As filed with the Securities and Exchange Commission on April 28, 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. 8 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9
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. 20004-2415
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
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It is proposed that this filling will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] On __ pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on __ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
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
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page ..................... Cover Page
2. Definitions .................... Definitions
3. Synopsis ....................... Expense Tables; Summary
4. Condensed Financial
Information .................. Condensed Financial Information; Yields
and Total Returns
5. General
(a) Depositor ................ Citicorp Life Insurance Company
(b) Registrant ............... The Separate Account
(c) Portfolio Company ........ The Funds
(d) Fund Prospectus .......... The Funds
(e) Voting Rights ............ Voting Privileges
(f) Administrators ........... N/A
6. Deductions and Expenses
(a) General .................. Charges and Deductions; Summary
(b) Sales Load ............... Charges and Deductions; Summary
(c) Special Purchase Plan .... N/A
(d) Commissions .............. Distribution of the Contracts
(e) Expenses - Registrant .... Charges and Deductions; Summary
(f) Fund Expenses ............ Charges and Deductions
(g) Organizational Expenses .. N/A
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7. Contracts
(a) Persons with Rights ...... Summary; Addition, Deletion or
Substitution of Investments; Description
of the Contract; Annuity Payment Options;
Voting Privileges; Death Benefit Before
the Annuity Income Date; Modification;
Election of Annuity Payment Options
(b) (i) Allocation of
Purchase Payments ... Summary; Purchase Payments; Free-Look
Period; Allocation of Purchase Payments
(ii) Transfers ........... Summary; Transfer Privileges
(iii) Exchanges ........... Transfers, Assignments
(c) Changes .................. Additions, Deletions or Substitutions of
Investments; Description of the Contract;
Modification;
(d) Inquiries ................ Cover page; Inquiries
8. Annuity Period ................. Summary; Annuity Payment Options
9. Death Benefit .................. Death Benefit Before the Annuity Date
10. Purchases and Contract Value
(a) Purchases ................ Summary; Issuance of a Contract; Purchase
Payments; Free Look Period; Allocation of
Purchase Payments; Variable Contract
Value; Transfer Privileges
(b) Valuation ................ Definitions; Variable Contract Value;
(c) Daily Calculation ........ Definitions; Variable Contract Value;
(d) Underwriter .............. Issuance of a Contract; Distribution of
the Contracts
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11. Redemptions
(a) - By Owners .............. Summary; Transfer Privilege; Surrenders
and Partial Withdrawals; Annuity Payments
on the Annuity Date; Payments; Annuity
Payment Options; Federal Tax Matters
- By Annuitant ........... Summary; Transfer Privilege; Surrenders
and Partial Withdrawals; Proceeds on the
Annuity Date; Payments; Annuity Payment
Options; Federal Tax Matters
(b) Texas ORP ................ N/A
(c) Check Delay .............. Purchase Payments
(d) Lapse .................... N/A
(e) Free Look ................ Summary; Free Look Period
12. Taxes .......................... Summary; Federal Tax Matters
13. Legal Proceedings .............. Legal Proceedings
14. Table of Contents for the
Statement of Additional
Information ................... Statement of Additional Information Table
of Contents
<PAGE>
PART B
Item of Form N-4 Part B Caption
15. Cover Page ..................... Cover Page
16. Table of Contents .............. Table of Contents
17. General Information and
History ....................... N/A
18. Services
(a) Fees and Expenses of
Registrant ............... Charges and Deductions (prospectus)
(b) Management Contracts ..... N/A
(c) Custodian ................ N/A
Independent Public
Accountant ............... Experts
(d) Assets of Registrant ..... The Separate Account
(e) Affiliated Persons ....... Citicorp Life Insurance Company
(prospectus)
(f) Principal Underwriter .... Distribution of the Contracts (prospectus)
19. Purchase of Securities
Being Offered ................. Distribution of the Contracts (prospectus)
Offering Sales Load ........... N/A
20. Underwriters ................... Distribution of the Contracts (prospectus)
21. Calculation of Performance
Data ........................... Calculation of Yields and Total Returns;
Yields and Total Returns (prospectus)
22. Annuity Payments ............... Variable Annuity Payments; Annuity Payment
Options (prospectus)
23. Financial Statements ........... Financial Statements
<PAGE>
PART C -- OTHER INFORMATION
Item of Form N - 4 Part C Caption
24. Financial Statements
and Exhibits ................. Financial Statements and Exhibits
(a) Financial Statements ...... (a) Financial Statements
(b) Exhibits .................. (b) Exhibits
25. Directors and Officers
of the Depositor ............... Directors and Officers of Citicorp Life
Insurance Company
26. Persons Controlled By or
Under Common Control with the
Depositor or Registrant ...... Persons Controlled By or Under Common
Control with the Depositor or Registrant
27. Number of Contractowners ....... Number of owners
28. Indemnification ................ Indemnification
29. Principal Underwriters ......... Principal Underwriter
30. Location of Accounts
and Records .................... Location of Books and Records
31. Management Services ............ Management Services
32. Undertakings ................... Undertakings and Representations
Signature Page ................. Signatures
<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.
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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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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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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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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:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 400 $96 $144 $194 $344
CitiSelect VIP Folio 500 $96 $144 $194 $344
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity
VIP Fund) $93 $135 $179 $315
Fidelity VIP Growth Portfolio $90 $128 $166 $289
Fidelity VIP Equity Income Portfolio $89 $125 $161 $277
Fidelity VIP Overseas Portfolio $93 $135 $178 $312
Fidelity VIP II Contrafund Portfolio $91 $128 $167 $291
Fidelity VIP II Index 500 Portfolio $86 $116 $146 $246
AIM V.I. Capital Appreciation Fund $90 $128 $166 $288
AIM V.I. Growth Fund $90 $125 $162 $279
AIM V.I. International Equity Fund $93 $137 $181 $320
AIM V.I. Value Fund $93 $137 $181 $320
AIM V.I. Growth and Income Fund $93 $135 $178 $312
MFS Research Series $93 $135 $178 $312
MFS Emerging Growth Series $92 $134 $177 $310
2. If the Contract is annuitized under a fixed annuity payment option providing
either a life annuity or a life annuity with a period certain of at least five
years at the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 400 $32 $ 97 $164 $344
CitiSelect VIP Folio 500 $32 $ 97 $164 $344
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity
VIP Fund) $29 $ 87 $149 $315
Fidelity VIP Growth Portfolio $26 $ 79 $136 $289
Fidelity VIP Equity Income Portfolio $25 $ 76 $130 $277
Fidelity VIP Overseas Portfolio $28 $ 87 $147 $312
Fidelity VIP II Contrafund Portfolio $26 $ 80 $137 $291
Fidelity VIP II Index 500 Portfolio $22 $ 67 $114 $246
AIM V.I. Capital Appreciation Fund $26 $ 79 $135 $288
AIM V.I. Growth Fund $25 $ 77 $131 $279
AIM V.I. International Equity Fund $29 $ 89 $152 $320
AIM V.I. Value Fund $29 $ 89 $152 $320
AIM V.I. Growth and Income Fund $28 $ 87 $147 $312
MFS Research Series $28 $ 87 $147 $312
MFS Emerging Growth Series $28 $ 86 $146 $310
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3. If the Contract is not surrendered or annuitized at the end of the applicable
time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 400 $32 $ 97 $164 $344
CitiSelect VIP Folio 500 $32 $ 97 $164 $344
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity
VIP Fund) $29 $ 87 $149 $315
Fidelity VIP Growth Portfolio $26 $ 79 $136 $289
Fidelity VIP Equity Income Portfolio $25 $ 76 $130 $277
Fidelity VIP Overseas Portfolio $28 $ 87 $147 $312
Fidelity VIP II Contrafund Portfolio $26 $ 80 $137 $291
Fidelity VIP II Index 500 Portfolio $22 $ 67 $114 $246
AIM V.I. Capital Appreciation Fund $26 $ 79 $135 $288
AIM V.I. Growth Fund $25 $ 77 $131 $279
AIM V.I. International Equity Fund $29 $ 89 $152 $320
AIM V.I. Value Fund $29 $ 89 $152 $320
AIM V.I. Growth and Income Fund $28 $ 87 $147 $312
MFS Research Series $28 $ 87 $147 $312
MFS Emerging Growth Series $28 $ 86 $146 $310
----
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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Accumulation Unit Value
---------------------------------
Beginning of
Period End of Period
Subaccount (12/10/97) (12/31/97)
- --------------------------------------------------------------------------------
CitiSelect VIP Folio 400 1.08 1.08
CitiSelect VIP Folio 500 1.10 1.09
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity VIP Fund) 1.10 1.11
Fidelity VIP Growth Portfolio 1.81 1.80
Fidelity VIP Equity Income Portfolio 1.21 1.21
Fidelity VIP Overseas Portfolio 1.09 1.09
Fidelity VIP II Contrafund Portfolio 1.21 1.21
Fidelity VIP II Index 500 Portfolio 1.23 1.23
AIM V.I. Capital Appreciation Fund 1.69 1.67
AIM V.I. Growth Fund 1.22 1.21
AIM V.I. International Equity Fund 1.06 1.05
AIM V.I. Value Fund 1.20 1.19
AIM V.I. Growth and Income Fund 1.19 1.18
MFS Research Series 1.16 1.15
MFS Emerging Growth Series 1.18 1.16
Number of Accumulation
Units Outstanding
----------------------
End of Period
Subaccount (12/31/97)
- --------------------------------------------------------------------------------
CitiSelect VIP Folio 400 281,111
CitiSelect VIP Folio 500* 0
CitiFunds Small Cap Growth VIP Portfolio*
(formerly Landmark Small Cap Equity VIP Fund) 0
Fidelity VIP Growth Portfolio* 0
Fidelity VIP Equity Income Portfolio* 0
Fidelity VIP Overseas Portfolio* 0
Fidelity VIP II Contrafund Portfolio* 0
Fidelity VIP II Index 500 Portfolio* 0
AIM V.I. Capital Appreciation Fund* 0
AIM V.I. Growth Fund* 0
AIM V.I. International Equity Fund* 0
AIM V.I. Value Fund* 0
AIM V.I. Growth and Income Fund* 0
MFS Research Series* 0
MFS Emerging Growth Series* 0
* As of 12/31/97, no purchase payments had been allocated to the subaccounts
investing in the CitiSelect VIP Folio 500, CitiFunds Small Cap Growth VIP
Portfolio, 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 or MFS
Emerging Growth Series under the Guaranteed Minimum Income Benefit option.
