense 1,239,265 1,232,260 976,065
- --------------------------------------------------------------------------------
Net investment income $102,762,955 23,484,474 26,200,378
================================================================================
Investment expense includes $502,373 in depreciation on investments in real
estate for 1996, 1995, and 1994.
(Continued)
9
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
<TABLE>
<CAPTION>
===================================================================================================
Investments in bonds at December 31, 1996 and 1995 are summarized below.
1996
- ---------------------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized fair
value gains losses value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
U.S. Treasury securities $ 19,898,960 90,486 (1,054,088) 18,935,358
U.S. government agency 89,860,220 430,728 (1,649,602) 88,641,346
Industrial and miscellaneous bonds 186,793,061 1,318,830 (4,003,535) 184,108,356
- ---------------------------------------------------------------------------------------------------
Total bonds $296,552,241 1,840,044 (6,707,225) 291,685,060
===================================================================================================
1995
- ---------------------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized fair
value gains losses value
- ---------------------------------------------------------------------------------------------------
U.S. Treasury securities $ 19,035,995 163,197 (45,432) 19,153,760
U.S. government agency 75,952,370 847,318 (888,939) 75,910,749
Industrial and miscellaneous bonds 182,379,845 2,573,892 (1,699,699) 183,254,038
Total bonds $277,368,210 3,584,407 (2,634,070) 278,318,547
</TABLE>
The carrying and estimated fair values of bonds at December 31, 1996, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
================================================================================
Estimated
Carrying fair
value value
- --------------------------------------------------------------------------------
Within 1 year $ 499,848 501,640
After 1 year through 5 years 28,440,901 28,062,026
After 5 years through 10 years 122,036,197 119,581,184
After 10 years through 20 years 14,803,815 14,749,024
After 20 years 14,466,935 13,440,001
Mortgage backed securities 116,304,545 115,351,185
$296,552,241 291,685,060
================================================================================
Proceeds from sale of bonds during 1996, 1995, and 1994 were $61,066,581,
$51,565,705, and $117,526,794, respectively. Gross gains of $1,075,411,
$1,857,733, and $355,965, and gross losses of $1,081,062, $95,496, and $-0-
were realized on those sales in 1996, 1995, and 1994, respectively.
Investments in mortgage loans were purchased from Citicorp Mortgage, Inc.
(CMI), an affiliate, pursuant to a Mortgage Loan Purchase and Sale
Agreement. In the event of default by the borrower, CMI has agreed to take
back the related loans at current book value.
(Continued)
10
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
(4) INVESTMENTS ON DEPOSIT
At December 31, 1996 and 1995, investments with a carrying value of
$2,701,958 and $2,695,641, respectively, were on deposit with various state
insurance departments as required by law and $4,819,650 and $2,665,960,
respectively, were on deposit in escrow accounts under the terms of certain
of the Company's reinsurance agreements.
(5) INVESTMENTS IN AFFILIATES
Investments in affiliates is comprised of the following:
Condensed financial information for First Citicorp Life Insurance Company,
on a statutory basis, is as follows:
<TABLE>
<CAPTION>
========================================================================================
1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance sheet at December 31:
Admitted assets $291,720,101 200,416,978 110,743,798
Liabilities 272,567,912 182,465,874 92,714,793
- ----------------------------------------------------------------------------------------
Capital and surplus $ 19,152,189 17,951,104 18,029,005
========================================================================================
Results of operations:
Premiums earned $112,681,329 108,340,895 79,395,337
Benefits and expenses 126,674,439 117,006,106 81,977,659
Investment income, including realized gains 16,263,882 10,684,469 4,767,146
Other income 502,543 83,188 21,437
- ----------------------------------------------------------------------------------------
Income before federal income taxes 2,773,315 2,102,446 2,206,261
Federal income tax expense 1,178,369 2,123,528 701,760
- ----------------------------------------------------------------------------------------
Net income (loss) $ 1,594,946 (21,082) 1,504,501
========================================================================================
</TABLE>
During 1996, all operations of FG Casualty Company were transferred to CAC
along with the operations of FG Insurance Corporation, an affiliate of the
Company. During 1996, CAC became a wholly owned subsidiary of the Company
and FG Casualty Company was sold to an unrelated third party (note 1). The
sale of FG Casualty Company was insignificant to the financial position of
the Company.
(Continued)
11
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
Condensed financial information for CAC, on a statutory basis, is as follows:
================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------
Balance sheet at December 31:
Admitted assets $56,301,892 1,807,771 1,728,292
Liabilities 21,797,022 71,700 62,736
- --------------------------------------------------------------------------------
Capital and surplus $34,504,870 1,736,071 1,665,556
================================================================================
Results of operations:
Net premiums earned $66,903,396 -- --
Losses and underwriting expenses 25,003,148 -- --
- --------------------------------------------------------------------------------
Underwriting gain 41,900,248 -- --
Investment income 825,948 109,369 81,813
Other income -- -- 1,267
- --------------------------------------------------------------------------------
Income before federal income taxes 42,726,196 109,369 83,080
Federal income tax expense 14,957,396 38,855 29,113
- --------------------------------------------------------------------------------
Net income $27,768,800 70,514 53,967
================================================================================
Condensed financial information for FG Casualty Company, on a statutory basis,
is as follows:
================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------
Balance sheet at December 31:
Admitted assets $-- 88,552,358 98,649,579
Liabilities -- 12,745,798 38,299,177
- --------------------------------------------------------------------------------
Capital and surplus $-- 75,806,560 60,350,402
================================================================================
Results of operations:
Net premiums earned $-- 17,297,323 17,258,960
Losses and underwriting expenses -- 9,057,292 5,696,160
- --------------------------------------------------------------------------------
Underwriting gain -- 8,240,031 11,562,800
Investment income, including realized gains -- 4,165,601 4,207,553
- --------------------------------------------------------------------------------
Income before federal income taxes -- 12,405,632 15,770,353
Federal income tax expense -- 4,554,315 5,282,152
- --------------------------------------------------------------------------------
Net income $-- 7,851,317 10,488,201
================================================================================
(Continued)
12
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(6) ACCIDENT AND HEALTH INSURANCE POLICY AND CONTRACT CLAIMS
Activity in the liability for accident and health insurance policy and
contract claims is summarized as follows:
================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------
Balance at January 1 $17,094,210 10,793,721 11,226,420
- --------------------------------------------------------------------------------
Incurred related to:
Current year 25,334,054 21,893,536 15,951,737
Prior years (3,071,930) (3,297,260) (6,084,117)
- --------------------------------------------------------------------------------
Total incurred 22,262,124 18,596,276 9,867,620
- --------------------------------------------------------------------------------
Paid related to:
Current year 10,574,937 7,366,024 8,095,080
Prior years 8,543,857 4,929,763 2,205,239
- --------------------------------------------------------------------------------
Total paid 19,118,794 12,295,787 10,300,319
- --------------------------------------------------------------------------------
Balance at December 31 $20,237,540 17,094,210 10,793,721
================================================================================
The schedule above reflects the due and unpaid, in the course of
settlement, and incurred but not reported components of the unpaid claims
reserves for the Company's health and disability coverages. The schedule
also includes unpaid claims reserves recorded in future policy benefits
which represent the present value of amounts not yet due on claims.
