As filed with the Securities and Exchange Commission on February 26, 1998
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. 7 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8
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
Catherine S. Mulholland, Esq.
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 LLP
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.
<PAGE>
It is proposed that this filling will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on ___ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] on May 1, 1998 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.
Title of Securities Being Registered: Individual Flexible Premium Deferred
Variable Annuity Contracts
<PAGE>
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
<TABLE>
<CAPTION>
PART A
Item of Form N-4 Prospectus Caption
<S> <C> <C>
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
<PAGE>
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
<PAGE>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B
Item of Form N-4 Part B Caption
<S> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART C -- OTHER INFORMATION
Item of Form N - 4 Part C Caption
<S> <C> <C>
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
</TABLE>
<PAGE>
PART A
PROSPECTUS
<PAGE>
SUPPLEMENT DATED MAY 1, 1998 TO PROSPECTUS DATED MAY 1, 1998
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 minimum subsequent purchase payment for
Qualified Contracts is $100.) 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(R) VIP
Folio 400, CitiSelect(R) VIP Folio 500 and CitiFundsSM Small Cap Growth VIP
Portfolio (formerly 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.
<PAGE>
Guaranteed Minimum Benefit Factor - For each fixed annuity payment option, the
Guaranteed Minimum Benefit payable for each $1,000 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 4.25%, 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 4.25%. 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 Guaranteed
Minimum Benefit Factor 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 Income
Benefit option, less any withdrawals, credited daily with an effective annual
interest rate of 4.25%. 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
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<PAGE>
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 Guaranteed Minimum 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. (The minimum subsequent purchase payment for Qualified
Contracts is $100.) The 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 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
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<PAGE>
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.
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
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<PAGE>
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 currently include
a 0.84% per annum deduction for the mortality and expense risk charge and a
0.15% per annum deduction for administrative expenses. We reserve the right to
change these charges in the future but guarantee they will not exceed 1.25% and
0.15% per annum, respectively. 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.
EXPENSE TABLE
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 Benefit option and that the entire
Contract Value is Variable Contract Value.
Separate Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge 0.84%
Administration Charge 0.15%
Guaranteed Minimum Income Benefit Charge 0.50%
-----
Total Separate Account Expenses 1.49%
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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:
<TABLE>
<CAPTION>
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 400 $ $
CitiSelect VIP Folio 500 $ $
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity VIP Fund) $ $
Fidelity VIP Growth 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 $ $ $ $
AIM V.I. Growth Fund $ $
AIM V.I. International Equity Fund $ $
AIM V.I. Value Fund $ $
AIM V.I. Growth and Income Fund $ $
MFS Research Series $ $
MFS Emerging Growth Series $ $
</TABLE>
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:
<TABLE>
<CAPTION>
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 400 $ $
CitiSelect VIP Folio 500 $ $
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity VIP Fund) $ $
Fidelity VIP Growth 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 $ $ $ $
AIM V.I. Growth Fund $ $
AIM V.I. International Equity Fund $ $
AIM V.I. Value Fund $ $
AIM V.I. Growth and Income Fund $ $
MFS Research Series $ $
MFS Emerging Growth Series $ $
</TABLE>
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<PAGE>
3. If the Contract is not surrendered or annuitized at the end of the applicable
time period:
<TABLE>
<CAPTION>
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 400 $ $
CitiSelect VIP Folio 500 $ $
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity VIP Fund) $ $
Fidelity VIP Growth 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 $ $ $ $
AIM V.I. Growth Fund $ $
AIM V.I. International Equity Fund $ $
AIM V.I. Value Fund $ $
AIM V.I. Growth and Income Fund $ $
MFS Research Series $ $
MFS Emerging Growth Series $ $
</TABLE>
- -----------------
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
The following tables set forth certain information pertaining to the net
assets of the Separate Account reflecting election of the Guaranteed Minimum
Income Benefit option, as represented by the accumulation unit values and number
of accumulation units for the period from the date this option was first offered
(December 10, 1997) through December 31, 1997. 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.
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<PAGE>
Accumulation Unit Value
--------------------------
Commencement Year Ending
Subaccount Date (12/31/97)
- -------------------------------------------------------------------
CitiSelect VIP Folio 400
CitiSelect VIP Folio 500
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity
VIP Fund)
Fidelity VIP Growth 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
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
AIM V.I. Growth and Income Fund
MFS Research Series
MFS Emerging Growth Series
Number of
Accumulation
Units Outstanding
-------------------
Year Ending
Subaccount (12/31/97)
- ------------------------------------------------------------
CitiSelect VIP Folio 400
CitiSelect VIP Folio 500
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity
VIP Fund)
Fidelity VIP Growth 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
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
AIM V.I. Growth and Income Fund
MFS Research Series
MFS Emerging Growth Series
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<PAGE>
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
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, 1998
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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(R) VIP Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP
Folio 400, CitiSelect(R) VIP Folio 500 and CitiFundsSM Small Cap Growth VIP
Portfolio (formerly 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
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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, 1998
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TABLE OF CONTENTS
DEFINITIONS
EXPENSE TABLES
SUMMARY
The Contract
Charges and Deductions
Annuity Provisions
Federal Tax Status
CONDENSED FINANCIAL INFORMATION
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
Citicorp Life Insurance Company
Citicorp Life Variable Annuity Separate Account
The Funds
Addition, Deletion or Substitution of Investments
DESCRIPTION OF THE CONTRACT
Issuance of a Contract
Purchase Payments
Free-Look Period
Allocation of Purchase Payments
Variable Contract Value
Transfer Privileges
Surrenders and Partial Withdrawals
Death Benefit Before the Annuity Income Date
Annuity Payments on the Annuity Income Date
Payments
Modification
Owner
Reports to Owners
Inquiries
THE FIXED ACCOUNT
Fixed Account Value
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
Annual Contract Fee
Asset-Based Administration Charge
Transfer Processing Fee
Mortality and Expense Risk Charge
Fund Expenses
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Premium Taxes
Other Taxes
ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
Fixed Annuity Payments
Legal Developments Regarding Unisex Actuarial Tables
Variable Annuity Payments
Description of Annuity Payment Options
YIELDS AND TOTAL RETURNS
FEDERAL TAX MATTERS
Introduction
Tax Status of the Contract
Taxation of Annuities
Transfers, Assignments or Exchange of a Contract
Withholding
Multiple Contracts
Taxation of Qualified Plans
Possible Charge for the Company's Taxes
Other Tax Consequences
DISTRIBUTION OF THE CONTRACTS
LEGAL PROCEEDINGS
VOTING PRIVILEGES
COMPANY HOLIDAYS
FINANCIAL STATEMENTS
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
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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.
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Contract Value The total amount invested under the Contract.