-8-
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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.
-9-
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
CITICORP LIFE INSURANCE COMPANY 800
Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
Telephone: (800) 497-4857
PROSPECTUS
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), 408 or 408A 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
3
<PAGE>
bear the entire investment risk on amounts allocated to the Separate Account.
This Prospectus sets forth basic information about the Contract and the
Separate Account that a prospective investor should know before investing.
Additional information about the Contract and the Separate Account is contained
in the Statement of Additional Information, which has been filed with the
Securities and Exchange Commission. The Statement of Additional Information has
the same date as this Prospectus and is incorporated herein by reference. The
table of contents for the Statement of Additional Information is on page 39 of
this prospectus. You may obtain a copy of the Statement of Additional
Information free of charge by writing to or calling the Company at the address
or phone number shown above.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY CURRENT PROSPECTUSES FOR VARIABLE ANNUITY
PORTFOLIOS, THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND, THE FIDELITY VARIABLE
INSURANCE PRODUCTS FUND II, THE AIM VARIABLE INSURANCE FUNDS, INC. AND THE MFS
VARIABLE INSURANCE TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTRACTS AND SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK
GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION, REINVESTMENT RISK AND
POSSIBLE LOSS OF PRINCIPAL INVESTED.
YOUR RIGHT TO LOOK TO A DELAWARE BANK OR TRUST COMPANY FOR PAYMENT ON ANY
INSURANCE POLICY IS LIMITED BY LAW. INSURANCE POLICIES ISSUED BY THE
SUBSIDIARIES OR DIVISIONS OF DELAWARE BANKS OR TRUST COMPANIES ARE NOT DIRECT
LIABILITIES OF SUCH BANKS OR TRUST COMPANIES. ONLY THE ASSETS OF THE INSURANCE
DIVISION OR SUBSIDIARY ISSUING A POLICY ARE APPLICABLE TO THE PAYMENT AND
SATISFACTION OF SUCH POLICY OR CLAIMS MADE THEREUNDER.
INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK OR
TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
May 1, 1998
4
<PAGE>
TABLE OF CONTENTS
DEFINITIONS
EXPENSE TABLES
SUMMARY
The Contract
Charges and Deductions
Annuity Provisions
Federal Taxes
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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<PAGE>
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
6
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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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<PAGE>
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."
8
<PAGE>
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), 408 or
408A 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
9
<PAGE>
to either Joint Owner unless the context clearly
indicates otherwise.
10
<PAGE>
EXPENSE TABLES
The following expense information assumes that the entire Contract Value
is Variable Contract Value.
Owner Transaction Expenses
Sales Charge Imposed on Purchase Payments None
Maximum Surrender Charge (contingent
deferred sales charge) as a percentage
of the premium payment withdrawn 7%
Surrender Fee None*
Transfer Processing Fee (imposed after the 18th $25**
transfer in any Contract Year)
Annual Contract Fee $30***
Separate Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge**** 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%.
11
<PAGE>
CitiSelect VIP Folio 200
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers
and reimbursements) 0.95%
CitiSelect VIP Folio 300
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers
and reimbursements) 0.95%
CitiSelect VIP Folio 400
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers
and reimbursements) 1.25%
CitiSelect VIP Folio 500
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers
and reimbursements) 1.25%
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity VIP Fund)
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.15%
Total Annual Fund Expenses (after fee waivers
and reimbursements) 0.90%
Fidelity VIP Growth Portfolio
Management Fees 0.60%
Other Expenses 0.09%
Total Annual Fund Expenses 0.69%
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<PAGE>
Fidelity VIP High Income Portfolio
Management Fees 0.59%
Other Expenses 0.12%
Total Annual Fund Expenses 0.71%
Fidelity VIP Equity Income Portfolio
Management Fees 0.50%
Other Expenses 0.08%
Total Annual Fund Expenses 0.58%
Fidelity VIP Overseas Portfolio
Management Fees 0.75%
Other Expenses 0.17%
Total Annual Fund Expenses 0.92%
Fidelity VIP II Contrafund Portfolio
Management Fees 0.60%
Other Expenses 0.11%
Total Annual Fund Expenses 0.71%
Fidelity VIP II Index 500 Portfolio
Management Fees (after fee waivers and reimbursements) 0.24%
Other Expenses (after fee waivers and reimbursements) 0.04%
Total Annual Fund Expenses (after fee waivers and
reimbursements) 0.28%
AIM V.I. Capital Appreciation Fund
Management Fees 0.63%
Other Expenses 0.05%
Total Annual Fund Expenses 0.68%
AIM V.I. Government Securities Fund
Management Fees 0.50%
Other Expenses 0.37%
Total Annual Fund Expenses 0.87%
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<PAGE>
AIM V.I. Growth Fund
Management Fees 0.65%
Other Expenses 0.08%
Total Annual Fund Expenses 0.73%
AIM V.I. International Equity Fund
Management Fees 0.75%
Other Expenses 0.18%
Total Annual Fund Expenses 0.93%
AIM V.I. Value Fund
Management Fees 0.62%
Other Expenses 0.08%
Total Annual Fund Expenses 0.70%
AIM V.I. Growth and Income Fund
Management Fees 0.63%
Other Expenses 0.06%
Total Annual Fund Expenses 0.69%
MFS World Governments Series
Management Fees 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Money Market Series
Management Fees 0.50%
Other Expenses (after fee reduction) 0.10%
Total Annual Fund Expenses (after fee reduction) 0.60%
MFS Bond Series
Management Fees 0.60%
Other Expenses (after fee reduction) 0.40%
Total Annual Fund Expenses (after fee reduction) 1.00%
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<PAGE>
MFS Total Return Series
Management Fees 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Research Series
Management Fees 0.75%
Other Expenses 0.17%
Total Annual Fund Expenses 0.92%
MFS Emerging Growth Series
Management Fees 0.75%
Other Expenses 0.15%
Total Annual Fund Expenses 0.90%
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 the portfolios. Absent fee waivers and reimbursements, "Other
Expenses" and "Total Annual Fund Expenses" for the CitiSelect VIP Portfolios and
CitiFunds Small Cap VIP Portfolio were: CitiSelect VIP Folio 200 - 3.49% and
4.44%; CitiSelect VIP Folio 300 - 3.30% and 4.25%; CitiSelect VIP Folio 400 -
3.21% and 4.46%; CitiSelect VIP Folio 500 - 3.27% and 4.52% and CitiFunds Small
Cap Growth VIP Portfolio - 4.60% and 5.50%, respectively. AIM Advisors, Inc.
("AIM") may from time to time voluntarily waive or reduce its respective fees.
Effective May 1, 1998, the Funds reimburse AIM in an amount up to 0.25% of the
average net asset value of each Fund, for expenses incurred in providing, or
assuring that participating insurance companies provide, certain administrative
services. Currently, the fee only applies to the average net asset value of each
Fund in excess of the net asset value of each Fund as calculated on April 30,
1998. MFS has agreed to bear, subject to reimbursement, expenses such that the
"Other Expenses" of the MFS Bond Series, the MFS Money Market Series and all
other Series do not exceed, on an annualized basis, 0.40%, 0.10% and 0.25%
respectively of the average daily net assets. This offset arrangement does not,
however, apply to the MFS Emerging Growth Series and MFS Research Series. Absent
such fee waivers and reimbursements, "Other Expenses" and "Total Annual Fund
Expenses" incurred for fiscal year 1997 were: MFS World Governments Series 0.40%
and 1.15%; MFS Money Market Series 0.86% and 1.36%; MFS Bond Series 2.98% and
3.58%; MFS Total Return Series 0.27% and 1.02%, respectively. The Investment
Advisor for the Fidelity VIP II Index 500 Portfolio voluntarily agreed to
reimburse a portion of the funds operating expenses during the period. Absent
this reimbursement, the "Management Fees," "Other Expenses" and "Total Annual
Fund Expenses" incurred for fiscal year 1997 would have been 0.27%, 0.13% and
0.40%, respectively. There can be no assurance that the fee waivers and
reimbursements reflected in the table will continue at their reflected levels.
For a more complete description of the various costs and expenses see "Charges
and Deductions" and the prospectuses for the Funds.