(7) FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with its
ultimate parent, Citicorp, and its other subsidiaries. The Company
participates in a tax-sharing agreement with the Parent whereby it is
liable to the Parent for federal income taxes on a stand-alone basis.
Under the Life Insurance Company Income Tax Act of 1959, a portion of
income prior to 1984 is not subject to federal income taxes, within certain
limits, until it is distributed to stockholders, at which time the
distribution is taxed at ordinary corporate rates. The untaxed income is
accumulated in a memorandum tax account designated as "Policyholders'
Surplus Account." The accumulated "Policyholders' Surplus Account," as
reported in the federal income tax returns at December 31, 1996, 1995, and
1994, was approximately $10,532,900. Based on the current tax rate, if such
accumulated amounts were distributed to stockholders, the income tax would
be approximately $3,686,500. Since the Company does not intend to make any
significant taxable distributions in the foreseeable future, no provision
for such taxes has been made in the accompanying statutory financial
statements.
At December 31, 1996, the Company had a stockholders' surplus account
balance of approximately $301,559,520 from which it could pay dividends to
the stockholder without incurring additional federal income tax liability.
(Continued)
13
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
Federal income tax expense on income from operations varies from amounts
computed by applying the current federal corporate income tax rate to
income from operations before federal income tax expense and net realized
capital gains (losses). The reasons for these differences, and the tax
effects thereof, are as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax at
U.S. corporate tax rate $ 40,891,529 35.00% 16,108,560 35.00% 18,702,729 35.00%
Difference between changes
in statutory reserves as
compared to tax reserves (100,513) (.10) 254,169 .55 138,001 .25
Policy acquisition expenses
capitalized, net of
amortization (48,558) (.05) 171,520 .37 422,684 .79
Dividend exclusion (26,001,332) (22.26) -- -- (1,995,000) (3.73)
Amortization of IMR (455,017) (522,773) (1.14) (440,646) (.82)
Prior year taxes -- -- -- -- 4,226,419 7.90
Other, net (45,652) (529,839) (1.15) (79,528) (.14)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 14,240,457 12.19% 15,481,637 33.63% 20,974,659 39.25%
====================================================================================================================================
</TABLE>
(8) RELATED PARTY TRANSACTIONS
The Company leases two buildings to an affiliate and rental income received
from this affiliate of $3,127,000, $3,127,000, and $3,087,000 in 1996,
1995, and 1994, respectively, is included in net investment income. These
leases expire at various dates and contain options for renewal. The future
minimum rental income for the year ending December 31, 1997 is $3,127,000
under the terms of the leases.
The Company has entered into various service contracts with affiliates of
the Company which cover management, investment, and information processing
services. Expenses incurred under such agreements were $2,766,904,
$2,865,000, and $3,545,000 in 1996, 1995, and 1994, respectively.
The Company utilizes the services of Citicorp Insurance Services, Inc. and
CMI. Employees of these companies are eligible to participate in defined
benefit plans provided by Citicorp. Charges for these services are based on
the actual salary and benefit costs of employees providing service to the
Company. Included in these charges are costs associated with Citicorp's
benefit plans.
(9) DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid by Arizona insurance
companies without the prior approval of the Arizona Director of Insurance
is not to exceed the lesser of 10% of policyholder surplus as of December
31 of the preceding year or net gain from operations. The Company has
(Continued)
14
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
available an additional $24.1 million for the payment of dividends in 1997
without prior approval (note 13). No dividend was declared in 1996. A
dividend of $16 million was declared in 1995 and paid in 1996. A dividend
of $15 million was declared in 1994 and paid in 1995.
(10) RISK-BASED CAPITAL
The insurance departments of various states, including the Company's
domiciliary state of Arizona, impose risk-based capital (RBC) requirements
on insurance enterprises. The RBC calculation serves as a benchmark for the
regulation of life insurance companies by state insurance regulators. The
requirements apply various weighted factors to financial balances or
activity levels based on their perceived degree of risk.
The RBC guidelines define specific capital levels where action by the
Company or regulatory intervention is required based on the ratio of a
Company's actual total adjusted capital (sum of capital and surplus and
asset valuation reserve) to control levels determined by the RBC formula.
At December 31, 1996, the Company's actual total adjusted capital exceeded
all regulatory requirements, thus, no action by the Company or its
regulators is required.
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation arising in the ordinary
course of operations. Management is of the opinion, after reviewing these
matters with legal counsel, that the ultimate liability, if any, resulting
from any or all of the above matters would not have a material adverse
effect on the Company's financial position.
(12) DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND STATUTORY
ACCOUNTING PRACTICES
Statutory accounting practices differ in some respects from generally
accepted accounting principles. Under GAAP, the following applies:
(a) The liability for future policy benefits is computed using the
rule-of-78s and pro rata methods.
(b) Life premiums are reflected as earned when due. Annuity considerations
and other fund deposits are reflected as deposits rather than revenue.
(c) Acquisition costs are capitalized and amortized generally over the
premium paying period for individual life contracts and in relation to
the estimated present value of gross profits of the underlying
business for interest-sensitive life and investment contracts.
(d) Deferred income taxes are provided for the tax effects of temporary
differences between the financial reporting and tax basis of assets
and liabilities.
(e) Nonadmitted assets, less applicable allowance accounts, are restored
to the balance sheet.
(f) Asset valuation and interest maintenance reserves are not provided.
(Continued)
15
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
================================================================================
(g) Realized investment gains (losses) resulting from changes in interest
rates are recognized when the related security is sold.
(h) Majority-owned subsidiaries are consolidated and the Company's
investment in subsidiaries is eliminated in consolidation.
(i) Debt securities are classified into one of three categories:
held-to-maturity, trading, or available-for-sale. Held-to-maturity
securities are carried at amortized cost. Trading securities are
reported at fair value with unrealized gains and losses included in
earnings. Available-for-sale securities are reported at fair value
with unrealized gains and losses excluded from earnings and reported
as a separate component of equity, net of tax.
(j) Reinsurance premiums, commissions, expense reimbursements, and
reserves would be presented on a gross basis consistent with terms of
the reinsurance contracts.
The statutory financial statements do not include any adjustments that
might result from differences between statutory accounting practices and
GAAP.