It is the sum of the Variable Contract Value and the
value of the Contract in the Fixed Account.
Dollar Cost Averaging A series of systematic monthly transfers from either
the Money Market Subaccount or the Fixed Account to
the available subaccounts.
Fixed Account An allocation option under our General Account.
Under the Fixed Account, we credit any portion of the
initial purchase payment allocated to the Fixed
Account with the Initial Fixed Account Interest Rate
shown in the Contract Schedule. We may declare
different initial interest rates for each subsequent
purchase payment or transfer to the Fixed Account.
After the initial one-year period, the interest rate
earned will be the Current Fixed Account Interest
Rate. The Current Fixed Account Interest Rate is
determined by us in our discretion and is guaranteed
for one year.
General Account Assets other than those allocated to the Separate
Account or any other separate account.
"In writing" and
"written request" A written form satisfactory to us and received by us
at our Administrative Office. We have the right to
require a signature guarantee from an institution
qualified to give such a guarantee before acting on
any written request.
Net Asset Value
per Share The share value of any portfolio as of any
Valuation Day reflecting investment performance and
decreased by any expenses and fees assessed against
the portfolio.
Net Investment Factor An index used to measure the investment performance
of a subaccount from one Valuation Period to the next.
Non-Qualified Contract A Contract that is not a "qualified contract."
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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 the "Company" Citicorp Life Insurance Company.
"You" and "Your" The Owner of the Contract. In the event of Joint
Ownership, you and your apply equally
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to either Joint Owner unless the context clearly
indicates otherwise.
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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**** 0.84%
Administration Charge 0.15%
Total Separate Account Expenses 0.99%
Annual Fund Expenses
(as percentage of average net assets)
- -----------
* 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.
**** We reserve the right to assess a Mortality and Expense Risk Charge of not
more than 1.25%.
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CitiSelect VIP Folio 200
Management Fees %
Other Expenses (after fee waivers and reimbursements) %
Total Annual Fund Expenses (after fee waivers
and reimbursements) %
CitiSelect VIP Folio 300
Management Fees %
Other Expenses (after fee waivers and reimbursements) %
Total Annual Fund Expenses (after fee waivers
and reimbursements) %
CitiSelect VIP Folio 400
Management Fees %
Other Expenses (after fee waivers and reimbursements) %
Total Annual Fund Expenses (after fee waivers
and reimbursements) %
CitiSelect VIP Folio 500
Management Fees %
Other Expenses (after fee waivers and reimbursements) %
Total Annual Fund Expenses (after fee waivers
and reimbursements) %
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity VIP Fund)
Management Fees %
Other Expenses (after fee waivers and reimbursements) %
Total Annual Fund Expenses (after fee waivers
and reimbursements) %
Fidelity VIP Growth Portfolio
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
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Fidelity VIP High Income Portfolio
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
Fidelity VIP Equity Income Portfolio
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
Fidelity VIP Overseas Portfolio
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
Fidelity VIP II Contrafund Portfolio
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
Fidelity VIP II Index 500 Portfolio
Management Fees (after fee waivers and reimbursements) %
Other Expenses %
Total Annual Fund Expenses (after fee waivers and
reimbursements) %
AIM V.I. Capital Appreciation Fund
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
AIM V.I. Government Securities Fund
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
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AIM V.I. Growth Fund
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
AIM V.I. International Equity Fund
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
AIM V.I. Value Fund
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
AIM V.I. Growth and Income Fund
Management Fees %
Other Expenses %
Total Annual Fund Expenses %
MFS World Governments Series
Management Fees %
Other Expenses (after fee reduction) %
Total Annual Fund Expenses (after fee reduction) %
MFS Money Market Series
Management Fees %
Other Expenses (after fee reduction) %
Total Annual Fund Expenses (after fee reduction) %
MFS Bond Series
Management Fees %
Other Expenses (after fee reduction) %
Total Annual Fund Expenses (after fee reduction) %
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MFS Total Return Series
Management Fees %
Other Expenses (after fee reduction) %
Total Annual Fund Expenses (after fee reduction) %
MFS Research Series
Management Fees %
Other Expenses (after fee reduction) %
Total Annual Fund Expenses (after fee reduction) %
MFS Emerging Growth Series
Management Fees %
Other Expenses (after fee reduction) %
Total Annual Fund Expenses (after fee reduction) %
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 1997 expenses for the Separate Account and fiscal year 1997 expenses
for CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP Folio
400, CitiSelect VIP Folio 500, CitiFunds Small Cap Growth VIP Portfolio, 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, 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.
(Expense reimbursement information for fiscal year 1997 to be provided by
amendment)
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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 $ $
CitiSelect VIP Folio 300 $ $
CitiSelect VIP Folio 400 $ $
CitiSelect VIP Folio 500 $ $
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) $ $
Fidelity VIP Growth Portfolio $ $ $ $
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 $ $ $ $
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 $ $ $ $
MFS Money Market Series $ $ $ $
MFS Bond Series $ $
MFS Total Return Series $ $
MFS Research Series $ $
MFS Emerging Growth Series $ $
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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 $ $
CitiSelect VIP Folio 300 $ $
CitiSelect VIP Folio 400 $ $
CitiSelect VIP Folio 500 $ $
CitiSelect Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) $ $
Fidelity VIP Growth Portfolio $ $ $ $
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 $ $ $ $
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 $ $ $ $
MFS Money Market Series $ $ $ $
MFS Bond Series $ $
MFS Total Return Series $ $
MFS Research Series $ $
MFS Emerging Growth Series $ $
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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 200 $ $
CitiSelect VIP Folio 300 $ $
CitiSelect VIP Folio 400 $ $
CitiSelect VIP Folio 500 $ $
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) $ $
Fidelity VIP Growth Portfolio $ $ $ $
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 $ $ $ $
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 $ $ $ $
MFS Money Market Series $ $ $ $
MFS Bond Series $ $
MFS Total Return Series $ $
MFS Research Series $ $
MFS Emerging Growth Series $ $
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.
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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 at our administrative office or, if
required in the jurisdiction where the Contract is purchased, by the sales
representative who sold it, plus any premium taxes deducted. In some
jurisdictions, we may be required to return the Contract Value plus any fees and
charges 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
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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.
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.
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
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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 0.84% (approximately 0.34% for mortality risk and 0.50% for expense risks).
We reserve the right to change this charge in the future but guarantee it will
not exceed 1.25% per annum. (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%. We reserve the right to change this charge
in the future but guarantee it will not exceed 0.15% per annum. (See
"Asset-Based Administration Charge".) We do not expect to make a profit from
this charge.
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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."
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<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, 1997. This condensed financial information is
derived from the financial statements of the Separate Account and should be read
in conjunction with the financial statements, related notes and other financial
information contained in the Statement of Additional Information.