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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 $88 $121 $154 $264
CitiSelect VIP Folio 300 $88 $121 $154 $264
CitiSelect VIP Folio 400 $91 $130 $169 $295
CitiSelect VIP Folio 500 $91 $130 $169 $295
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) $88 $121 $154 $264
Fidelity VIP Growth Portfolio $86 $113 $141 $236
Fidelity VIP High Income
Portfolio $86 $114 $142 $238
Fidelity VIP Equity Income
Portfolio $84 $110 $135 $224
Fidelity VIP Overseas Portfolio $88 $120 $152 $261
Fidelity VIP II Contrafund
Portfolio $86 $114 $142 $238
Fidelity VIP II Index 500
Portfolio $82 $101 $120 $191
AIM V.I. Capital Appreciation Fund $85 $113 $140 $235
AIM V.I. Government Securities
Fund $89 $122 $157 $269
AIM V.I. Growth Fund $85 $110 $136 $226
AIM V.I. International Equity
Fund $89 $122 $157 $269
AIM V.I. Value Fund $89 $122 $157 $269
AIM V.I. Growth and Income Fund $88 $120 $152 $261
MFS World Governments Series $89 $122 $157 $269
MFS Money Market Series $85 $110 $136 $226
MFS Bond Series $89 $122 $157 $269
MFS Total Return Series $89 $122 $157 $269
MFS Research Series $88 $120 $152 $261
MFS Emerging Growth Series $88 $119 $151 $258
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<PAGE>
2. If the Contract is annuitized under an annuity option providing either
a life annuity or a life annuity with a period certain of at least five years at
the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 200 $23 $ 72 $123 $264
CitiSelect VIP Folio 300 $23 $ 72 $123 $264
CitiSelect VIP Folio 400 $26 $ 81 $139 $295
CitiSelect VIP Folio 500 $26 $ 81 $139 $295
CitiSelect Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) $23 $ 72 $123 $264
Fidelity VIP Growth Portfolio $21 $ 64 $110 $236
Fidelity VIP High Income
Portfolio $21 $ 64 $111 $238
Fidelity VIP Equity Income
Portfolio $20 $ 60 $104 $224
Fidelity VIP Overseas Portfolio $23 $ 71 $122 $261
Fidelity VIP II Contrafund
Portfolio $21 $ 64 $111 $238
Fidelity VIP II Index 500
Portfolio $16 $ 51 $ 88 $191
AIM V.I. Capital Appreciation Fund $21 $ 64 $109 $235
AIM V.I. Government Securities
Fund $24 $ 74 $126 $269
AIM V.I. Growth Fund $20 $ 61 $105 $226
AIM V.I. International Equity
Fund $24 $ 74 $126 $269
AIM V.I. Value Fund $24 $ 74 $126 $269
AIM V.I. Growth and Income Fund $23 $ 71 $122 $261
MFS World Governments Series $24 $ 74 $126 $269
MFS Money Market Series $20 $ 61 $105 $226
MFS Bond Series $24 $ 74 $126 $269
MFS Total Return Series $24 $ 74 $126 $269
MFS Research Series $23 $ 71 $122 $261
MFS Emerging Growth Series $23 $ 70 $121 $258
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<PAGE>
3. If the Contract is not surrendered or annuitized at the end of the
applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 200 $23 $ 72 $123 $264
CitiSelect VIP Folio 300 $23 $ 72 $123 $264
CitiSelect VIP Folio 400 $26 $ 81 $139 $295
CitiSelect VIP Folio 500 $26 $ 81 $139 $295
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) $23 $ 72 $123 $264
Fidelity VIP Growth Portfolio $21 $ 64 $110 $236
Fidelity VIP High Income
Portfolio $21 $ 64 $111 $238
Fidelity VIP Equity Income
Portfolio $20 $ 60 $104 $224
Fidelity VIP Overseas Portfolio $23 $ 71 $122 $261
Fidelity VIP II Contrafund
Portfolio $21 $ 64 $111 $238
Fidelity VIP II Index 500
Portfolio $16 $ 51 $ 88 $191
AIM V.I. Capital Appreciation Fund $21 $ 64 $109 $235
AIM V.I. Government Securities
Fund $24 $ 74 $126 $269
AIM V.I. Growth Fund $20 $ 61 $105 $226
AIM V.I. International Equity
Fund $24 $ 74 $126 $269
AIM V.I. Value Fund $24 $ 74 $126 $269
AIM V.I. Growth and Income Fund $23 $ 71 $122 $261
MFS World Governments Series $24 $ 74 $126 $269
MFS Money Market Series $20 $ 61 $105 $226
MFS Bond Series $24 $ 74 $126 $269
MFS Total Return Series $24 $ 74 $126 $269
MFS Research Series $23 $ 71 $122 $261
MFS Emerging Growth Series $23 $ 70 $121 $258
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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<PAGE>
SUMMARY
UNLIKE BANK ACCOUNTS, CONTRACT VALUE IS NOT INSURED. INVESTMENT OF
CONTRACT VALUE INVOLVES CERTAIN RISKS INCLUDING LOSS OF PURCHASE PAYMENTS
(PRINCIPAL). CONTRACT VALUE IS NOT DEPOSITED IN OR GUARANTEED BY ANY BANK AND IS
NOT GUARANTEED BY ANY GOVERNMENT AGENCY.
The Contract
Issuance of a Contract. Contracts may be issued in connection with
retirement plans that may or may not qualify for special federal tax treatment
under the Code. The maximum age for Owners on the Contract date is 90. (See
"Issuance of a Contract.")
Free-Look Period. You have the right to return the Contract within 10 days
(or longer in certain states) after you receive it. We will consider the
Contract received five days after it is mailed to your last known address. The
returned Contract will become void. We will return to you an amount equal to the
Contract Value on the date the Contract is received 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. Qualified Contracts may require
an earlier Annuity Income Date. (See "Federal Tax Matters.")
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 Taxes
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 Matters."
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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.
Accumulation Unit Value
---------------------------------------------------
Subaccount Commencement Year Ending Year Ending Year Ending
Date* (12/31/95) (12/31/96) (12/31/97)
- --------------------------------------------------------------------------------
CitiSelect VIP Folio 200 1.00 -- -- 1.06
CitiSelect VIP Folio 300 1.00 -- -- 1.07
CitiSelect VIP Folio 400 1.00 -- -- 1.08
CitiSelect VIP Folio 500 1.00 -- -- 1.09
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) 1.00 -- -- 1.11
Fidelity VIP Growth Portfolio 1.00 1.31 1.48 1.80
Fidelity VIP High Income
Portfolio 1.00 -- -- 1.14
Fidelity VIP Equity Income
Portfolio 1.00 -- -- 1.22
Fidelity VIP Overseas
Portfolio 1.00 -- -- 1.09
Fidelity VIP II Contrafund
Portfolio 1.00 -- -- 1.21
Fidelity VIP II Index 500
Portfolio 1.00 -- -- 1.24
AIM V.I. Capital Appreciation
Fund 1.00 1.00 1.49 1.67
AIM V.I. Government Securities
Fund 1.00 -- -- 1.06
AIM V.I. Growth Fund 1.00 -- -- 1.21
AIM V.I. International Equity
Fund 1.00 -- -- 1.05
AIM V.I. Value Fund 1.00 -- -- 1.19
AIM V.I. Growth and Income
Fund 1.00 -- -- 1.18
MFS World Governments Series 1.00 1.00 1.12 1.10
MFS Money Market Series 1.00 1.00 1.06 1.09
MFS Bond Series 1.00 -- -- 1.08
MFS Total Return Series 1.00 -- -- 1.16
MFS Research Series 1.00 -- -- 1.15
MFS Emerging Growth Series 1.00 -- -- 1.17
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Number of Accumulation Units Outstanding
----------------------------------------
Year Ending Year Ending Year Ending
Subaccount (12/31/95) (12/31/96) (12/31/97)
- -------------------------------------------------------------------------------
CitiSelect VIP Folio 200 -- -- 2,283,189
CitiSelect VIP Folio 300 -- -- 3,338,546
CitiSelect VIP Folio 400 -- -- 2,863,311
CitiSelect VIP Folio 500 -- -- 1,046,036
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund) -- -- 150,143
Fidelity VIP Growth Portfolio 4,565 98,550 725,424
Fidelity VIP High Income Portfolio -- -- 819,371
Fidelity VIP Equity Income Portfolio -- -- 2,265,460
Fidelity VIP Overseas Portfolio -- -- 1,070,184
Fidelity VIP II Contrafund Portfolio -- -- 1,585,128
Fidelity VIP II Index 500 Portfolio -- -- 2,215,225
AIM V.I. Capital Appreciation Fund 0 77,611 1,293,126
AIM V.I. Government Securities Fund -- -- 573,525
AIM V.I. Growth Fund -- -- 315,240
AIM V.I. International Equity Fund -- -- 2,357,251
AIM V.I. Value Fund -- -- 2,102,285
AIM V.I. Growth and Income Fund -- -- 827,506
MFS World Governments Series 0 65,848 303,642
MFS Money Market Series 0 47,376 3,362,150
MFS Bond Series -- -- 861,145
MFS Total Return Series -- -- 1,592,342
MFS Research Series -- -- 2,569,829
MFS Emerging Growth Series -- -- 2,322,481
* 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.
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THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
Citicorp Life Insurance Company
Citicorp Life Insurance Company (formerly Family Guardian Life Insurance
Company) is a stock life insurance company organized under the laws of the State
of Arizona in 1971. Citicorp Life Insurance Company is a wholly owned subsidiary
of Citibank Delaware which is a wholly owned subsidiary of Citicorp Holdings
Inc., which in turn, is a wholly owned subsidiary of Citicorp, one of the
world's largest bank holding companies. Citicorp Life and its former parent
corporation, Citicorp Mortgage, Inc., a Delaware holding company, were both
acquired by Citicorp in 1973. During 1990, the ownership of Citicorp Life was
transferred to Citibank Delaware.
Pursuant to the 1973 approval by the Board of Governors of the Federal
Reserve System (FRB), Citicorp Life initially limited its activities to the
reinsurance of credit life and disability insurance sold in connection with
extensions of credit by Citicorp. Additional Federal approvals were received in
1976 and 1980, authorizing Citicorp Life to underwrite group and individual term
life and disability insurance directly related to extensions of credit by the
domestic Citicorp holding company system. Subsequent Delaware and Federal law
changes in 1989 and 1991, respectively, now enable Citicorp Life to underwrite
and issue insurance coverages and annuities which are independent of any
extension of credit.