(13) SUBSEQUENT EVENTS
The Company paid a dividend of $75.0 million to its parent and invested
$43.0 million of seed money into its variable annuity product in February
1997. Approval for the extraordinary dividend was obtained from the Arizona
Director of Insurance prior to distribution.
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Financial Statements and Schedule
December 31, 1996
(With Independent Auditors' Report Thereon)
<PAGE>
[KPMG Peat Marwick LLP]
1010 Market Street
St. Louis, MO 63101-2085
Independent Auditors' Report
The Board of Directors
Citicorp Life Insurance Company and Policyholders
of Citicorp Life Insurance Company
Variable Annuity Separate Account:
We have audited the accompanying statements of net assets, including the
schedule of investments, of the Landmark Equity Fund, Landmark U.S. Government
Fund, Landmark International Equity Fund, Landmark Balanced Fund, A.I.M. V.I.
Capital Appreciation Fund, Fidelity Growth Portfolio, MFS Money Market Series,
and MFS World Government Series Portfolios of Citicorp Life Insurance Company
Variable Annuity Separate Account as of December 31, 1996, and the related
statements of operations and changes in net assets for the periods presented.
These financial statements are the responsibility of Citicorp Life Insurance
Company Variable Annuity Separate Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned at December 31, 1996 by correspondence with
the Landmark Variable Insurance Products Fund, A.I.M. Variable Insurance Funds,
Inc., Fidelity Variable Insurance Products Fund, and MFS Variable Insurance
Trust. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Landmark Equity Fund,
Landmark U.S. Government Fund, Landmark International Equity Fund, Landmark
Balanced Fund, A.I.M. V.I. Capital Appreciation Fund, Fidelity Growth Portfolio,
MFS Money Market Series, and MFS World Government Series Portfolios of Citicorp
Life Insurance Company Variable Annuity Separate Account as of December 31,
1996, and the results of their operations and changes in their net assets for
the periods presented, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
February 7, 1997
1
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Net Assets
December 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Landmark A.I.M. V.I.
U.S. Landmark Landmark Capital
Landmark Government International Balanced Appreciation
Equity Fund Fund Equity Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets
Investments at market value
(see schedule of investments) $1,311,984 1,154,871 4,483,228 1,262,073 115,785
Payable to Citicorp Life
Insurance Company 1 38 59 30 62
- ----------------------------------------------------------------------------------------------------------
Total net assets $1,311,983 1,154,833 4,483,169 1,262,043 115,723
- ----------------------------------------------------------------------------------------------------------
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 1,508 70,075 109,826 55,410 115,723
Citicorp Life Insurance Company equity 1,310,475 1,084,758 4,373,343 1,206,633 --
- ----------------------------------------------------------------------------------------------------------
Total net assets represented $1,311,983 1,154,833 4,483,169 1,262,043 115,723
- ----------------------------------------------------------------------------------------------------------
Total units held by contractholders 1,165 65,380 101,764 46,475 77,611
Accumulated unit value $ 1.29 1.07 1.08 1.19 1.49
Cost of investments $1,059,207 1,170,964 4,288,747 1,136,001 111,685
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
[restubbed table]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Fidelity MFS MFS World
Growth Money Government
Portfolio Market Series Series
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets
Investments at market value
(see schedule of investments) 145,817 50,127 74,053
Payable to Citicorp Life
Insurance Company 79 27 40
- ------------------------------------------------------------------------------
Total net assets 145,738 50,100 74,013
- ------------------------------------------------------------------------------
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 145,738 50,100 74,013
Citicorp Life Insurance Company equity -- -- --
- ------------------------------------------------------------------------------
Total net assets represented 145,738 50,100 74,013
- ------------------------------------------------------------------------------
Total units held by contractholders 98,550 47,376 65,848
Accumulated unit value 1.48 1.06 1.12
Cost of investments 140,566 50,127 70,829
- ------------------------------------------------------------------------------
</TABLE>
[end of restubbed table]
2
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Operations
For the year ended December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Landmark A.I.M. V.I.
U.S. Landmark Landmark Capital
Landmark Government International Balanced Appreciation
Equity Fund Fund Equity Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income - dividends $ 45,449 69,642 130,400 61,588 173
Expenses:
Mortality and expense risk fees 3 467 404 312 548
Daily administrative charges -- 55 47 38 65
- ---------------------------------------------------------------------------------------------------------
Total expenses 3 522 451 350 613
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) 45,446 69,120 129,949 61,238 (440)
- ---------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain on sale of investments -- 12 22 44 5
Change in unrealized gain (loss)
on investments 117,485 (50,069) 122,500 38,580 4,100
- ---------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 117,485 (50,057) 122,522 38,624 4,105
- ---------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from operations $162,931 19,063 252,471 99,862 3,665
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
[restubbed table]
<TABLE>
<CAPTION>
Fidelity MFS MFS World
Growth Money Government
Portfolio Market Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income - dividends 429 379 --
Expenses:
Mortality and expense risk fees 703 111 470
Daily administrative charges 84 13 56
- --------------------------------------------------------------------------------
Total expenses 787 124 526
- --------------------------------------------------------------------------------
Net investment income (loss) (358) 255 (526)
- --------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain on sale of investments 124 -- 15
Change in unrealized gain (loss)
on investments 4,380 -- 3,224
- --------------------------------------------------------------------------------
Net gain (loss) on investments 4,504 -- 3,239
- --------------------------------------------------------------------------------
Increase in net assets resulting
from operations 4,146 255 2,713
- --------------------------------------------------------------------------------
</TABLE>
[end of restubbed table]
3
<PAGE>
<TABLE>
<CAPTION>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1996
- ----------------------------------------------------------------------------------------------------------------
Landmark A.I.M. V.I.