<TABLE>
<CAPTION>
Accumulation Unit Value
------------------------------------------------------
Subaccount Commencement Year Ending Year Ending Year Ending
Date* (12/31/95) (12/31/96) (12/31/97)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 200 1.00 - -
CitiSelect VIP Folio 300 1.00 - -
CitiSelect VIP Folio 400 1.00 - -
CitiSelect VIP Folio 500 1.00 - -
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark Small
Cap Equity VIP Fund) 1.00 - -
Fidelity VIP Growth Portfolio 1.00 1.31 1.48
Fidelity VIP High Income
Portfolio 1.00 - -
Fidelity VIP Equity Income
Portfolio 1.00 - -
Fidelity VIP Overseas
Portfolio 1.00 - -
Fidelity VIP II Contrafund
Portfolio 1.00 - -
Fidelity VIP II Index 500
Portfolio 1.00 - -
AIM V.I. Capital Appreciation Fund 1.00 1.00 1.49
AIM V.I. Government Securities
Fund 1.00 - -
AIM V.I. Growth Fund 1.00 - -
AIM V.I. International Equity
Fund 1.00 - -
AIM V.I. Value Fund 1.00 - -
AIM V.I. Growth and Income
Fund 1.00 - -
MFS World Governments Series 1.00 1.00 1.12
MFS Money Market Series 1.00 1.00 1.06
MFS Bond Series 1.00 - -
MFS Total Return Series 1.00 - -
MFS Research Series 1.00 - -
MFS Emerging Growth Series 1.00 - -
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Number of Accumulation Units Outstanding
------------------------------------------------------------
Year Ending Year Ending Year Ending
Subaccount (12/31/95) (12/31/96) (12/31/97)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CitiSelect VIP Folio 200 - -
CitiSelect VIP Folio 300 - -
CitiSelect VIP Folio 400 - -
CitiSelect VIP Folio 500 - -
CitiFunds Small Cap Growth VIP
Portfolio (formerly 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 - -
</TABLE>
*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.
24
<PAGE>
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
Citicorp Life Insurance Company
Citicorp Life Insurance Company (formerly Family Guardian Life Insurance
Company) is a stock life insurance company organized under the laws of the State
of Arizona in 1971. Citicorp Life Insurance Company is a wholly owned subsidiary
of Citibank Delaware which is a wholly owned subsidiary of Citicorp Holdings
Inc., which in turn, is a wholly owned subsidiary of Citicorp, one of the
world's largest bank holding companies. Citicorp Life and its former parent
corporation, Citicorp Mortgage, Inc., a Delaware holding company, were both
acquired by Citicorp in 1973. During 1990, the ownership of Citicorp Life was
transferred to Citibank Delaware.
Pursuant to the 1973 approval by the Board of Governors of the Federal Reserve
System (FRB), Citicorp Life initially limited its activities to the reinsurance
of credit life and disability insurance sold in connection with extensions of
credit by Citicorp. Additional Federal approvals were received in 1976 and 1980,
authorizing Citicorp Life to underwrite group and individual term life and
disability insurance directly related to extensions of credit by the domestic
Citicorp holding company system. Subsequent Delaware and Federal law changes in
1989 and 1991, respectively, now enable Citicorp Life to underwrite and issue
insurance coverages and annuities which are independent of any extension of
credit.
As of December 31, 1997, Citicorp Life Insurance Company had statutory assets
in excess of . 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
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<PAGE>
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 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
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<PAGE>
300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500 and CitiFunds Small Cap
Growth VIP Portfolio (formerly 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 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. 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.
CitiFunds Small Cap Growth VIP Portfolio (formerly 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
27
<PAGE>
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.
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.
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<PAGE>
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,
29
<PAGE>
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 AIM 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 trustees
of the AIM V.I. Capital Appreciation Fund.
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
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<PAGE>
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
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<PAGE>
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.
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
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<PAGE>
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 CFBDS, 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
33
<PAGE>
or, if required in the jurisdiction where the Contract is purchased, 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. In some jurisdictions, we may be required to return the Contract
Value plus any fees and charges deducted. These amounts may be more or less than
the aggregate amount of purchase payments made up to that time. In other
jurisdictions, we instead return the greater of the Contract Value plus any
premium tax deducted or aggregate purchase payment(s) less any prior
withdrawals. In those cases, we will allocate initial purchase payments to the
Money Market Subaccount for the free-look period following the Contract Date.
The free-look period begins on the date following your receipt of the Contract.
We will consider the Contract received five days after it is mailed to your last
known address.
Allocation of Purchase Payments
At the time of application, you select the allocation of the initial net
purchase payment among the subaccounts and the Fixed Account. Any allocation
must be for at least $100 and be a whole percentage of a purchase payment.
If the application for a Contract is properly completed and is accompanied by
all the information necessary to process it, including payment of the initial
purchase payment, the initial purchase payment will be allocated, as designated
by you, to one or more of the subaccounts or to the Fixed Account within two
valuation days of receipt of such purchase payment by us at our administrative
office. If the application is not properly completed, we reserve the right to
retain the purchase payment for up to five valuation days while we attempt to
complete the application. If the application is not complete at the end of the
5-day period, we will inform the applicant of the reason for the delay and the
initial purchase payment will be returned immediately, unless the applicant
specifically consents to our retaining the purchase payment until the
application is complete. Once the application is complete, the initial purchase
payment will be allocated as designated by you within two valuation days.
Notwithstanding the foregoing, in jurisdictions where we must refund the
greater of aggregate purchase payments or Contract Value in the event you
exercise the free-look right, any portion of the initial purchase payment to be
allocated to a subaccount will be allocated to the Money Market Subaccount for
the free-look period following the Contract Date. At the end of that period, the
amount in the Money Market Subaccount will be allocated to the subaccounts as
designated by you based on the proportion that the allocation percentage for
each such subaccount bears to the sum of the
34
<PAGE>
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
35
<PAGE>
transferred to the subaccount from another subaccount or from the Fixed
Account during the current valuation period.
Any amounts transferred, surrendered or deducted from a subaccount will be
processed by cancelling or liquidating accumulation units. The number of
accumulation units to be cancelled is determined by dividing the dollar amount
being removed from a subaccount by the accumulation unit value for that
subaccount at the end of the valuation period during which the amount was
removed. The number of accumulation units in any subaccount will be decreased at
the end of the valuation period by: (a) any amounts transferred (and any
applicable transfer fee) from that subaccount to another subaccount or to the
Fixed Account; (b) any amounts withdrawn or surrendered during that valuation
period; (c) any surrender charge, Annual Contract Fee or premium tax assessed
upon a partial withdrawal or surrender; and (d) the Annual Contract Fee, if
assessed during that valuation period.