As of December 31, 1997, Citicorp Life Insurance Company had statutory
assets of $590,449,772. 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.
Like all financial services providers, Citicorp Life utilizes computer
systems that may be affected by Year 2000 transition issues, and relies on
service providers, including the Funds, that also may be affected. We have
developed, and are in the process of implementing, a Year 2000 transition plan.
In addition, we are in the process of confirming that the Funds and other
service providers are also engaged in similar transition plans. The resources
that are being devoted to this effort are substantial. It is difficult to
predict with precision whether the amount of resources ultimately devoted, or
the outcome of these efforts, will have any negative impact on our operations.
However, as of the date of this Prospectus, it is not anticipated that you will
experience negative effects on your investment, or on the services provided in
connection therewith, as a result of Year 2000 transition implementation. We
currently anticipate that our systems will be Year 2000 compliant on or about
January 1, 1999, but there can be no assurance that we will be successful, or
that the interaction with other service providers will not impair services at
that time.
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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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. The investment objectives and policies of certain portfolios are
similar to the investment objectives and policies of other portfolios that may
be managed by the same investment adviser or manager. The investment results of
the portfolios, however, may be higher or lower than the results of such other
portfolios. There can be no assurance, and no representation is made, that the
investment results of any of the portfolios will be comparable to the investment
results of any other portfolio, even if the other portfolio has the same
investment adviser or manager. 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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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
capitalizations below the top 1,000 stocks of the equity market. Under normal
circumstances, at least 65% of the fund's total assets will be invested in such
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<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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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,
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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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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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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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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
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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
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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
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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;
2. The Death Benefit on your 75th birthday, less the dollar amount of
any subsequent withdrawals; 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 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. Qualified Contracts may require an earlier
Annuity Income Date. (See "Federal Tax Matters.")
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 at our sole discretion 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%. We have no specific formula for determining the
Initial Fixed Account Interest Rate or the Current Fixed Account Interest Rate.
The Fixed Account Value will not share in the investment performance of our
General Account or any portion thereof.
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. We may use any mortality and expense risk
profits to finance contract distribution 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. When a subaccount 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 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 the subaccounts. Non-standard
performance data will only be disclosed if standard performance data for the
required periods is also disclosed.
In addition, we may present historic performance data for the portfolios
since their inception reduced by some or all of the fees and charges under the
Contract. Such adjusted historic performance includes data that precedes the
inception date of the subaccounts. This data is designed to show the performance
that would have resulted if the Contract had been in existence during that time.
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), 408 or 408A 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. Legislation has been proposed in 1998 that,
if enacted, would adversely modify the federal taxation of certain insurance and
annuity contracts. For example, one proposal would tax transfers among
investment options and tax exchanges involving variable contracts. A second
proposal would reduce the "investment in the contract" under cash value life
insurance and certain annuity contracts by certain amounts, thereby increasing
the amount of income for purposes of computing gain. Although the likelihood of
there being any changes is uncertain, there is always the possibility that the
tax treatment of the Contracts could change by legislation or other means.
Moreover, it is also possible that any change could be retroactive (that is,
effective prior to the date of the change). You should consult a tax adviser
with respect to legislative developments and their effect on the Contract.
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
Distribitions from Contracts generally are subject to withholding for the
Owner's federal income tax liability. The withholding rate varies according to
the type of distributions and the Owner's tax satus. The Owner will be provided
the opportunity to elect not to have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a) plans and section
403(b) tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
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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; 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
61
<PAGE>
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.
Simplified Employee Pension (SEP) IRAs. Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In addition to all of the general
Code rules governing IRAs, such plans are subject to certain Code requirements
regarding participation and amounts of contributions.
Roth IRAs. Effective January 1, 1998, section 408A of the Code permits
certain eligible individuals to contribute to a Roth IRA. Contributions to a
Roth IRA, which are subject to certain limitations, are not deductible and must
be made in cash or as a rollover or transfer from another Roth IRA or other IRA.
A rollover from or conversion of an IRA to a Roth IRA may be subject to tax and
other special rules may apply. You should consult a tax adviser before combining
any converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA.
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.
For qualified plans under Section 403(b), the Code requires that
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the Owner's death.
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.
62
<PAGE>
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
63
<PAGE>
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.
64
<PAGE>
COMPANY HOLIDAYS
We are closed on the following holidays: New Years Day, Civil Rights Day
(Martin Luther King Day), President's Day, Memorial Day, Independence Day, Labor
Day, 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
Subaccount Performance Data
Adjusted Historic Portfolio Performance Data
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 ("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:
Subaccount Performance Data
From time to time we may quote average annual total returns and cumulative
total returns for subaccounts from their inception 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 statement of additional
information but will deduct the Guaranteed Minimum Income Benefit Charge of
0.50% on an annual basis as if the charge had been in effect since the
subaccounts' inception. 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 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 will be deducted at a rate of 0.84% of
Separate Account assets on an annual basis. This data is not an indication of
future performance of the subaccounts.
Based on the method of calculation described in the accompanying statement
of additional information 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 were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount
Average Annual Total Return Table
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the
Subaccount one-year period
(date of inception of subaccount) period from
ending inception to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect(R) VIP Folio 400 (2/03/97) 0.70% 0.70%
CitiSelect(R) VIP Folio 500 (2/03/97) 1.73% 1.73%
CitiFunds(SM)Small Cap Growth
VIP Portfolio (2/03/97)
(formerly Landmark Small Cap Equity VIP Fund) 3.79% 3.79%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 4.41% 16.95%
Growth Fund (2/03/97) 14.15% 14.15%
International Equity Fund (2/03/97) -2.39% -2.39%
Value Fund (2/03/97) 12.07% 12.07%
Growth and Income Fund (2/03/97) 11.03% 11.03%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 13.30% 20.00%
Equity Income Portfolio (2/03/97) 15.19% 15.19%
Overseas Fund (2/03/97) 1.73% 1.73%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 14.15% 14.15%
Index 500 Portfolio (2/03/97) 17.27% 17.27%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (2/03/97) 7.92% 7.92%
Emerging Growth Series (2/03/97) 9.99% 9.99%
- --------------------------------------------------------------------------------
1
<PAGE>
Based on the method of calculation described in the accompanying statement
of additional information 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 were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount
Cumulative Total Return Table
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the
Subaccount one-year period
(date of inception of subaccount) period from
ending inception to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 400 (2/03/97) 0.70% 0.70%
CitiSelect VIP Folio 500 (2/03/97) 1.73% 1.73%
CitiFunds Small Cap Growth VIP Portfolio (2/03/97)
(formerly Landmark Small Cap Equity VIP Fund) 3.79% 3.79%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 4.41% 56.51%
Growth Fund (2/03/97) 14.15% 14.15%
International Equity Fund (2/03/97) -2.39% -2.39%
Value Fund (2/03/97) 12.07% 12.07%
Growth and Income Fund (2/03/97) 11.03% 11.03%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 13.30% 68.46%
Equity Income Portfolio (2/03/97) 15.19% 15.19%
Overseas Fund (2/03/97) 1.73% 1.73%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 14.15% 14.15%
Index 500 Portfolio (2/03/97) 17.27% 17.27%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (2/03/97) 7.92% 7.92%
Emerging Growth Series (2/03/97) 9.99% 9.99%
- --------------------------------------------------------------------------------
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 subaccounts' Non-Standardized Average Annual Total
Returns and Non-Standardized Cumulative Total Returns described in the
accompanying statement of additional information except that the Guaranteed
Minimum Income Benefit Charge will also be deducted as if the charge had been in
effect since the subaccounts' inception.
2
<PAGE>
Based on the method of calculation described in the accompanying statement
of additional information 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 were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount Non-Standardized
Average Annual Total Return Table
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the
Subaccount one-year period
(date of inception of subaccount) period from
ending inception to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 400 (2/03/97) 8.31% 8.31%
CitiSelect VIP Folio 500 (2/03/97) 9.42% 9.42%
CitiFunds Small Cap Growth VIP Portfolio (2/03/97)
(formerly Landmark Small Cap Equity VIP Fund) 11.63% 11.63%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 11.52% 18.96%
Growth Fund (2/03/97) 22.77% 22.77%
International Equity Fund (2/03/97) 5.00% 5.00%
Value Fund (2/03/97) 20.54% 20.54%
Growth and Income Fund (2/03/97) 19.42% 19.42%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 21.01% 22.06%
Equity Income Portfolio (2/03/97) 23.89% 23.89%
Overseas Fund (2/03/97) 9.42% 9.42%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 22.77% 22.77%
Index 500 Portfolio (2/03/97) 26.13% 26.13%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (2/03/97) 16.08% 16.08%
Emerging Growth Series (2/03/97) 18.31% 18.31%
- --------------------------------------------------------------------------------
3
<PAGE>
Based on the method of calculation described in the accompanying statement
of additional information 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 were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Subaccount Non-Standardized
Cumulative Total Return Table
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option For the For the
Subaccount one-year period
(date of inception of subaccount) period from
ending inception to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 400 (2/03/97) 8.31% 8.31%
CitiSelect VIP Folio 500 (2/03/97) 9.42% 9.42%
CitiFunds Small Cap Growth VIP Portfolio (2/03/97)
(formerly Landmark Small Cap Equity VIP Fund) 11.63% 11.63%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 11.52% 64.33%
Growth Fund (2/03/97) 22.77% 22.77%
International Equity Fund (2/03/97) 5.00% 5.00%
Value Fund (2/03/97) 22.54% 20.54%
Growth and Income Fund (2/03/97) 19.42% 19.42%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 21.01% 76.86%
Equity Income Portfolio (2/03/97) 23.89% 23.89%
Overseas Fund (2/03/97) 9.42% 9.42%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 22.77% 22.77%
Index 500 Portfolio (2/03/97) 26.13% 26.13%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (2/03/97) 16.08% 22.77%
Emerging Growth Series (2/03/97) 18.31% 26.13%
- --------------------------------------------------------------------------------
Adjusted Historic Portfolio Performance Data
The charts below show adjusted historic performance data for the
portfolios, including for periods prior to the inception of the subaccounts,
reduced by some or all of the fees and charges under the Contract. 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 statement of additional information, except that the Guaranteed
Minimum Income Benefit Charge will also be deducted. Non-standard performance
data will be disclosed only if standard performance data for the required
periods is also disclosed.