U.S. Landmark Landmark Capital
Landmark Government International Balanced Appreciation
Equity Fund Fund Equity Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets resulting
from operations:
Net investment income (loss) $ 45,446 69,120 129,949 61,238 (440)
Realized gain on sale of investments -- 12 22 44 5
Change in unrealized gain (loss)
on investments 117,485 (50,069) 122,500 38,580 4,100
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from operations 162,931 19,063 252,471 99,862 3,665
- ----------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 1,531 66,291 107,779 47,895 110,664
Transfers from Citicorp Life
Insurance Company -- -- -- -- 1,394
Annual administrative charges -- -- -- (14)
Contract withdrawals -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from capital transactions 1,531 66,291 107,779 47,881 112,058
- ----------------------------------------------------------------------------------------------------------------
Total increase in net assets 164,462 85,354 360,250 147,743 115,723
Net assets at beginning of period 1,147,521 1,069,479 4,122,919 1,114,300 --
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period $1,311,983 1,154,833 4,483,169 1,262,043 115,723
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
[restubbed table]
<TABLE>
<CAPTION>
Fidelity MFS MFS World
Growth Money Government
Portfolio Market Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets resulting
from operations:
Net investment income (loss) (358) 255 (526)
Realized gain on sale of investments 124 -- 15
Change in unrealized gain (loss)
on investments 4,380 -- 3,224
- --------------------------------------------------------------------------------
Increase in net assets resulting
from operations 4,146 255 2,713
- --------------------------------------------------------------------------------
Capital transactions:
Contract deposits 134,244 49,845 71,300
Transfers from Citicorp Life
Insurance Company 1,394 -- --
Annual administrative charges (16) -- --
Contract withdrawals -- -- --
- --------------------------------------------------------------------------------
Increase in net assets resulting
from capital transactions 135,622 49,845 71,300
- --------------------------------------------------------------------------------
Total increase in net assets 139,768 50,100 74,013
Net assets at beginning of period 5,970 -- --
- --------------------------------------------------------------------------------
Net assets at end of period 145,738 50,100 74,013
- --------------------------------------------------------------------------------
</TABLE>
[end of restubbed table]
4
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the period June 5, 1995 (Inception) to December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Landmark
U.S. Landmark Landmark Fidelity
Landmark Government International Balanced Growth
Equity Fund Fund Equity Fund Fund Portfolio
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets resulting
from operations:
Net investment income (loss) $ 12,229 35,503 50,938 21,665 (50)
Realized gain on sale of investments -- -- -- 2 8
Change in unrealized appreciation
on investments 135,292 33,976 71,981 87,492 871
- ------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from operations 147,521 69,479 122,919 109,159 829
- ------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits -- -- -- 5,141 5,141
Transfers from Citicorp Life
Insurance Company 1,000,000 1,000,000 4,000,000 1,000,000 --
Annual administrative charges -- -- -- -- --
Contract withdrawals -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from capital transactions 1,000,000 1,000,000 4,000,000 1,005,141 5,141
- ------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,147,521 1,069,479 4,122,919 1,114,300 5,970
Net assets at beginning of period -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period $1,147,521 1,069,479 4,122,919 1,114,300 5,970
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) History
The Citicorp Life Insurance Company 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 Variable Insurance Products (VIP) Funds, the
A.I.M. 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 A.I.M.
V.I. Capital Appreciation Fund of the A.I.M. Variable Insurance Funds, Inc.,
the Growth Portfolio of the Fidelity Investments Variable Insurance Products
Fund, the MFS Money Market Series and the MFS World Government 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. There were no assets or operations reflected
within the A.I.M. V.I. Capital Appreciation Fund, MFS Money Market Series or
the MFS World Government Series Portfolio's at December 31, 1995 as the
initial investments to these Portfolio's were made in April, April, and June
1996, respectively.
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) Summary of 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.
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
by the Fund at the close of business on the last working day of the period.
(continued)
6
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
Accounting for Investments - Investment transactions are accounted for on
the trade date. Dividend income is recorded on the ex-dividend date. The
cost of investments sold is generally determined on the specific
identification method.
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.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of increase and
decrease in net assets from operations during the period. Actual results
could differ from those estimates.
(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 net assets 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 net assets 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, a deferred
sales charge will be assessed. 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.
(continued)
7
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
(4) Purchases of Investments
For the year ended December 31, 1996, investment activity in each of the
respective Funds was as follows:
- ------------------------------------------------------------------------
Cost of Proceeds
Shares of purchases from sales
- ------------------------------------------------------------------------
Landmark Variable Insurance Products Funds:
Landmark Equity Fund $ 46,980 2
Landmark U.S. Government Fund 135,933 484
Landmark International Equity Fund 238,180 393
Landmark Balanced Fund 109,483 338
A.I.M. Variable Insurance Funds, Inc.:
A.I.M. V.I. Capital Appreciation Fund 112,231 551
Fidelity Variable Insurance Products Fund:
Growth Portfolio 136,067 728
MFS Variable Insurance Trust:
MFS Money Market Series 55,224 5,097
MFS World Governments Series 71,300 486
- ------------------------------------------------------------------------
(continued)
8
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
(5) Net Increase in Accumulation Units
For the year ended December 31, 1996, transactions in accumulation units of
contractholders of the Account were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Landmark A.I.M. V.I.
U.S. Landmark Landmark Capital
Landmark Government International Balanced Appreciation
Equity Fund Fund Equity Fund Fund Fund
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units purchased 1,165 65,380 101,764 41,393 76,664
Units withdrawn and contract charges -- -- -- (12) --
Units transferred between funds -- -- -- -- 947
- -------------------------------------------------------------------------------------------------------
Net increase 1,165 65,380 101,764 41,381 77,611
Units at beginning of period -- -- -- 5,094 --
- -------------------------------------------------------------------------------------------------------
Units at end of period 1,165 65,380 101,764 46,475 77,611
- -------------------------------------------------------------------------------------------------------
</TABLE>
[restubbed table]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Fidelity MFS MFS World
Growth Money Government
Portfolio Market Series Series
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Units purchased 93,044 47,376 65,848
Units withdrawn and contract charges (11) -- --
Units transferred between funds 952 -- --
- ---------------------------------------------------------------------------
Net increase 93,985 47,376 65,848
Units at beginning of period 4,565 -- --
- ---------------------------------------------------------------------------
Units at end of period 98,550 47,376 65,848
- ---------------------------------------------------------------------------
</TABLE>
[end of restubbed table]
9
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
================================================================================
(5) Net Increase in Accumulation Units (continued)
For the period June 5, 1995 (Inception) to December 31, 1995, transactions
in accumulation units of contractholders of the Account were as follows:
- -------------------------------------------------------------------------
Landmark Fidelity
Balanced Growth
Fund Portfolio
- -------------------------------------------------------------------------
Units purchased 5,094 4,565
Units withdrawn and contract charges -- --
Units transferred between funds -- --
- -------------------------------------------------------------------------
Net increase 5,094 4,565
Units at beginning of period -- --
- -------------------------------------------------------------------------
Units at end of period 5,094 4,565
- -------------------------------------------------------------------------
10
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
Number Market
of shares value Cost
- --------------------------------------------------------------------------------
Landmark Variable Insurance
Products Funds:
Landmark Equity Fund 103,387 $1,311,984 1,059,207
Landmark U.S. Government Fund 115,603 1,154,871 1,170,964
Landmark International Equity Fund 422,547 4,483,228 4,288,747
Landmark Balanced Fund 110,611 1,262,073 1,136,001
A.I.M. Variable Insurance Funds, Inc.:
A.I.M. V.I. Capital Appreciation Fund 5,959 115,785 111,685
Fidelity Variable Insurance Products Fund:
Growth Portfolio 4,683 145,817 140,566
MFS Variable Insurance Trust:
MFS Money Market Series 50,127 50,127 50,127
MFS World Government Series 6,999 74,053 70,829
- --------------------------------------------------------------------------------
11
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
(1) Certified resolution of the board of directors of Citicorp Life
Insurance Company (the "Company") establishing Citicorp Life Variable
Annuity Separate Account (the "Separate Account").*
(2) Not Applicable.