Determination of Accumulation Unit Value. The accumulation unit value for each
subaccount's first Valuation Period was set at $1.00. The accumulation unit
value for a subaccount is calculated for each subsequent Valuation Period by
multiplying that subaccount's accumulation unit value on the preceding Valuation
Day by the net investment factor for that sub-account for the Valuation Period
then ended.
The net investment factor for each subaccount for any Valuation Period is
calculated by dividing (1) by (2) and subtracting (3) from the result, where:
(1) Is the net asset value per share of the corresponding portfolio at
the end of the Valuation Period plus the per share amount of any
declared and unpaid dividends or capital gains accruing to that
portfolio plus (or minus) a per share credit (or charge) for any
taxes resulting from the investment operations of the subaccount.
(2) Is the portfolio's net asset value per share at the beginning of the
Valuation Period; and
(3) Is a factor representing the daily mortality and expense risk charge
and the administration charge deducted from the subaccount.
Transfer Privileges
General. Before the Annuity Income Date you may transfer all or part of the
amount in a subaccount or the Fixed Account to another subaccount or the Fixed
Account.
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We 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, 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
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other subaccounts. 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 also 1/6 of the Fixed Account value at the time the
automatic transfers begin. Once elected, dollar-cost averaging remains in effect
for a Contract until the Contract Value in the Money Market Subaccount or the
Fixed Account is inadequate to execute the requested transfers or until you
cancel the election by providing us with at least 6 days prior written notice.
You may exercise your right to cancel the election at any time. There is no
additional charge for using dollar-cost averaging. However, automatic transfers
will be treated as any other transfer in determining the number of transfers in
any Contract Year. We reserve the right to discontinue offering the dollar-cost
averaging facility at any time and for any reason.
Surrenders and Partial Withdrawals
Surrender. At any time before the Annuity Income Date, you may surrender the
Contract for its surrender value. The surrender value will be determined as of
the end of the Valuation Period during which written notice requesting surrender
is received at our administrative office. The surrender value will be paid in a
lump sum. A surrender may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
Partial Withdrawals. At any time before the Annuity Income Date, you may make
partial withdrawals of the surrender value. Partial withdrawal requests must be
in writing and specify from which Account(s) the withdrawal is to be made. The
amount withdrawn must equal at least $500 except for systematic withdrawals.
When a withdrawal is made, you will receive the amount requested to be withdrawn
less any applicable surrender charge. If a partial withdrawal request would
reduce the Contract Value to less than $2,000, we may pay the full surrender
value and terminate the Contract. We will withdraw the amount requested from the
Contract Value as of the end of the Valuation Period during which
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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
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from which partial withdrawals are being made becomes zero; (2) a termination
date specified by you is reached; or (3) you request that your participation in
the plan cease. Withdrawals under the systematic withdrawal plan are subject to
a surrender charge. (See "Surrender Charge").
Systematic withdrawals may have adverse federal income tax consequences and
you should, therefore, consult with your tax adviser before electing to
participate in the plan. We reserve the right to discontinue offering the
systematic withdrawal plan at any time
Death Benefit Before the Annuity Income Date
Death of the Owner. Upon receipt of due proof of your death (or in the case of
Joint Owners, the death of the first Joint Owner to die) while the Contract is
in force and before the Annuity Income Date, we will pay the Beneficiary the
Death Benefit. In the case of Joint Owners, the surviving Joint Owner will be
the primary beneficiary. You may specify the manner in which the Death Benefit
is to be paid. If you do not specify how the Death Benefit is to be paid, the
Beneficiary may elect the manner in which the Death Benefit is to be
distributed.
In either case, the Death Benefit under a Non-Qualified Contract must be
distributed in full within 5 years after the deceased Owner's death unless:
1. The benefit is paid as a life annuity or an annuity with a period
certain not exceeding the Beneficiary's life expectancy with payments
beginning within one year of the deceased Owner's death; or
2. The Beneficiary is the surviving spouse of the deceased Owner, in which
case he or she may continue this Contract as the Owner.
If the Beneficiary is not a natural person, the benefit must be distributed
within 5 years of your death. Similar rules apply to Qualified Contracts.
Death Benefit. If you die prior to age 75, the Death Benefit will be the
greatest of:
1. The Contract Value on the date we receive due proof of your death;
2. The Contract Value on the most recent 5th Contract Anniversary
immediately preceding the date of death, increased by the dollar amount
of any purchase payments and
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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 Date. You
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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
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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 state
law requires us to permit other Joint Owners or we otherwise agree. For
Qualified Contracts, the Owner must be the Annuitant and Joint Owners are not
permitted. Before the Annuity Income Date you have all the rights under the
Contract, subject to the rights of any assignee of record. This includes the
right to:
1. Transfer values between Accounts and designate or change the
allocation of purchase payments to each Account;
2. Name and/or change the Beneficiaries, Owner or Annuitant;
3. Surrender the Contract in whole or in part for cash;
4. Assign the Contract Value, in whole or in part;
5. Designate and change the Annuity Income Date; and
6. Elect or change the Annuity Payment Option.
All elections, authorizations and change requests must be made to us in
writing. Upon receipt by us, any change will be effective as of the date it was
signed by you, except that any values or amounts payable under the Contract will
be determined as of the Valuation
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Day on or next following the date of receipt. Payment made or action taken by us
prior to the time written notice is received will discharge our liability under
this Contract to the extent of such action or payment. The consent of any
irrevocable Beneficiary is required to exercise any right. If Joint Owners are
named, both must consent to any change.
Reports to Owners
At least annually, we will mail to each Owner, at such Owner's last known
address of record, a report setting forth the Contract Value, subaccount values,
and Fixed Account Value, as well as your current purchase payment allocation
directions. We will also provide you with shareholder reports of the Funds as
well as other notices, reports or documents as required by law.
Inquiries
Inquiries regarding a Contract may be made by writing to us at our
administrative office.
THE FIXED ACCOUNT
You may allocate some or all of the purchase payments and transfer some or all
of the Contract Value to the Fixed Account, which is part of our General Account
and pays interest at declared rates guaranteed for one year. Our General Account
supports our insurance and annuity obligations. Since the Fixed Account is part
of the General Account, we assume the risk of investment gain or loss on this
amount. All assets in the General Account are subject to our general liabilities
from business operations.
The Fixed Account 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
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allocation of purchase payments, transfers of Contract Value from the Fixed
Account, surrenders and partial withdrawals from the Fixed Account and charges
assessed in connection with the Contract. The Fixed Account Value is guaranteed
to accumulate at a minimum effective annual interest rate of 3%.