4
<PAGE>
For purposes of calculating the average annual total returns and
cumulative total returns of the portfolios, we have deducted a daily mortality
and expense risk charge equal to 1.25% of annual assets (except that beginning
on March 2, 1998, we deduct the new daily mortality and expense risk charge of
0.84% of annual assets), the $30 annual contract fee, the applicable surrender
charge, and the Guaranteed Minimum Income Benefit Charge of 0.50% on an annual
basis.
Based on the method of calculation described in the accompanying statement
of additional information and the election of the Guaranteed Minimum Income
Benefit option, the Adjusted Historic Average Annual Total Returns for the
portfolios available under the option for the period ending December 31, 1997
were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Adjusted Portfolio
Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the
Guaranteed Minimum Income Benefit For the For the For the period
Option Portfolio one-year 5-year 10-year from
(date of inception of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 400 (11/25/96) 0.70% N/A N/A 0.70%
CitiSelect VIP Folio 500 (11/25/96) 1.72% N/A N/A 1.72%
CitiFunds Small Cap Growth VIP
Portfolio (11/25/96)
(formerly Landmark Small Cap
Equity VIP Fund) 3.79% N/A N/A 3.79%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 4.28% N/A N/A 15.07%
Growth Fund (5/05/93) 16.55% N/A N/A 14.79%
International Equity Fund (5/05/93) -1.77% N/A N/A 9.75%
Value Fund (5/05/93) 13.63% N/A N/A 16.53%
Growth and Income Fund (5/02/94) 15.49% N/A N/A 18.58%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 13.47% 15.46% 14.65% 13.13%
Equity Income Portfolio (10/9/86) 17.72% 17.55% 14.21% 12.17%
Overseas Fund (1/28/87) 2.49% 11.63% 7.39% 6.03%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS
FUND II
Contrafund Portfolio (1/03/95) 14.05% N/A N/A 25.03%
Index 500 Portfolio (8/27/92) 22.02% 17.26% N/A 17.43%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 10.46% N/A N/A 17.58%
Emerging Growth Series (7/24/95) 11.97% N/A N/A 18.64%
- --------------------------------------------------------------------------------
5
<PAGE>
Based on the method of calculation described in the accompanying statement
of additional information and the election of the Guaranteed Minimum Income
Benefit option, the Cumulative Total Returns for the portfolios available under
the option for the period ending December 31, 1997 were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Adjusted Portfolio
Cumulative Annual Total Return Table
- --------------------------------------------------------------------------------
For the
Guaranteed Minimum Income Benefit For the For the For the period
Option Portfolio one-year 5-year 10-year from
(date of inception of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS %
CitiSelect VIP Folio 400 (11/25/96) 0.70% N/A N/A 0.70%
CitiSelect VIP Folio 500 (11/25/96) 1.72% N/A N/A 1.72%
CitiFunds Small Cap Growth VIP
Portfolio (11/25/96)
(formerly Landmark Small Cap
Equity VIP Fund) 3.79% N/A N/A 3.79%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 4.28% N/A N/A 92.36%
Growth Fund (5/05/93) 16.55% N/A N/A 90.15%
International Equity Fund (5/05/93) -1.77% N/A N/A 54.29%
Value Fund (5/05/93) 13.63% N/A N/A 103.96%
Growth and Income Fund (5/02/94) 15.49% N/A N/A 86.84%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE P
RODUCTS FUND
Growth Portfolio (10/9/86) 13.47% 105.24% 292.73% 299.98%
Equity Income Portfolio (10/9/86) 17.72% 124.51% 277.96% 263.47%
Overseas Fund (1/28/87) 2.49% 73.42% 104.04% 89.60%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 14.05% N/A N/A 95.22%
Index 500 Portfolio (8/27/92) 22.02% 121.83% N/A 136.17%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 10.46% N/A N/A 48.36%
Emerging Growth Series (7/24/95) 11.97% N/A N/A 51.78%
- --------------------------------------------------------------------------------
From time to time we may also quote adjusted historic average annual total
returns and cumulative total returns for the portfolios that reflect the
election of the Guaranteed Minimum Income Benefit option and do not deduct 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 statement of additional information, except that the Guaranteed
Minimum Income Benefit Charge will also be deducted.
6
<PAGE>
Based on the method of calculation described in the accompanying statement
of additional information and the election of the Guaranteed Minimum Income
Benefit option, the adjusted Non-Standardized Average Annual Total Returns for
the portfolios under the option for the period ending December 31, 1997 were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Adjusted Portfolio
Average Annual Total Return Table
Without Deduction of Surrender Charges and Annual Contract Fee
- --------------------------------------------------------------------------------
For the
Guaranteed Minimum Income Benefit For the For the For the period
Option Portfolio one-year 5-year 10-year from
(date of inception of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS %
CitiSelect VIP Folio 400 (11/25/96) 8.31% N/A N/A 8.31%
CitiSelect VIP Folio 500 (11/25/96) 9.42% N/A N/A 9.42%
CitiFunds Small Cap Growth VIP
Portfolio (11/25/96)
(formerly Landmark Small Cap
Equity VIP Fund) 11.63% N/A N/A 11.63%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 11.36% N/A N/A 15.85%
Growth Fund (5/05/93) 24.47% N/A N/A 15.56%
International Equity Fund (5/05/93) 4.91% N/A N/A 10.51%
Value Fund (5/05/93) 21.35% N/A N/A 17.31%
Growth and Income Fund (5/02/94) 23.34% N/A N/A 19.87%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86)
Equity Income Portfolio (10/9/86) 21.14% 15.71% 14.72% 13.21%
Overseas Fund (1/28/87) 25.68% 17.82% 14.29% 12.25%
9.45% 11.93% 7.49% 6.12%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 21.79% N/A N/A 27.08%
Index 500 Portfolio (8/27/92) 30.30% 17.57% N/A 17.53%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 17.98% N/A N/A 19.94%
Emerging Growth Series (7/24/95) 19.60% N/A N/A 21.02%
- --------------------------------------------------------------------------------
7
<PAGE>
Based on the method of calculation described in the accompanying statement
of additional information and the election of the Guaranteed Minimum Income
Benefit option, the adjusted Non-Standardized Cumulative Total Returns for the
portfolios under the option for the period ending December 31, 1997 were:
- --------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Option
Adjusted Portfolio
Cumulative Total Return Table
Without Deduction of Surrender Charges and Annual Contract Fee
- --------------------------------------------------------------------------------
For the
Guaranteed Minimum Income Benefit For the For the For the period
Option Portfolio one-year 5-year 10-year from
(date of inception of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS %
CitiSelect VIP Folio 400 (11/25/96) 8.31% N/A N/A 8.31%
CitiSelect VIP Folio 500 (11/25/96) 9.42% N/A N/A 9.42%
CitiFunds Small Cap Growth VIP
Portfolio (11/25/96)
(formerly Landmark Small Cap
Equity VIP Fund) 11.63% N/A N/A 11.63%
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 11.36% N/A N/A 98.51%
Growth Fund (5/05/93) 24.47% N/A N/A 96.23%
International Equity Fund (5/05/93) 4.91% N/A N/A 59.29%
Value Fund (5/05/93) 21.35% N/A N/A 110.47%
Growth and Income Fund (5/02/94) 23.34% N/A N/A 94.45%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86)
Equity Income Portfolio (10/9/86) 21.14% 107.54% 295.35% 303.07%
Overseas Fund (1/28/87) 25.68% 127.10% 280.67% 266.37%
9.45% 75.72% 105.99% 91.51%
- --------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 21.79% N/A N/A 104.95%
Index 500 Portfolio (8/27/92) 30.30% 124.73% N/A 137.20%
- --------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST
Research Series (7/26/95) 17.98% N/A N/A 55.73%
Emerging Growth Series (7/24/95) 19.60% N/A N/A 59.30%
- --------------------------------------------------------------------------------
8
<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
3
<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
Subaccount Performance Data
Adjusted Historic Portfolio Performance Data
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, as well as income other than investment income)
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, as well as income
other than investment income) 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, as well as income
other than investment income) 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 - 3.14%
Effective Yield - 3.19%
7
<PAGE>
The current and effective yields on amounts held in this subaccount
normally fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the MFS Money Market Series, the types and quality of portfolio securities
held by the MFS Money Market Series and the MFS Money Market Series' operating
expenses. Yields on amounts held in the Money Market Subaccount may also be
presented for periods other than a seven-day period.
Yield calculations do not take into account the surrender charge under the
Contract equal to a maximum of 7% of the amount of purchase payments withdrawn
for certain withdrawals. During each Contract Year, up to 10% of all purchase
payments, less any prior withdrawal of purchase payments, may be withdrawn
without the imposition of a surrender charge.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the
current annualized yield of the Bond Subaccount for a Contract for 30-day or
one-month periods. The annualized yield generated by the Bond Subaccount refers
to income generated by the subaccount during a 30-day or one-month period and is
assumed to be generated each 30-day or one month period over a 12-month period.
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:
8
<PAGE>
NI = net income of the portfolio for the 30-day or one-month period
attributable to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the
30-day or one-month period.