(3) Form of underwriting agreement among the Company, the Separate Account
and The Landmark Funds Broker-Dealer Services, Inc.*
(4) (a) Contract Form.*
(b) Individual Retirement Annuity Endorsement.*
(c) 403(b) Tax Sheltered Annuity Endorsement.*
(d) Annuity Contract Endorsement: Waiver of Surrender Charges.*
(e) Variable Annuity Endorsement: Amendment of Contract Provisions.**
(f) Guaranteed Minimum Income Benefit Rider
(5) (a) Contract Application.**
(b) Supplemental Application
(6) (a) Certificate of Incorporation of the Company.*
(b) By-Laws of the Company.*
(7) None.
(8) (a) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and Citicorp Life Insurance Company*
(b) Participation Agreement Among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and Citicorp Life Insurance
Company.**
(c) Participation Agreement Between MFS Variable Insurance Trust,
Citicorp Life Insurance Company and Massachusetts Financial
Services Company.**
<PAGE>
(d) Participation Agreement By and Among AIM Variable Insurance
Funds, Inc. and Citicorp Life Insurance Company, on Behalf of
Itself and Citicorp Life Variable Annuity Separate Account.**
(e) Participation Agreement Among Landmark VIP Funds and Citicorp
Life Insurance Company.**
(f) Participation Agreement Between Variable Annuity Portfolios and
Citicorp Life Insurance Company.**
(g) Administrative Services Agreement between Citicorp Insurance
Services, Inc. and Citicorp Life Insurance Company with
Addendums.*
(9) Opinion and Consent of Richard M. Zuckerman, Esq.
(10) (a) Consent of Sutherland, Asbill & Brennan, L.L.P.
(b) Consent of KPMG Peat Marwick LLP.
(11) Not Applicable.
(12) None.
(13) Schedule for Computation of Each Performance Calculation.***
(14) Not Applicable.
*Incorporated herein by reference to the registrant's Post- Effective Amendment
No. 2 to the Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on April 29, 1996(File 33-81626).
**Incorporated herein by reference to the registrant's Post- Effective Amendment
No. 3 to the Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on November 8, 1996 (File 33-81626).
***Incorporated herein by reference to the registrant's Post-Effective Amendment
No. 5 to the Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on April 28, 1997 (File 33-81626).
<PAGE>
Item 25. Directors and Officers of the Company.
Steven J. Freiberg Director*
Charles R. Haskins Director/Executive Vice President*
Alan F. Liebowitz Director/President and Chief
Executive Officer*
Joseph E. Madalon Director/Senior Vice President and
Chief Financial Officer*
Charles H. Masland, IV Director/Senior Vice President*
Larry D. Williams Director/Senior Vice President*
Marc J. Fink Senior Vice President
Elizabeth C. Craig Vice President
Daniel F. Forcade Vice President and Treasurer*
Mark C. Lovejoy Vice President and Chief
Underwriter*
Eric S. Miller Vice President*
Ian C. Stuart Vice President
Richard M. Zuckerman Vice President/Associate General
Counsel/Secretary*
- ----------
* 800 Silver Lake Boulevard, Dover, DE 19904
<PAGE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
ORGANIZATION CHART
-----------------------
CITICORP
(Delaware Corporation)
-----------------------
| 100%
|
-----------------------
CITICORP HOLDINGS, INC.
(Delaware Corporation)
-----------------------
| 100%
|
-----------------------
CITIBANK DELAWARE
(Delaware Corporation)
-----------------------
|
|------------------------|
| 100% |
--------------------- ----------------------
CITICORP LIFE CITICORP ASSURANCE
INSURANCE COMPANY CO
(Arizona Corporation) (Delaware Corporation)
--------------------- ----------------------
|
|----|
| 100%
- ----------------------
FIRST CITICORP LIFE
INSURANCE
COMPANY
(New York Corporation)
- ----------------------
<PAGE>
Item 27. Number of Contract owners
As of December 31, 1996, there were twelve (12) contract owners.
Item 28. Indemnification
The Articles of Incorporation of Citicorp Life Insurance Company provide in
Article IX as follows:
(1) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact he is or was a director or officer
of the Corporation, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director or officer of the Corporation, against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court having
jurisdiction in cases of equity of the State of Arizona or the court
in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability
<PAGE>
but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which
the court having jurisdiction in cases of equity of the State of
Arizona or such other court shall deem proper.
(3) The Corporation may indemnify any person who is or was an employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise to
the extent and under the circumstances provided by paragraphs 1 and 2
of this Article IX with respect to a person who is or was a director
or officer of the Corporation.
(4) Any indemnification under paragraphs 1, 2 and 3 of this Article IX
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct
set forth therein. Such determination shall be made (a) by the Board
of Directors by a majority vote of a quorum (as defined in the by-laws
of the Corporation) consisting of directors who were not parties to
such action, suit or proceeding, or (b) if such quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors
so direct, by independent legal counsel in a written opinion, or (c)
by the stockholders.
(5) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors of the Corporation in the manner provided in the
next preceding paragraph upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such
amount unless it shall ultimately be determined that he is entitled to
be indemnified by the Corporation as authorized in this Article IX.
(6) The indemnification provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification
may be entitled under any statute, by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
<PAGE>
(7) By action of its Board of Directors, notwithstanding any interest of
the directors in the action, the Corporation may cause to be purchased
and maintained insurance, in such amounts as the Board of Directors
deems appropriate, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or of any corporation a
majority of the voting stock of which is owned by the Corporation, or
is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the
power or would be required to indemnify him against such liability
under the provisions of this Article IX or of the General Corporation
Law of the State of Arizona.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, offi cers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriter
(a) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Registrant's Distributor, is also the distributor for Landmark Cash
Reserves, Premium Liquid Reserves, Landmark Tax Free Reserves,
Landmark New York Tax Free Reserves, Landmark California Tax Free
Reserves, Landmark Connecticut Tax Free Reserves, Landmark New York
Tax Free Income Fund, Landmark Balanced Fund, Landmark Equity Fund,
Landmark U.S. Government Income Fund, Landmark Intermediate Income
Fund, Landmark U.S. Treasury Reserves, Premium U.S. Treasury Reserves,
Landmark Institutional Liquid Reserves and Landmark Institutional U.S.
Treasury Reserves. LFBDS is also the placement agent for Balanced
Portfolio, Cash Reserves Portfolio, U.S.
<PAGE>
Treasury Reserves Portfolio, Tax Free Reserves Portfolio,
International Equity Portfolio, Equity Portfolio and Government Income
Portfolio.