Beginning on the date we issue the Contract, we will credit any portion of the
initial purchase payment allocated to the Fixed Account with a specified
interest rate, known as the Initial Fixed Account Interest Rate. We may declare
different initial interest rates for each subsequent purchase payment or
transfer into the Fixed Account. We will guarantee the initial rate credited for
one year from the date the purchase payment is received or transfer is
effective. Thereafter, the interest rate earned will be the applicable Current
Fixed Account Interest Rate as we may declare.
The Current Fixed Account Interest Rate is a rate we establish from time to
time for all amounts under the Contract that have been allocated to the Fixed
Account for more than one year. We may change the Current Fixed Account Interest
Rate from time to time to reflect prevailing market conditions but not more
often than once every twelve months. The Initial Fixed Account Interest Rate and
the Current Fixed Account Interest Rate will vary but will always be equal to or
greater than an effective annual rate of 3%.
At your written request, all or a portion of the Fixed Account Value may be
transferred to any subaccount. 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)
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confined to a hospital, nursing home or long term care
facility for at least 30 consecutive days, provided (a) confinement is for
medically necessary reasons at the recommendation of a physician; (b) the
hospital, nursing home or long term care facility is licensed or otherwise
recognized and operating as such by the proper authority in the state where it
is located, the Joint Commission on Accreditation of Hospitals or Medicare; and
(c) the withdrawal or surrender request is received by us no later than 91 days
after the last day of your confinement.
Annual Contract Fee
On the last day of each Contract Year prior to the Annuity Income Date, we
deduct from the Contract Value an Annual Contract Fee of $30 to reimburse us for
administrative expenses relating to the Contract. The fee will be charged by
reducing the value of all active Accounts on a pro-rata basis. With respect to
each subaccount, we deduct this fee by cancelling accumulation units. The number
of accumulation units deducted from each subaccount will be determined by
dividing the pro-rata portion of the fee applicable to that subaccount by the
accumulation unit value of that subaccount on the date the fee is assessed. 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 not to
exceed 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
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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. This
charge will not exceed 1.25% annually (approximately 0.50% for mortality risk
and 0.75% for expense risk), which is equivalent to a daily rate of 0.0034246%.
Currently, the annual mortality and expense risk charge is 0.84% (approximately
0.34% for mortality risk and 0.50% for expense risk), which is equivalent to a
daily rate of 0.0023128%.
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:
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(1) at the time the Contract is surrendered; (2) on the Annuity Income Date; or
(3) at such other date as the taxes are assessed.
Other Taxes
Currently, no charge is made against the Separate Account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the Separate Account or the Contracts. We may, however, make
such a charge in the future from surrender value, death benefits or annuity
payments, as appropriate. Such taxes may include taxes (levied by any government
entity) which we determine to have resulted from: (1) the establishment or
maintenance of the Separate Account; (2) receipt by us of purchase payments; (3)
issuance of the Contracts; or (4) the payment of annuity payments.
ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
On the Annuity Income Date, the Contract Value less any premium tax previously
unpaid and less any applicable surrender charge will be applied under an annuity
payment option. (See "Annuity Payments on the Annuity Income Date.") If an
election of an annuity payment option is not on file at our administrative
office on the Annuity Income Date, the proceeds will be paid as a life income
annuity with payments for ten years guaranteed. The value of each subaccount
will be applied to provide a variable annuity and the value of the Fixed Account
will be applied to provide a fixed dollar annuity. An annuity payment option may
be elected, revoked, or changed by you at any time before the Annuity Income
Date upon 30 days prior written notice. You may elect to apply any portion of
the Contract Value less any premium tax previously unpaid to provide either
variable annuity payments or fixed annuity payments or a combination of both.
The annuity payment options available are described below. In addition, you may
elect any other method of payment that is mutually agreeable to you and us.
We reserve the right to refuse the election of an annuity payment option other
than paying the Contract Value, less any applicable surrender charge and premium
tax previously unpaid, in a lump sum if the total amount applied to an annuity
payment option would be less than $2,000. If the amount of any annuity payment
for each affected Account would be or becomes less than $50.00, we may reduce
the frequency of payments to an interval that would result in payments of at
least $50.00
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Fixed Annuity Payments
Fixed annuity payments are periodic payments from us to the designated payee,
the amount of which is fixed and guaranteed by us. The amount of each payment
depends only on the form and duration of the annuity payment option chosen, the
age of the Annuitant, the sex of the Annuitant (if applicable), the amount
applied to purchase the annuity payments and the applicable annuity purchase
rates in the Contract. The annuity purchase rates in the Contract are based on a
minimum guaranteed interest rate of 3.0%. We may, in our sole discretion, make
annuity payments in an amount based on a higher interest rate.
Legal Developments Regarding Unisex Actuarial Tables
In 1983, the United States Supreme Court held in Arizona Governing Committee
v. Norris that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. In addition, legislative,
regulatory, or decisional authority of some states may prohibit use of
sex-distinct mortality tables under certain circumstances. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the impact of these authorities on any employment-related insurance or
benefits program before purchasing the Contract.
Variable Annuity Payments
The dollar amount of the first monthly variable annuity payment is determined
by dividing the Value of the Accounts to be applied to a variable annuity on the
Annuity Income Date by 1,000 and multiplying the result by the appropriate
factor in the annuity tables provided in the Contract. The appropriate factor is
based on annual net investment return of 3.0%. The amount of each payment will
depend on the age of the Annuitant(s) at the time the first payment is due, and
the sex of the Annuitant(s), if applicable, unless otherwise required by law.
The net investment performance of a subaccount is translated into a variation
in the amount of variable annuity payments through the use of annuity units. The
amount of the first variable annuity payment associated with each subaccount is
applied to purchase subaccount annuity units at the annuity unit value for the
subaccount on the Annuity Income Date. The number of annuity units of each
subaccount attributable to a Contract then remains fixed. Each subaccount has a
separate subaccount annuity unit value that changes with each valuation period
in substantially the same manner as do accumulation units of the subaccount.
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The dollar value of each variable annuity payment after the first is equal to
the sum of the amounts determined by multiplying the number of subaccount
annuity units under a Contract for a particular subaccount by the annuity unit
value for the subaccount for the valuation period which ends no earlier than the
fifth Valuation Day preceding the date of each such payment. If the net
investment return of the subaccount for a payment period is equal to the
pro-rated portion of the 3.0% annual assumed investment rate, the variable
annuity payment attributable to that subaccount for that period will equal the
payment for the prior period. To the extent that such net investment return
exceeds an annualized rate of 3.0% for a payment period, the payment for that
period will be greater than the payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 3.0%, the
payment for that period will be less than the payment for the prior period.