Based on the method of calculation described above, for the thirty-day
period ending December 31, 1997, the yield for the Bond Subaccount was:
Yield = 8.40%
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 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
9
<PAGE>
practicable, considering the type of the communication and the media through
which it is communicated.
Average annual total returns are calculated using subaccount unit values
which we calculate on each Valuation Day based on the performance of the
subaccount's underlying portfolio, the deductions for the mortality and expense
risk charge, the deductions for the asset-based administration charge and the
Annual Contract Fee. The calculation assumes that the contract fee is $30 per
year per Contract deducted at the end of each Contract Year for Contracts with
less than $25,000 of Contract Value. For purposes of calculating average annual
total return, an average per-dollar per-day contract fee attributable to the
hypothetical account for the period is used. The calculation also assumes
surrender of the Contract at the end of the period for the return quotation.
Total returns will therefore reflect a deduction of the surrender charge for any
period less than five years since the date of the purchase payment being
withdrawn. The total return is calculated according to the following formula:
TR = ((ERV/P)(1/N)) - 1
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>
Subaccount Performance Data
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 period
one-year from inception
period ending to
Subaccount (date of inception of subaccount) 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect(R) VIP Folio 200 (2/03/97) -0.86% -0.86%
CitiSelect(R) VIP Folio 300 (2/03/97) 0.17% 0.17%
CitiSelect(R) VIP Folio 400 (2/03/97) 1.20% 1.20%
CitiSelect(R) VIP Folio 500 (2/03/97) 2.24% 2.24%
CitiFunds(SM) Small Cap Growth VIP 4.31% 4.31%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 4.94% 17.62%
Government Securities Fund (2/03/97) -0.86% -0.86%
Growth Fund (2/03/97) 14.72% 14.72%
International Equity Fund (2/03/97) -1.89% -1.89%
Value Fund (2/03/97) 12.63% 12.63%
Growth and Income Fund (2/03/97) 11.59% 11.59%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 13.88% 20.74%
High Income Portfolio (2/03/97) 7.42% 7.42%
Equity Income Portfolio (2/03/97) 15.77% 15.77%
Overseas Fund (2/03/97) 2.24% 2.24%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 14.72% 14.72%
Index 500 Portfolio (2/03/97) 17.87% 17.87%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -8.07% 1.62%
Money Market Series (2/21/95)* -3.76% 1.30%
Bond Series (2/03/97) 1.20% 1.20%
Total Return Series (2/03/97) 9.50% 9.50%
Research Series (2/03/97) 8.46% 8.46%
Emerging Growth Series (2/03/97) 10.55% 10.55%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
11
<PAGE>
We may disclose cumulative total returns in conjunction with the standard
formats described above. The cumulative total returns will be calculated using
the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of subaccount recurring charges
for the period.
ERV = The ending redeemable value of the hypothetical investment at
the end of the period.
P = A hypothetical single payment of $1,000.
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 period
one-year from inception
period ending to
Subaccount (date of inception of subaccount) 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (2/03/97) -0.86% -0.86%
CitiSelect VIP Folio 300 (2/03/97) 0.17% 0.17%
CitiSelect VIP Folio 400 (2/03/97) 1.20% 1.20%
CitiSelect VIP Folio 500 (2/03/97) 2.24% 2.24%
CitiFunds Small Cap Growth VIP 4.31% 4.31%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 4.94% 59.06%
Government Securities Fund (2/03/97) -0.86% -0.86%
Growth Fund (2/03/97) 14.72% 14.72%
International Equity Fund (2/03/97) -1.89% -1.89%
Value Fund (2/03/97) 12.63% 12.63%
Growth and Income Fund (2/03/97) 11.59% 11.59%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 13.88% 71.45%
High Income Portfolio (2/03/97) 7.42% 7.42%
Equity Income Portfolio (2/03/97) 15.77% 15.77%
Overseas Fund (2/03/97) 2.24% 2.24%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 14.72% 14.72%
Index 500 Portfolio (2/03/97) 17.87% 17.87%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -8.07% 4.71%
Money Market Series (2/21/95)* -3.76% 3.75%
Bond Series (2/03/97) 1.20% 1.20%
Total Return Series (2/03/97) 9.50% 9.50%
Research Series (2/03/97) 8.46% 8.46%
Emerging Growth Series (2/03/97) 10.55% 10.55%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
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 period
one-year from inception
period ending to
Subaccount (date of inception of subaccount) 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (2/03/97) 6.64% 6.64%
CitiSelect VIP Folio 300 (2/03/97) 7.75% 7.75%
CitiSelect VIP Folio 400 (2/03/97) 8.86% 8.86%
CitiSelect VIP Folio 500 (2/03/97) 9.97% 9.97%
CitiFunds Small Cap Growth VIP 12.20% 12.20%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 12.08% 19.64%
Government Securities Fund (2/03/97) 6.64% 6.64%
Growth Fund (2/03/97) 23.39% 23.39%
International Equity Fund (2/03/97) 5.53% 5.53%
Value Fund (2/03/97) 21.15% 21.15%
Growth and Income Fund (2/03/97) 20.02% 20.02%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 21.62% 22.81%
High Income Portfolio (2/03/97) 15.54% 15.54%
Equity Income Portfolio (2/03/97) 24.52% 24.52%
Overseas Fund (2/03/97) 9.97% 9.97%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 23.39% 23.39%
Index 500 Portfolio (2/03/97) 26.77% 26.77%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -1.79% 3.39%
Money Market Series (2/21/95)* 2.83% 3.06%
Bond Series (2/03/97) 8.86% 8.86%
Total Return Series (2/03/97) 17.78% 17.78%
Research Series (2/03/97) 16.66% 16.66%
Emerging Growth Series (2/03/97) 18.90% 18.90%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
15
<PAGE>
- --------------------------------------------------------------------------------
Subaccount Non-Standardized Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the For the period
one-year from inception
period ending to
Subaccount (date of inception of subaccount) 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (2/03/97) 6.64% 6.64%
CitiSelect VIP Folio 300 (2/03/97) 7.75% 7.75%
CitiSelect VIP Folio 400 (2/03/97) 8.86% 8.86%
CitiSelect VIP Folio 500 (2/03/97) 9.97% 9.97%
CitiFunds Small Cap Growth VIP 12.20% 12.20%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 12.08% 67.00%
Government Securities Fund (2/03/97) 6.64% 6.64%
Growth Fund (2/03/97) 23.39% 23.39%
International Equity Fund (2/03/97) 5.53% 5.53%
Value Fund (2/03/97) 21.15% 21.15%
Growth and Income Fund (2/03/97) 20.02% 20.02%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 21.62% 80.00%
High Income Portfolio (2/03/97) 15.54% 15.54%
Equity Income Portfolio (2/03/97) 24.52% 24.52%
Overseas Fund (2/03/97) 9.97% 9.97%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 23.39% 23.39%
Index 500 Portfolio (2/03/97) 26.77% 26.77%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -1.79% 10.00%
Money Market Series (2/21/95)* 2.83% 9.00%
Bond Series (2/03/97) 8.86% 8.86%
Total Return Series (2/03/97) 17.78% 17.78%
Research Series (2/03/97) 16.66% 16.66%
Emerging Growth Series (2/03/97) 18.90% 18.90%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
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.
Adjusted Historic Portfolio Performance Data
The charts below show historic performance data for the portfolios,
including for periods prior to the inception of the subaccounts, reduced by some
or all of the fees and charges under the Contract. Non-standard performance data
will only be disclosed if standard performance data for the required periods is
also disclosed.
For the purposes of calculating the average annual total returns and
cumulative total returns of the portfolios, we have deducted a daily mortality
and expense risk charge equal to 1.25% of annual assets (except that beginning
March 2, 1998, we deduct the new mortality and expense risk charge of 0.84% of
annual assets), the $30 annual contract fee and the applicable surrender charge.