(b) The information required by this item 29 with respect to each director
and officer of LFBDS is incorporated by reference to Schedule A or
Form BD filed by LFBDS pursuant to the Securities and Exchange Act of
1934 (File No. 8-32417).
(c) Not applicable.
Item 30. Location Books and Records
All of the accounts, books, records or other documents required to be kept
by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by the Company at 800 Silver Lake Boulevard,
Dover, Delaware 19904.
Item 31. Management Services
Not applicable.
Item 32. Undertakings and Representations
(a) The registrant undertakes that it will file a post- effective
amendment to this registration statement as frequently as is necessary
to ensure that the audited financial statements in the registration
statement are never more than 16 months old for as long as purchase
payments under the contracts offered herein are being accepted.
(b) The registrant undertakes that it will include either (1) as part of
any application to purchase a contract offered by the prospectus, a
space that an applicant can check to request a statement of additional
information, or (2) a post card or similar written communication
affixed to or included in the prospectus that the applicant can remove
and send to the Company for a statement of additional information.
(c) The registrant undertakes to deliver any statement of additional
information and any financial statements required to be made available
under this Form N-4 promptly upon written or oral request to the
Company at the address or phone number listed in the prospectus.
(d) The Company represents that in connection with its offering of the
contracts as funding vehicles for retirement plans meeting the
requirements of Section 403(b) of the Internal Revenue Code of 1986,
it is relying on a no-action letter dated November 28, 1988, to the
American Council of Life Insurance (Ref. No. IP-6-88) regarding
Sections 22(e), 27(c)(1), and 27(d) of
<PAGE>
the Investment Company Act of 1940, and that paragraphs numbered (1)
through (4) of that letter will be complied with.
(e) Citicorp Life Insurance Company hereby represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Citicorp Life Insurance Company.
<PAGE>
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the registrant certifies that it has caused this amendment to the
Registration Statement to be signed on its behalf, in the City of Dover, and the
State of Delaware, on this 16th day of June, 1997.
CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest: /s/Richard M. Zuckerman By: /s /Larry D. Williams
------------------------------ ------------------------------
Senior Vice President of
Citicorp Life Insurance Company
BY: CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/Richard M. Zuckerman By: /s/Larry D. Williams
------------------------------ ------------------------------
Senior Vice President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/Larry D. Williams Director, SVP June 16, 1997
- -------------------------- -----------------------
/s/Charles R. Haskins Director, EVP June 16, 1997
- -------------------------- -----------------------
/s/Charles H. Masland, IV Director, SVP June 16, 1997
- -------------------------- -----------------------
/s/Daniel F. Forcade Treasurer, VP June 16, 1997
- -------------------------- -----------------------
<PAGE>
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the registrant certifies that it has caused this amendment to the
Registration Statement to be signed on its behalf, in the City of Dover, and the
State of Delaware, on this 16th day of June, 1997.
CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest: /s/Richard M. Zuckerman By: /s/Larry D. Williams
------------------------------ ------------------------------
Senior Vice President of
Citicorp Life Insurance Company
BY: CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/Richard M. Zuckerman By: /s/Larry D. Williams
------------------------------ ------------------------------
Senior Vice President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/Alan F. Liebowitz Director, President, CEO June 16, 1997
- -------------------------- ---------------------------
/s/Joseph E. Madalon Director, CFO June 16, 1997
- -------------------------- ---------------------------
/s/Steven J. Freiberg Director June 16, 1997
- -------------------------- ---------------------------
<PAGE>
EXHIBIT INDEX
4(f). Guaranteed Minimum Income Benefit Rider
5(b). Supplemental Application
9. Opinion and Consent of Richard M. Zuckerman, Esq.
10(a). Consent of Sutherland, Asbill & Brennan.
10(b). Consent of KPMG Peat Marwick LLP.
EXHIBIT 4(f)
<PAGE>
CITICORP LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
Home Office: Phoenix, AZ
Administrative Office: 800 Silver Lake Boulevard
P.O. Box 7031
Dover, DE 19903
GUARANTEED MINIMUM INCOME BENEFIT RIDER
BENEFIT PROVISION: We will begin a series of annuity payments on the Annuity
Income Date if this rider is in force. The payments will be paid to the
Annuitant(s) designated by you when you applied for this rider or as may be
changed. The amount of the payments will be based on the age and sex of the
Annuitant(s) unless the law requires some other amount. The amount will be the
greatest of the following:
1. What the Rider Value, less premium taxes, will give you, using the
Annuity Income Option Tables stated in the contract; or
2. What the Rider Value, less premium taxes, will give you using Annuity
Income Option Tables in annuity contracts issued by us on the Annuity
Income Date; or
3. What the Minimum Benefit Accumulation Amount will give you using the
Guaranteed Minimum Benefit Factor shown in the Contract Schedule:
DEFINITIONS:
In this rider:
An "Accumulation Unit" is an accounting device used to calculate the value of a
Sub-Account before annuity payments begin.
"Annuity Income Date" means the date on which annuity payments are to begin. The
first annuity payment will be calculated and paid as of this date.
"Annuity Income Option" means a manner in which annuity payments are paid.
"Contract" means the annuity contract to which this rider is attached.
"Fixed Dollar Annuity" means an Annuity Income Option under which payments do
not depend on the investment experience of any Sub-Account.
"Minimum Benefit Accumulation Amount" means the sum of all premium payments and
transfers applied under this rider, less any withdrawals under this rider, plus
interest of 5% per annum compounded daily. However, in the event the Annuity
Income Option elected does not contain a life annuity, the rate of interest will
be 3% per annum, compounded daily.
"Guaranteed Minimum Benefits" means the minimum annuity payments under this
rider.
"Guaranteed Minimum Benefit Factor " is the Guaranteed Minimum Benefit payable
for each $1,000 of the Minimum Benefit Accumulation Amount applied to an Annuity
Income Option on the Annuity Income Date. The Guaranteed Minimum Benefit Factor
is calculated using:
1. An annual interest rate of 5%, compounded daily, unless the Annuity
Income Option does not include a life annuity, in which case the
interest rate is 3% per annum, compounded daily; and .
2. The 1983 Individual Annuity Mortality Table "a" projected with Scale G.
If unisex rates are required, the Mortality Rate will reflect a 20/80
split between males and females
63-1500(04-97) Page 1
<PAGE>
"Rider Value" means the sum of the number of Accumulation Units in each
Sub-Account purchased under this rider multiplied by the Accumulation Unit value
of that Sub-Account.
"Stipulated Premium" means the scheduled premium amount to be paid each Contract
Year under this rider. The amount of the Stipulated Premium is determined and
will be allocated to the Sub-Accounts you have chosen at the time of
application.
"We," "our" and "us" mean Citicorp Life Insurance Company.