Once every three months, after the Annuity Income Date, the Annuitant may
elect, in writing, to transfer among the selected subaccount(s) on which
variable annuity payments are based. If such a transfer is elected, the number
of annuity units will change and be determined by "a" times "b," less any
applicable fees, divided by "c" where:
"a" is the number of annuity units being transferred;
"b" is the subaccount annuity unit value from which the transfer is made; and
"c" is the annuity unit value of the subaccount to which the transfer is made.
Thereafter, the number of annuity units will remain fixed until transferred.
After the Annuity Income Date, no transfers may be made between the subaccounts
and the Fixed Account.
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.
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Option 2: Life Annuity. We will make annuity payments to a payee each month as
long as the Annuitant is alive. When the Annuitant dies, all payments will
cease.
Option 3: Life Annuity with Period Certain. We will make annuity payments to a
payee each month as long as the Annuitant is alive. If the Annuitant dies
prior to the end of the guaranteed period, payments will continue to be made
to the person(s) named by the Annuitant to receive such guaranteed payments
for the remainder of the fixed period. If no such person is named or none
survive the Annuitant, the remainder of the guaranteed payments will be paid
to the Annuitant's estate.
Option 4: Joint and Survivor Annuity. We will make annuity payments to a payee
each month for the joint lifetime of the Annuitant and another person. At the
death of either, payments will continue to be made to the payee. When the
survivor dies, all payments will cease.
The amount of each payment will be determined from the tables in the Contract
that apply to the particular option using the Annuitant's age and sex (if
applicable). Age will be determined from the last birthday at the due date of
the first payment.
Note Carefully: Under annuity payment options 2 and 4 it would be possible for
only one annuity payment to be made if the Annuitant(s) were to die before the
due date of the second annuity payment; only two annuity payments if the
Annuitant(s) were to die before the due date of the third annuity payment; and
so forth.
Alternate Payment Option. In lieu of one of the above options, the Contract
Value, less any applicable surrender charge and premium taxes previously unpaid,
or Death Benefit, as applicable, may be applied to any other payment option made
available by us or requested and agreed to by us
YIELDS AND TOTAL RETURNS
From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the subaccounts of the Separate Account.
These figures are based on historical earnings and do not indicate or project
future performance. We also may, from time to time, advertise or include in
sales literature subaccount performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance appears in the Statement of Additional
Information.
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Effective yields and total returns for the subaccounts are based on the
investment performance of the corresponding portfolio. The performance of a
portfolio in part reflects its expenses. See the prospectuses for the
portfolios.
The yield of the Money Market Subaccount refers to the annualized income
generated by an investment in the subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the subaccount is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a subaccount (except the Money Market Subaccount) refers to the
annualized income generated by an investment in the subaccount over a specified
30-day or one-month period. The yield is calculated by assuming that the income
generated by the investment during that 30-day or one-month period is generated
each period over a 12-month period and is shown as a percentage of the
investment.
The total return of a subaccount refers to return quotations assuming an
investment under a Contract has been held in the subaccount for various periods
of time. For periods prior to the date the Separate Account commenced
operations, performance information will be calculated based on the performance
of the corresponding portfolios and the assumption that the subaccounts were in
existence for the same periods as those indicated for the portfolios, with the
level of Contract charges that were in effect at the inception of the
subaccounts. When a subaccount or portfolio has been in operation for one, five,
and ten years, respectively, the total return for these periods will be
provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which 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 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).
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In addition to the 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 and average annual total returns for the portfolios
may be disclosed, including such disclosures for periods prior to the date the
Separate Account commenced operations.
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.
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We may also report other information including the effect of tax-deferred
compounding on a subaccount's investment returns, or returns in general, which
may be illustrated by tables, graphs, or charts. All income and capital gains
derived from subaccount investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the subaccount investment
experience is positive.
FEDERAL TAX MATTERS
The Following Discussion is General and
Is Not Intended as Tax Advice
Introduction
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by us. Any person concerned about
these tax implications should consult a competent tax advisor before initiating
any transaction. This discussion is based upon our understanding of the present
federal income tax laws, as they are currently interpreted by the Internal
Revenue Service ("IRS"). No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and used
in connection with plans qualifying for favorable tax treatment. The Qualified
Contract is designed for use by individuals whose purchase payments are
comprised solely of proceeds 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.
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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.
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Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any owner dies on or after the
Annuity Income Date but prior to the time the entire interest in the contract
has been distributed, the remaining portion of such interest will be distributed
at least as rapidly as under the method of distribution being used as of the
date of that owner's death; and (b) if any owner dies prior to the Annuity
Income Date, the entire interest in the Contract will be distributed within five
years after the date of the owner's death. These requirements will be considered
satisfied as to any portion of the owner's interest which is payable to or for
the benefit of a "designated beneficiary" and which is distributed over the life
of such beneficiary or over a period not extending beyond the life expectancy of
that beneficiary, provided that such distributions begin within one year of that
owner's death. The owner's "designated beneficiary" is the individual designated
by the owner as a beneficiary and to whom ownership of the contract passes by
reason of death of the owner. However, if the owner's "designated beneficiary"
is the surviving spouse of the deceased owner, the Contract may be continued
with the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.
Other rules may apply to Qualified Contracts.
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.
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.
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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
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the contract) gross income does not include that part of any amount received as
an annuity under an annuity contract that bears the same ratio to such amount as
the investment in the contract bears to the expected return at the annuity
starting date. For variable annuity payments, the taxable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
"investment in the contract" by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her "investment in the contract." For
fixed annuity payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the annuity payments for the term of the
payments; however, the remainder of each annuity payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
Annuitant's final tax return.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a Contract
because of the death of an owner. Generally, such amounts are includible in the
income of the recipient as follows: (i) if distributed in a lump sum, they are
taxed in the same manner as a full surrender of the contract or (ii) if
distributed under a payment option, they are taxed in the same way as annuity
payments. For these purposes, the investment in the Contract is not affected by
the owner's death. That is, the investment in the Contract remains the amount of
any purchase payments paid which were not excluded from gross income.
Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant to
a Non-Qualified Contract, there may be imposed a federal penalty tax equal to
10% of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
1. made on or after the taxpayer reaches age 59 1/2;
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;
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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.
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Multiple Contracts
All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by us (or our affiliates) to the same owner during any
calendar year are treated as one annuity Contract for purposes of determining
the amount includible in gross income under Section 72(e). The effects of this
rule are not yet completely clear; however, it could affect the time when income
is taxable and the amount that might be subject to the 10% penalty tax described
above. In addition, the Treasury Department has specific authority to issue
regulations that prevent the avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. There may also be other situations
in which the Treasury may conclude that it would be appropriate to aggregate two
or more annuity contracts purchased by the same owner. Accordingly, you should
consult a competent tax advisor before purchasing more than one annuity contract
in any calendar year.