17
<PAGE>
Based on the method of calculation described above, the Adjusted Average
Annual Total Returns for the portfolios for the periods ending December 31, 1997
were:
- --------------------------------------------------------------------------------
Adjusted Portfolio Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the
For the For the For the period
Portfolio (date of inception of one-year 5-year 10-year from
of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) -0.86% N/A N/A -0.86%
CitiSelect VIP Folio 300 (11/25/96) 0.17% N/A N/A 0.17%
CitiSelect VIP Folio 400 (11/25/96) 1.20% N/A N/A 1.20%
CitiSelect VIP Folio 500 (11/25/96) 2.24% N/A N/A 2.24%
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
(11/25/96) 4.31% N/A N/A 4.31%
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund
(5/05/93) 4.80% N/A N/A 15.71%
Government Securities Fund
(5/05/93) -0.18% N/A N/A 3.26%
Growth Fund (5/05/93) 17.14% N/A N/A 15.42%
International Equity Fund
(5/05/93) -1.28% N/A N/A 10.33%
Value Fund (5/05/93) 14.21% N/A N/A 17.18%
Growth and Income Fund (5/02/94) 16.07% N/A N/A 19.23%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 14.05% 16.10% 15.48% 13.97%
High Income Portfolio (9/19/85) 8.67% 12.08% 11.17% 10.82%
Equity Income Portfolio (10/9/86) 18.32% 18.22% 15.02% 12.97%
Overseas Fund (1/28/87) 3.01% 12.24% 8.00% 6.63%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 14.62% N/A N/A 25.72%
Index 500 Portfolio (8/27/92) 22.64% 17.94% N/A 18.12%
MFS VARIABLE INSURANCE TRUST
World Governments Series
(6/14/94) -8.75% N/A N/A 2.27%
Money Market Series (1/03/95)* -3.15% N/A N/A 1.52%
Bond Series (10/24/95) 1.64% N/A N/A 3.16%
Total Return Series (1/03/95) 11.98% N/A N/A 16.83%
Research Series (7/26/95) 11.02% N/A N/A 18.20%
Emerging Growth Series (7/24/95) 12.54% N/A N/A 19.26%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
18
<PAGE>
The Adjusted Cumulative Total Returns for the portfolios for the periods
ending December 31, 1997 were:
- --------------------------------------------------------------------------------
Adjusted Portfolio Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the
For the For the For the period
Portfolio (date of inception of one-year 5-year 10-year from
of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) -0.86% N/A N/A -0.86%
CitiSelect VIP Folio 300 (11/25/96) 0.17% N/A N/A 0.17%
CitiSelect VIP Folio 400 (11/25/96) 1.20% N/A N/A 1.20%
CitiSelect VIP Folio 500 (11/25/96) 2.24% N/A N/A 2.24%
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
(11/25/96) 4.31% N/A N/A 4.31%
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund
(5/05/93) 4.80% N/A N/A 97.38%
Government Securities Fund
(5/05/93) -0.18% N/A N/A 16.11%
Growth Fund (5/05/93) 17.14% N/A N/A 95.09%
International Equity Fund
(5/05/93) -1.28% N/A N/A 58.14%
Value Fund (5/05/93) 14.21% N/A N/A 109.36%
Growth and Income Fund (5/02/94) 16.07% N/A N/A 90.63%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 14.05% 111.05% 322.21% 334.51%
High Income Portfolio (9/19/85) 8.67% 76.89% 188.65% 253.66%
Equity Income Portfolio (10/9/86) 18.32% 131.02% 305.85% 293.46%
Overseas Fund (1/28/87) 3.01% 78.16% 116.09% 101.68%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 14.62% N/A N/A 98.47%
Index 500 Portfolio (8/27/92) 22.64% 128.26% N/A 143.62%
MFS VARIABLE INSURANCE TRUST
World Governments Series
(6/14/94) -8.75% N/A N/A 8.30%
Money Market Series (1/03/95)* -3.15% N/A N/A 4.62%
Bond Series (10/24/95) 1.64% N/A N/A 7.04%
Total Return Series (1/03/95) 11.98% N/A N/A 59.32%
Research Series (7/26/95) 11.02% N/A N/A 50.26%
Emerging Growth Series (7/24/95) 12.54% N/A N/A 53.73%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
19
<PAGE>
From time to time, sales literature or advertisements may also quote
adjusted average annual total returns and cumulative total returns for the
portfolios that do not reflect the surrender charge or the Annual Contract Fee.
These are calculated in exactly the same way as the adjusted portfolio average
annual total returns and cumulative total returns described above, except that
ending value for the period does not take into account any charges on amounts
surrendered or withdrawn or the payment of the annual contract fee.
Based on this method of calculation, the Adjusted Portfolio Average Total
Returns and Cumulative Total Returns without the deduction of surrender charges
and the Annual Contract Fee for the portfolios for the periods ending December
31, 1997 were:
20
<PAGE>
Adjusted Portfolio Average Annual Total Return Table
Without Deduction of Surrender Charges and Annual Contract Fee
- --------------------------------------------------------------------------------
For the
For the For the For the period
Portfolio (date of inception of one-year 5-year 10-year from
of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) 6.64% N/A N/A 6.64%
CitiSelect VIP Folio 300 (11/25/96) 7.75% N/A N/A 7.75%
CitiSelect VIP Folio 400 (11/25/96) 8.86% N/A N/A 8.86%
CitiSelect VIP Folio 500 (11/25/96) 9.97% N/A N/A 9.97%
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
(11/25/96) 12.20% N/A N/A 12.20%
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund
(5/05/93) 11.92% N/A N/A 16.49%
Government Securities Fund
(5/05/93) 6.64% N/A N/A 3.98%
Growth Fund (5/05/93) 25.10% N/A N/A 16.20%
International Equity Fund
(5/05/93) 5.44% N/A N/A 11.09%
Value Fund (5/05/93) 21.96% N/A N/A 17.97%
Growth and Income Fund (5/02/94) 23.96% N/A N/A 20.53%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 21.75% 16.36% 15.55% 14.04%
High Income Portfolio (9/19/85) 16.02% 12.33% 11.24% 10.90%
Equity Income Portfolio (10/9/86) 26.32% 18.49% 15.10% 13.04%
Overseas Fund (1/28/87) 10.00% 12.53% 8.10% 6.72%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 22.41% N/A N/A 27.78%
Index 500 Portfolio (8/27/92) 30.96% 18.24% N/A 18.21%
MFS VARIABLE INSURANCE TRUST
World Governments Series
(6/14/94) -2.51% N/A N/A 3.45%
Money Market Series (1/03/95)* 3.48% N/A N/A 3.21%
Bond Series (10/24/95) 8.60% N/A N/A 5.47%
Total Return Series (1/03/95) 19.60% N/A N/A 18.75%
Research Series (7/26/95) 18.58% N/A N/A 20.57%
Emerging Growth Series (7/24/95) 20.20% N/A N/A 21.65%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
21
<PAGE>
- --------------------------------------------------------------------------------
Adjusted Portfolio Cumulative Total Return Table
Without Deduction of Surrender Charges and Annual Contract Fee
- --------------------------------------------------------------------------------
For the
For the For the For the period
Portfolio (date of inception of one-year 5-year 10-year from
of portfolio) period period period inception
ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/25/96) 6.64% N/A N/A 6.64%
CitiSelect VIP Folio 300 (11/25/96) 7.75% N/A N/A 7.75%
CitiSelect VIP Folio 400 (11/25/96) 8.86% N/A N/A 8.86%
CitiSelect VIP Folio 500 (11/25/96) 9.97% N/A N/A 9.97%
CitiFunds Small Cap Growth VIP
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
(11/25/96) 12.20% N/A N/A 12.20%
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund
(5/05/93) 11.92% N/A N/A 103.67%
Government Securities Fund
(5/05/93) 6.64% N/A N/A 19.95%
Growth Fund (5/05/93) 25.10% N/A N/A 101.32%
International Equity Fund
(5/05/93) 5.44% N/A N/A 63.25%
Value Fund (5/05/93) 21.96% N/A N/A 116.01%
Growth and Income Fund (5/02/94) 23.96% N/A N/A 98.38%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 21.75% 113.40% 324.83% 337.60%
High Income Portfolio (9/19/85) 16.02% 78.90% 190.40% 256.64%
Equity Income Portfolio (10/9/86) 26.32% 133.67% 308.56% 296.37%
Overseas Fund (1/28/87) 10.00% 80.50% 118.04% 103.60%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 22.41% N/A N/A 108.36%
Index 500 Portfolio (8/27/92) 30.96% 131.22% N/A 144.65%
MFS VARIABLE INSURANCE TRUST
World Governments Series
(6/14/94) -2.51% N/A N/A 12.80%
Money Market Series (1/03/95)* 3.48% N/A N/A 9.92%
Bond Series (10/24/95) 8.60% N/A N/A 12.36%
Total Return Series (1/03/95) 19.60% N/A N/A 67.30%
Research Series (7/26/95) 18.58% N/A N/A 57.71%
Emerging Growth Series (7/24/95) 20.20% N/A N/A 61.35%
- --------------------------------------------------------------------------------
* The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
22
<PAGE>
Effect of the Annual Contract Fee on Performance Data
The Contract provides for a $30 Annual Contract Fee to be deducted
annually at the end of each Contract Year from the Accounts based on the
proportion of the Contract Value invested in each such Account. For purposes of
reflecting the contract fee in yield and total return quotations, the annual
charge is converted into a per-dollar per-day charge based on the average
Contract Value of all Contracts on the last day of the period for which
quotations are provided. The per-dollar per-day average charge will then be
adjusted to reflect the basis upon which the particular quotation is calculated.
This fee is waived for Contracts having a Contract Value of at least $25,000 or
if, during the Contract Year, purchase payments of at least $2,500 ($2,000 for
Qualified Contracts), exclusive of the initial purchase payment, are paid.
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable annuity payments which
follows is based on an assumed investment rate of 3.0% per year. The assumed net
investment rate is used merely in order to determine the first monthly payment
per thousand dollars of applied value. This rate does not bear any relationship
to the actual net investment experience of the Separate Account or of any
subaccount.
Amount of Variable Annuity Payments
The amount of the first variable annuity payment is determined by dividing
the Contract Value on the Annuity Income Date by 1,000 and multiplying the
result by the appropriate factor in the annuity tables provided in the Contract.
These tables are based upon the 1983 IAM Tables (promulgated by the Society of
Actuaries). The appropriate factor is based on the annual net investment return
of 3.0%. The amount of each payment will depend on the age of the Annuitant(s)
at the time the first payment is due, and the sex of the Annuitant(s), unless
otherwise required by law.
The dollar amount of the second and subsequent variable annuity payments
will vary and is determined by multiplying the number of subaccount annuity
units by the subaccount annuity unit value as of a date no earlier than the
fifth Valuation Day preceding the date the payment is due. The number of such
units will remain fixed during the annuity period, assuming you or the
Annuitant, if you are deceased, make no exchanges of annuity
23
<PAGE>
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, 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:
24
<PAGE>
(1) is the subaccount's net investment factor on the Valuation Day the
Annuity Unit Value is being calculated; and
(2) is 0.999919 (which is the daily factor that will produce the 3.0%
annual investment rate assumed in the annuity tables), adjusted by
the number of days since the previous Valuation Day.
The following illustration shows, by use of hypothetical example, the
method of determining the annuity unit value.