"You" and "your" mean the Owner named in the Contract Schedule. In the event of
joint ownership, you and your apply equally to either Joint Owner unless the
context clearly indicates otherwise.
EFFECTIVE DATE: This rider becomes effective on the Rider Effective Date shown
in the Contract Schedule. While this rider is in force, it is a part of the
contract to which it is attached. It is subject to all terms, conditions and
definitions of the contract. If there is any inconsistency, the terms and
meaning in this rider will control.
PREMIUM PAYMENT: The initial premium applied under this rider is due on the date
the contract is issued. Subsequent premium payments under this rider may be made
at such time and in such manner as you determine, subject to the following:
1. During the first three Contract Years, we reserve the right to limit
total premium payments under this rider to no more than the sum of the
scheduled Stipulated Premium payments for those Contract Years, plus
$10,000. Thereafter, the sum of the total premium payments received in
the current Contract Year and the preceding two Contract Years can be
no greater than the sum of the scheduled Stipulated Premium for those
Contract Years, plus $10,000.
2. We reserve the right to refuse premium payments of less than $150.
ALLOCATION OF PREMIUM: You must specify the portion of each premium payment to
be allocated to each Sub-Account under this rider. We reserve the right to
require allocations to any Sub-Account to be expressed in whole percent and be
at least $100 of any premium payment. The Sub-Accounts available under this
rider and your allocation directions are shown in the application. Premium may
also be allocated to these, and any other Sub-Accounts, under the terms of the
contract. If premium is paid to Sub-Accounts under the terms of the contract
only, the terms of this rider do not apply.
TRANSFERS: Prior to the Annuity Income Date, and upon written request to us, you
may transfer the value, or any portion thereof, held in any Sub-Account(s) under
this rider to any other Sub-Account(s) offered under this rider.
Similarly, you may transfer the value, or any portion thereof, held in any
Sub-Account(s) under this rider to the same or any other Sub-Account(s) under
the terms of the contract only. Such transfers will be treated as withdrawals
under this rider but not the contract. No Surrender Charges will apply to such
transfers.
All transfers are subject to the contract's "Transfers" provisions. All
transfers are made on a last in - first out basis.
WITHDRAWALS: That portion of the Rider Value held in any Sub-Account may be
withdrawn, in whole or in part, subject to the contract's "Withdrawals"
provisions. Normally, withdrawals will reduce the Minimum Benefit Accumulation
Amount on a dollar-for-dollar basis. However, if, on the Withdrawal Date, the
Minimum Benefit Accumulation Amount exceeds the Rider Value and the amount of
the withdrawal is greater than 5% of the Minimum Benefit Accumulation Amount on
the first day of the then current Contract Year, the Minimum Benefit
Accumulation Amount will be reduced on a pro rata basis. The amount of the
reduction will be the amount withdrawn divided by the Rider Value in that
Sub-Account prior to the withdrawal and multiplying this percentage by the
Minimum Benefit Accumulation Amount.
63-1500(04-97) Page 2
<PAGE>
CHARGES: Our charge for this rider is equivalent to 0.50% per annum of the
average daily net assets held in each Sub-Account under this rider. This charge
is calculated and deducted on a daily basis.
ANNUITY INCOME DATE: The Annuity Income Date is elected by you at the time of
application and is shown in the Contract Schedule. The Annuity Income Date must
be at least 10 years after the Contract Date. The Annuity Income Date may be
changed upon 30 days written notice. However, if the Annuity Income Date is less
than 20 years after the Contract Date, such change must result in a new Annuity
Income Date not less than 2 years from the date of the change. We reserve the
right to terminate this rider if a change is made that does not conform to these
requirements.
A change of the Annuity Income Date may result in a change to the Guaranteed
Minimum Benefits. If the Annuity Income Date is changed, we will provide you
with a new Contract Schedule reflecting any changes.
ANNUITY INCOME OPTION: The Annuity Income Option is elected by you at the time
of application and is shown in the Contract Schedule. Only Fixed Dollar
Annuities are available under this rider as Annuity Income Option(s). If the
Annuity Income Date is at least 10, but less than 20 years after the Contract
Date, the Annuity Income Option must contain a life annuity feature. If the
Annuity Income Date is at least 20 years after the Contract Date, any Fixed
Dollar Annuity Income Option available under the contract, or a lump sum
distribution, may be elected.
Subject to the above, you may change the Annuity Income Option prior to the
Annuity Income Date upon 30 days prior notice in writing to us. A change of the
Annuity Income Option will result in a change to the Guaranteed Minimum
Benefits. If the Annuity Income Option is changed, we will provide you with a
new Contract Schedule reflecting any changes.
CHANGE OF ANNUITANT: The Annuitant was designated by you at the time of
application and is shown in the Contract Schedule. Prior to the Annuity Income
Date, you may change the Annuitant by notifying us in writing. Such change may
result in a change to the Guaranteed Minimum Benefits. If the Annuitant(s) is
(are) changed, we will provide you with a new Contract Schedule reflecting any
changes.
MODIFICATION: We reserve the right to modify this rider, to the extent allowed
by law, to:
1. Comply with any law or regulation issued by a governmental agency to
which we or this rider is subject;
2. Add, delete or modify Sub-Accounts offered under this rider; or
3. Reflect a change in the operation of a Sub-Account.
TERMINATION: This rider will remain in force until terminated or the contract is
surrendered. If, at any time after the Rider Effective Date, the Rider Value
becomes equal to zero, this rider will terminate. If terminated, this rider can
not be reinstated but the provisions of the contract will continue to apply.
/s/Richard M. Zuckerman
Secretary
63-1500(04-97)
Page 3
EXHIBIT 4(f)
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Administrative Offices: 800 Silver Lake Blvd., P.O. Box 7031, Dover, DE 19903
Supplemental Variable Annuity Application
(Make all checks payable to Citicorp Life Insurance Company)
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1. Contract Name (First) (Middle) (Last) Tax ID/Social Security No.
Owner
- -----------------------------------------------------------------------------------------------------------------------------------
2. Annuity Income Option Payment Mode
[ ] Life Annuity [ ] Joint and Contingent Annuity [ ] Monthly [ ] Quarterly
[ ] Life Annuity w/Period Certain ______% to Contingent Annuitant [ ] Semi-Annual [ ] Annual
_____ No. of Years [ ] Period Certain Annuity Annual $_________ Increase in Payments
[ ] Joint and Survivor Annuity ______ No. of Years Annual _________% Increase in Payments
_____% Benefit to Survivor [ ] Lump Sum Payment Annuity Income Date __________________________
- -----------------------------------------------------------------------------------------------------------------------------------
3. Premium Mode [ ] Monthly [ ] Quarterly [ ] Semi-Annual [ ] Annual
If you desire to pay premiums automatically by Electronic Funds Transfer, complete and submit the appropriate election form
with this application.