Taxation of Qualified Plans
The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract Owners, the
Annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but we shall not be bound by the terms and conditions of such
plans to the extent such terms contradict the Contract, unless we consent. Some
retirement plans are subject to distribution and other requirements that are not
incorporated 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
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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. which entered into a selling agreement with CFBDS, 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.
CFBDS, 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. CFBDS, Inc. is not obligated to sell any specific number of Contracts.
CFBDS, 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% 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."
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
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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.
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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, Thanksgiving Day, Day After Thanksgiving, the day before Christmas 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,
1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995 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, 1997.
------------
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.
65
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS
The Contract
Incontestability
Misstatement of Age or Sex
Participation
Assignment
DISTRIBUTION OF THE CONTRACTS
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Subaccount Yields
Other Subaccount Yields
Average Annual Total Returns
Effect of the Annual Contract Fee on Performance Data
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
Amount of Variable Annuity Payments
Annuity Unit Value
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
66
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
SUPPLEMENT DATED MAY 1, 1998 TO
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1998
Citicorp Life Variable Annuity Separate Account
Citicorp Life Insurance Company
Individual Flexible Premium Deferred Variable Annuity Contracts
Effective May 1, 1998, 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 average annual total returns and cumulative total
returns described in the accompanying prospectus but for the inclusion of the
Guaranteed Minimum Income Benefit Charge. For purposes of calculating both
average annual total returns and cumulative total returns, we deduct a mortality
and expense risk charge equal to 1.25% of Citicorp Life Variable Annuity
Separate Account ("Separate Account") assets on an annual basis. Such charge
represents the mortality and expense risk charge assessed under the Contract
through fiscal year ended December 31, 1997. Effective March 2, 1998, the
mortality and expense risk charge equals 0.84% of Separate Account assets on an
annual basis.
Based on the method of calculation described in the accompanying
prospectus and the election of the Guaranteed Minimum Income Benefit option, the
Average Annual Total Returns for the subaccounts available under the option for
the period ending December 31, 1997 would have been:
Guaranteed Minimum Income Benefit Option
Subaccount
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
12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect(R) VIP Folio 400 (11/25/96) N/A
CitiSelect(R) VIP Folio 500 (11/25/96) N/A
CitiFunds(SM) Small Cap Growth VIP
Portfolio (11/25/96)
(formerly Landmark Small Cap Equity VIP Fund) N/A
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- --------------------------------------------------------------------------------
<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, 1997 would have been:
- -------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount
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
12/31/97 12/31/97 to
12/31/97
- -------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 400 (11/25/96) N/A
CitiSelect VIP Folio 500 (11/25/96) N/A
CitiFunds Small Cap Growth VIP Portfolio
(11/25/96) (formerly Landmark Small Cap
Equity VIP Fund) N/A
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
- -------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- --------------------------------------------------------------------------------
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, 1997 would have been:
<PAGE>
- -------------------------------------------------------------------------------
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
12/31/97 12/31/97 12/31/97
- -------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 400 (11/25/96) N/A
CitiSelect VIP Folio 500 (11/25/96) N/A
CitiFunds Small Cap Growth VIP Portfolio
(11/25/96)(formerly Landmark Small Cap Equity
VIP Fund) N/A
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
- -------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- -------------------------------------------------------------------------------
<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, 1997 would have been:
- --------------------------------------------------------------------------------
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
12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 400 (11/25/96) N/A
CitiSelect VIP Folio 500 (11/25/96) N/A
CitiFunds Small Cap Growth VIP Portfolio
(11/25/96)(formerly Landmark Small Cap Equity
VIP Fund) N/A
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- --------------------------------------------------------------------------------
<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, 1998
2
<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, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS
The Contract
Incontestability
Misstatement of Age or Sex
Participation
Assignment
DISTRIBUTION OF THE CONTRACTS
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Subaccount Yields
Other Subaccount Yields
Average Annual Total Returns
Effect of the Annual Contract Fee on Performance Data
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
Amount of Variable Annuity Payments
Annuity Unit Value
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
4
<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
CFBDS, 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 CFBDS, Inc.
CFBDS, Inc. is an indirect wholly owned subsidiary of Citicorp and an affiliate
of Citicorp Life Insurance Company. For fiscal year 1997 and 1996, no
underwriting commissions were paid to, or retained by, CFBDS, Inc.
5
<PAGE>
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 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:
6
<PAGE>
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, 1997 were:
Current Yield - %
Effective Yield - %
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
7
<PAGE>
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.
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.
8
<PAGE>
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, 1997, the yield for the Bond Subaccount was:
Yield =
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.
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.
9
<PAGE>
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:
1/N
TR = ((ERV/P)) - )1
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.
10
<PAGE>
Based on the method of calculation described above, the Average Annual
Total Returns for the Subaccounts for the periods ending December 31, 1997 were:
- --------------------------------------------------------------------------------
Subaccount Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the
For the For the period
Subaccount (date of inception of one-year 5-year from
corresponding portfolio) period period inception
ending ending to
12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect(R) VIP Folio 200 (11/25/96) N/A
CitiSelect(R) VIP Folio 300 (11/25/96) N/A
CitiSelect(R) VIP Folio 400 (11/25/96) N/A
CitiSelect(R) VIP Folio 500 (11/25/96) N/A
CitiFundsSM Small Cap Growth VIP
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (11/25/96) N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Government Securities Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
High Income Portfolio (9/19/85) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) % N/A %
Money Market Series (1/03/95) % N/A %
Bond Series (10/24/95) % N/A %
Total Return Series (1/03/95) % N/A %
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- --------------------------------------------------------------------------------
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
11
<PAGE>
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.
12
<PAGE>
Based on the method of calculation described above, the Cumulative Total
Returns for the Subaccounts for the periods ending December 31, 1997 were:
- --------------------------------------------------------------------------------
Subaccount Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the
For the For the period
Subaccount (date of inception of one-year 5-year from
corresponding portfolio) period period inception
ending ending to
12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) N/A
CitiSelect VIP Folio 300 (11/25/96) N/A
CitiSelect VIP Folio 400 (11/25/96) N/A
CitiSelect VIP Folio 500 (11/25/96) N/A
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (11/25/96) N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Government Securities Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
High Income Portfolio (9/19/85) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) % N/A %
Money Market Series (1/03/95) % N/A %
Bond Series (10/24/95) % N/A %
Total Return Series (1/03/95) % N/A %
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- --------------------------------------------------------------------------------
13
<PAGE>
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 average annual total returns and 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.
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, 1997 were:
14
<PAGE>
- --------------------------------------------------------------------------------
Subaccount Non-Standardized
Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the For the For the
Subaccount (date of inception of one-year 5-year period
corresponding portfolio) period period from
ending ending inception
12/31/97 12/31/97 to 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) N/A
CitiSelect VIP Folio 300 (11/25/96) N/A
CitiSelect VIP Folio 400 (11/25/96) N/A
CitiSelect VIP Folio 500 (11/25/96) N/A
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (11/25/96) N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Government Securities Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
High Income Portfolio (9/19/85) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) % N/A %
Money Market Series (1/03/95) % N/A %
Bond Series (10/24/95) % N/A %
Total Return Series (1/03/95) % N/A %
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Subaccount Non-Standardized
Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the For the For the
Subaccount (date of inception of one-year 5-year period
corresponding portfolio) period period from
ending ending inception
12/31/97 12/31/97 to 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) N/A
CitiSelect VIP Folio 300 (11/25/96) N/A
CitiSelect VIP Folio 400 (11/25/96) N/A
CitiSelect VIP Folio 500 (11/25/96) N/A
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (11/25/96) N/A
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) % N/A %
Government Securities Fund (5/05/93) % N/A %
Growth Fund (5/05/93) % N/A %
International Equity Fund (5/05/93) % N/A %
Value Fund (5/05/93) % N/A %
Growth and Income Fund (5/02/94) % N/A %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) % % %
High Income Portfolio (9/19/85) % % %
Equity Income Portfolio (10/9/86) % % %
Overseas Fund (1/28/87) % % %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (1/03/95) % N/A %
Index 500 Portfolio (8/27/92) % N/A %
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) % N/A %
Money Market Series (1/03/95) % N/A %
Bond Series (10/24/95) % N/A %
Total Return Series (1/03/95) % N/A %
Research Series (7/26/95) % N/A %
Emerging Growth Series (7/24/95) % N/A %
- --------------------------------------------------------------------------------
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
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
16
<PAGE>
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.
17
<PAGE>
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 investment 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,
18
<PAGE>
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.
19
<PAGE>
Illustration of Calculation of Annuity Unit Value
1. Net Investment Factor for period................... 1.003662336
2. Adjustment for 3% Assumed Investment
Rate............................................... 0.999919016
3. 2x1................................................ 1.003581055
4. annuity unit value, beginning of
valuation period................................... 10.743769
5. annuity unit value, end of valuation
period (3x4)....................................... 10.782243
LEGAL MATTERS
All matters relating to Arizona law pertaining to the Contracts, including
the validity of the Contracts and our authority to issue the Contracts, have
been passed upon by Catherine S. Mulholland, General Counsel of the Company.
Sutherland, Asbill & Brennan LLP 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, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997 and the financial statements for the Separate
Account as of December 31, 1997 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.
20
<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, 1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995, 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, 1997.
21
<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 CFBDS, Inc. (formerly 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.**
(5) Contract 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 CitiFunds 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 Catherine S. Mulholland, Esq.****
(10) (a) Consent of Sutherland, Asbill & Brennan LLP.****
(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).
****To be filed by Amendment.
<PAGE>
Item 25. Directors and Officers of the Company.
Alan F. Liebowitz Director/President and Chief
Executive Officer*
Joseph E. Madalon Director/Senior Vice President and
Chief Financial Officer*
Marc J. Fink Director/Senior Vice President*
Charles H. Masland, IV Director/Senior Vice President*
Larry D. Williams Director/Senior Vice President*
Daniel F. Forcade Senior Vice President and
Treasurer*
Joel I. Levine Senior Vice President and Chief
Investment Officer*
Catherine S. Mulholland Senior Vice President and
General Counsel*
Ben Spurgeon Senior Vice President and Chief
Actuary*
Elizabeth C. Craig Vice President*
Mark C. Lovejoy Vice President and Chief Underwriter*
Eric S. Miller Vice President*
Ken Nelson Vice President*
Walter Smith Vice President*
Ian C. Stuart Vice President*
Richard M. Zuckerman Vice President/Associate General
Counsel and 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
[graphics omitted]
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, 1997 there were 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, officers 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
Regis-trant 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) CFBDS, Inc., the Registrant's Distributor, is also the distributor
for CitiFunds Cash Reserves, CitiFunds Premium Liquid Reserves,
CitiFunds Tax Free Reserves, CitiFunds New York Tax Free Reserves,
CitiFunds California Tax Free Reserves, CitiFunds Connecticut Tax
Free Reserves, CitiFunds New York Tax Free Income Fund, CitiFunds
Balanced Fund, CitiFunds Equity Fund, CitiFunds Short Term U.S.
Government Income Fund, CitiFunds Intermediate Income Fund,
CitiFunds U.S. Treasury Reserves, CitiFunds Premium U.S. Treasury
Reserves, CitiFunds Institutional Liquid Reserves, CitiFunds
Institutional U.S. Treasury Reserves and CitiFunds Institutional Tax
Free Reserves. CFBDS, Inc. is also the placement agent for
International Portfolio, Large Cap Value Portfolio, Intermediate
Income Portfolio,
<PAGE>
Foreign Bond Portfolio, Short Term Portfolio, Small Cap Value
Portfolio, Balanced Portfolio, Cash Reserves Portfolio, Emerging
Asian Markets Equity Portfolio, U.S. Treasury Reserves Portfolio,
Small Cap Growth Portfolio, Tax Free Reserves Portfolio,
International Equity Portfolio, Large Cap Growth[Equity] Portfolio,
Growth and Income Portfolio and Government Income Portfolio.
(b) The information required by this item 29 with respect to each
director and officer of CFBDS, Inc. is incorporated by reference to
Schedule A or Form BD filed by CFBDS, Inc. 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.
<PAGE>
(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 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 17th day of February, 1998.
CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest:/s/ Catherine S. Mulholland By:/s/ Larry D. Williams
--------------------------- -----------------------------
Senior Vice President of
Citicorp Life Insurance Company
BY: CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest:/s/ Catherine S. Mulholland 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 February 17, 1998
- ------------------------ ------------------
/s/ Charles H. Masland, IV Director, SVP February 17, 1998
- ------------------------- ------------------
/s/ Marc J. Fink Director, SVP February 17, 1998
- ------------------------ ------------------
/s/ Daniel F. Forcade Treasurer, SVP February 17, 1998
- ------------------------ ------------------
<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 17th day of February, 1998.
CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest:/s/ Catherine S. Mulholland By:/s/ Larry D. Williams
--------------------------- -----------------------------
Senior Vice President of
Citicorp Life Insurance Company
BY: CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest:/s/ Catherine S. Mulholland By:/s/ Larry D. Williams
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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
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/s/ Alan F. Liebowitz Director, President, CEO February 17, 1998
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/s/ Joseph E. Madalon Director, CFO February 17, 1998
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