- -----------------------------------------------------------------------------------------------------------------------------------
4. Initial Premium Allocation See Variable Annuity Application
- -----------------------------------------------------------------------------------------------------------------------------------
5. GUARANTEED MINIMUM BENEFIT RIDER (GMIB) [ ] Yes [ ] No
- -----------------------------------------------------------------------------------------------------------------------------------
5a. Additional Premium 5b. Guaranteed Minimum Benefit
Schedule First Schedule Second Schedule at Annuity Income Date (per
-------------- --------------- $1,000 applied) ____________
Start Date: If not completed, calculation will be made
at the home office and indicated on the
End Date: Contract Schedule Page
Premium Payments Per Year:
Yearly Increase ($ or %):
- -----------------------------------------------------------------------------------------------------------------------------------
5c. Premium Allocation: Indicate in Col 1, in WHOLE %, the allocation of additional premium payments. All payments will be allocated
in the same manner until changed. Premiums paid must result in an allocation of AT LEAST $100 to each sub-account elected. Indicate,
in Cols. 2 and 3, the allocation of total premiums (INITIAL & ADDITIONAL) among GMIB and Non-GMIB sub-accounts. The total of Cols. 2
and 3 for each selected sub-account must equal 100%.
(1) (2) (3)
Additional Premium Allocation % to GMIB % to NON GMIB
- ----------------------------- --------- -------------
VARIABLE ANNUITY PORTFOLIOS
1.____% CitiSelect(TM) VIP Folio 200 N/A
--------- ---------
2.____% CitiSelect(TM) VIP Folio 300 N/A
--------- ---------
G3.____% CitiSelect(TM) VIP Folio 400
--------- ---------
G4.____% CitiSelect(TM) VIP Folio 500
--------- ---------
G5.____% Landmark Small Cap Equity
VIP Fund
--------- ---------
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
G5.____% Growth Portfolio
--------- ---------
7.____% High Income Portfolio N/A
--------- ---------
G8.____% Equity Income Portfolio
--------- ---------
G9.____% Overseas Portfolio
--------- ---------
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
G10.____% Contrafund Portfolio
--------- ---------
G11.____% Index 500 Portfolio
--------- ---------
(1) (2) (3)
Additional Premium Allocation % to GMIB % to NON GMIB
- ----------------------------- --------- -------------
MFS VARIABLE INSURANCE TRUST
12.____% World Governments Series N/A
--------- ---------
13.____% Money Market Series N/A
--------- ---------
14.____% Bond Series N/A
--------- ---------
15.____% Total Return Series N/A
--------- ---------
G16.____% Research Series
--------- ---------
G17.____% Emerging Growth Series
--------- ---------
AIM VARIABLE INSURANCE FUNDS, INC.
G18.____% Capital Appreciation Fund
--------- ---------
19.____% Government Securities Fund N/A
--------- ---------
G20.____% Growth Fund
--------- ---------
G21.____% International Equity Fund
--------- ---------
G22.____% Value Fund
--------- ---------
G23.____% Growth and Income Fund
--------- ---------
FIXED ACCOUNT
24.____% N/A
--------- ---------
________Total (Must equal 100%)
(G = covered by GMIB rider)
- ------------------------------------------------------------- ---------------------------------------------------------------------
I (We) declare to the best of my (our) knowledge and belief that all of the answers herein are complete and true. I (We) agree that
this Supplemental Application shall be part of the Contract issued by Citicorp Life Insurance Company. I (We) understand that
annuity payments, when based upon the investment experience of a separate account, are variable and are not guaranteed as to fixed
dollar amount except as explicitly stated. I (We) also acknowledge receipt of a current prospectus.
Signed At: ___________________________ Date __________ Signature of Owner: __________________________________________
Agent's Signature: ___________________________________ Signature of Joint Owner: ___________________________________
</TABLE>
63-1805(05-97)
EXHIBIT 9
CITICORP LIFE INSURANCE COMPANY LETTERHEAD
With reference to Form N-4 Registration Statement filed on behalf of Citicorp
Life Insurance Company and the Citicorp Life Variable Annuity Separate Account
with the Securities and Exchange Commission covering flexible premium variable
deferred annuity policies, I have examined such documents and such law and have
made due inquiries as I considered necessary and appropriate, and on the basis
of such examination and inquiries, it is my opinion that:
1. The Citicorp Life Insurance Company is duly organized and validly
existing under the laws of the State of Arizona and has been duly
authorized to issue flexible premium variable deferred annuity
policies by the Department of Insurance of the State of Arizona.
2. The Citicorp Life Variable Annuity Separate Account is a duly
authorized and existing separate account established pursuant to
the provisions of the Revised Statutes of the state of Arizona;
3. The flexible premium variable deferred annuity policies, when
issued as contemplated by said Form N-4 Registration Statement,
will constitute legal, validly issued and binding obligations of
Citicorp Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to Post-Effective
Amendment No. 6 to the Form N-4 Registration Statement.
Citicorp Life Insurance Company
/s/ Richard M. Zuckerman
------------------------
Richard M. Zuckerman
Vice President, Associate General Counsel
June 16, 1997
-------------
(Date)
<PAGE>
CITICORP LIFE INSURANCE COMPANY LETTERHEAD
I hereby consent to the use of my name under the caption "Legal Matters" in the
Statement of Additional Information contained in this Post-Effective Amendment
to the Form N-4 Registration Statement, filed on behalf of Citicorp Life
Insurance Company and the Citicorp Life Variable Annuity Separate Account with
the Securities and Exchange Commission
Citicorp Life Insurance Company
/s/ Richard M. Zuckerman
------------------------
Richard M. Zuckerman
Vice President, Associate General Counsel
June 16, 1997
-------------
(Date)
EXHIBIT 10(a)
Sutherland, Asbill & Brennan, L.L.P.
Atlanta o Austin o New York o Washington
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
June 16, 1997
VIA EDGARLINK
- -------------
Board of Directors
Citicorp Life Insurance Company
800 Silver Lake Boulevard
Dover, DE 19904
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of
Post-Effective Amendment No. 6 to the registration statement on Form N-4 for
Citicorp Life Variable Annuity Separate Account (File No. 33-81626). In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Stephen E. Roth
Stephen E. Roth
EXHIBIT 10(b)
Independent Auditors' Consent
The Board of Directors
Citicorp Life Insurance Company:
We consent to the use of our report included herein and to the reference of our
firm under the heading "Financial Statements" in the Prospectus and under the
heading "Experts" in the Registration Statement for Citicorp Life Variable
Annuity Separate Account.
Our report dated April 18, 1997, 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 State of Arizona Department of Insurance. 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.
/s/KPMG Peat Marwick LLP
Chicago, Illinois
June 16, 1997