Illustration of Calculation of Annuity Unit Value
1. Net Investment Factor for period ....................... 1.003662336
2. Adjustment for 3% Assumed Investment Rate .............. 0.999919016
3. 2x1 .................................................... 1.003581055
4. annuity unit value, beginning of valuation period ...... 10.743769
5. annuity unit value, end of valuation period (3x4) ...... 10.782243
LEGAL MATTERS
All matters relating to Arizona law pertaining to the Contracts, including
the validity of the Contracts and our authority to issue the Contracts, have
been passed upon by 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.
25
<PAGE>
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.
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.
26
<PAGE>
CITICORP LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of Citibank Delaware)
Statutory Financial Statements
December 31, 1997, 1996, and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
Independent Auditors' Report
The Board of Directors
Citicorp Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and capital and surplus of Citicorp Life Insurance Company (a
wholly owned subsidiary of Citibank Delaware) as of December 31, 1997 and
1996, and the related statutory statements of operations, capital and
surplus, and cash flow for each of the years in the three-year period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described more fully in note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Arizona, which
practices differ from generally accepted accounting principles. The effect on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles, although not
reasonably determinable, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles,
the financial position of Citicorp Life Insurance Company as of December 31,
1997 and 1996, or the results of its operations or its cash flows for the
years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities, and
capital and surplus of Citicorp Life Insurance Company as of December 31,
1997 and 1996, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1997, on the basis
of accounting as described in note 1.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included
in the accompanying schedule is presented for purposes of additional
analysis, and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG Peat Marwick LLP
April 17, 1998
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets,
Liabilities, and Capital and Surplus
December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Admitted Assets 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cash and investments - other than investments
in insurance affiliates:
Bonds $353,130,836 296,552,241
Mutual funds -- --
Mortgage loans 1,311,377 1,499,111
Cash on hand and on deposit 6,929,415 2,079,352
Short-term investments 58,912,105 161,562,000
Real estate 26,054,375 26,556,748
Options 1,346,215 --
Investments in insurance affiliates 63,998,710 53,657,060
- --------------------------------------------------------------------------------
Total cash and investments 511,683,033 541,906,512
Net deferred and uncollected premiums 1,399,627 1,652,620
Due from reinsurers 17,121,282 19,788,541
Accrued investment income 5,412,349 5,718,087
Other assets 772,162 2,972,118
- --------------------------------------------------------------------------------
Total admitted assets excluding separate
account assets 536,388,453 572,037,878
Separate account assets 54,061,319 8,597,937
- --------------------------------------------------------------------------------
Total admitted assets $590,449,772 580,635,815
- --------------------------------------------------------------------------------
Liabilities and Capital and Surplus
- --------------------------------------------------------------------------------
Liabilities:
Future policy benefit reserves:
Life insurance 6,023,072 6,504,204
Accident and health insurance 1,064,091 1,267,906
Policyholder account balances - annuities 102,080,678 75,883,346
Policy and contract claim reserves:
Life insurance 4,785,221 5,969,586
Accident and health insurance 19,461,833 19,577,316
General expenses due or accrued 67,291 180,250
Federal income taxes due to parent 35,413,211 35,614,548
Asset valuation reserve 14,630,806 14,138,247
Interest maintenance reserve 8,552,176 9,027,467
Other liabilities 1,480,893 1,292,411
- --------------------------------------------------------------------------------
Total liabilities excluding separate
account liabilities 193,559,272 169,455,281
Separate account liabilities 42,799,108 601,103
- --------------------------------------------------------------------------------
Total liabilities 236,358,380 170,056,384
- --------------------------------------------------------------------------------
Commitments and contingencies
Capital and surplus:
Capital stock - $1 par value per share;
5,000,000 shares authorized; 2,500,000 shares
issued and outstanding 2,500,000 2,500,000
Surplus:
Paid-in 3,399,878 3,399,878
Assigned - separate account 11,262,211 7,996,834
Unassigned 336,929,303 396,682,719
- --------------------------------------------------------------------------------
Total capital and surplus 354,091,392 410,579,431
- --------------------------------------------------------------------------------
Total liabilities and capital and surplus $590,449,772 580,635,815
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
2
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations:
Annuities $ 72,200,297 21,559,834 17,404,560
Life insurance 26,439,369 28,870,474 35,711,063
Accident and health insurance 47,455,840 48,512,593 51,595,154
- ------------------------------------------------------------------------------------------------------------
Total premium and annuity considerations 146,095,506 98,942,901 104,710,777
Net investment income (including
dividends from subsidiaries of $20.0,
$74.3, and $5.7 million in 1997, 1996,
and 1995, respectively) 47,212,270 102,762,955 23,484,474
Amortization of interest maintenance reserve 964,031 1,300,049 1,493,637
Commissions and expense allowances on
reinsurance ceded 194,346 256,312 308,635
Net gain from operations in separate accounts 2,775,548 547,873 --
Other 301,918 (12,409) 4,085
- ------------------------------------------------------------------------------------------------------------
Total revenues 197,543,619 203,797,681 130,001,608
- ------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other policy benefits:
Annuities 2,111,772 1,527,015 1,327,395
Life insurance 13,039,222 15,268,489 17,389,922
Accident and health insurance 19,889,996 22,187,628 18,609,868
Surrenders 8,395,452 5,219,710 4,902,176
Change in future policy benefits:
Annuities 26,197,332 17,492,764 13,160,867
Life insurance (481,132) (446,083) (1,245,900)
Accident and health insurance (203,816) (20,674) (8,009)
Other operating costs and expenses:
Commissions 13,994,793 8,829,493 11,117,619
General insurance expenses 13,341,637 15,992,174 18,718,836
Net transfers to separate accounts 38,066,102 589,552 10,282
Other (66,555) 324,674 (5,905)
- ------------------------------------------------------------------------------------------------------------
Total benefits and expenses 134,284,803 86,964,742 83,977,151
- ------------------------------------------------------------------------------------------------------------
Income from operations before federal
income tax expense and net realized
capital gains (losses) 63,258,816 116,832,939 46,024,457
Federal income tax expense 20,097,427 14,240,457 15,481,637
- ------------------------------------------------------------------------------------------------------------
Income from operations before net realized
capital gains (losses) 43,161,389 102,592,482 30,542,820
Net realized capital gains (losses), net of
IMR transfer -- 101,296 (626,923)
- ------------------------------------------------------------------------------------------------------------
Net income $ 43,161,389 102,693,778 29,915,897
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
3
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Capital and Surplus
Years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital and surplus at beginning of year $ 410,579,431 349,380,157 319,456,225
Net income 43,161,389 102,693,778 29,915,897
Net unrealized gain (loss) from
revaluation of investments 1,337,886 (45,000,202) 15,824,719
Change in asset valuation reserve (492,559) 9,386,758 (7,188,498)
Dividends on common stock (100,000,000) -- (16,000,000)
Change in nonadmitted assets 3,914 67,901 (77,147)
Surplus paid in -- 1,500,000 --
Change in unassigned surplus -
separate accounts 489,829 (7,448,961) 7,448,961
Surplus contributed to separate accounts (988,498) -- --
- ----------------------------------------------------------------------------------------
Capital and surplus at end of year $ 354,091,392 410,579,431 349,380,157
- ----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
4
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash from operating activities:
Premiums and annuity considerations $ 146,348,499 99,269,724 105,047,103
Net investment income received 48,922,731 104,780,308 30,896,829
Other income received 277,427 (12,409) 4,085
Allowances and reserve adjustments received
on reinsurance ceded 194,346 256,312 308,635
Life and accident and health claims, and other
benefits paid (44,739,184) (41,824,703) (37,762,652)
Commissions, other expenses, and taxes paid (27,449,387) (25,359,582) (29,416,131)
Federal income taxes paid (20,561,930) (11,210,540) (33,773,867)
Net transfer to separate accounts (39,795,018) (589,552) (10,282)
Net surplus contribution to separate account (988,498) -- --
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 62,208,986 125,309,558 35,293,720
- ------------------------------------------------------------------------------------------------------
Cash from investing activities:
Proceeds from investments sold, matured, or repaid:
Bonds 84,612,461 74,104,424 56,095,825
Stocks -- 1,755,839 10,670
Mortgage loans 187,734 535,983 213,130
Other (120) 772 18,303
Separate account capitalization -- -- (7,000,000)
Cost of investments acquired (long-term only):
Cost of bonds acquired (141,341,381) (94,496,685) (56,547,871)
Cost of stocks acquired - affiliates (9,000,000) (6,500,000) --
Tax on capital gains (losses) -- (626,923) (748,898)
Other (1,349,980) -- --
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (66,891,286) (25,226,590) (7,958,841)
- ------------------------------------------------------------------------------------------------------
Cash from financing activities:
Surplus paid in -- 1,500,000 --
Other cash provided 8,392,371 30,952,803 2,831,771
Dividends paid to stockholder (100,000,000) (16,000,000) (15,000,000)
Change in due from reinsurers 2,667,259 5,001,222 (7,867,886)
Other cash used (4,177,162) (28,458,313) (3,450,732)
- ------------------------------------------------------------------------------------------------------
Net cash used in financing activities (93,117,532) (7,004,288) (23,486,847)
- ------------------------------------------------------------------------------------------------------
Net change in cash on hand and on deposit
and short-term investments (97,799,832) 93,078,680 3,848,032
Cash on hand and on deposit and short-term
investments, beginning of year 163,641,352 70,562,672 66,714,640
- ------------------------------------------------------------------------------------------------------
Cash on hand and on deposit and short-term
investments, end of year $ 65,841,520 163,641,352 70,562,672
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
5
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
(1) Basis of Presentation and Summary of Significant Accounting Policies
Citicorp Life Insurance Company (the Company) is a wholly owned subsidiary
of Citibank Delaware (the Parent), which is a second tier wholly owned
subsidiary of Citicorp. The Company issues and assumes term life
insurance, credit life, credit accident and health, credit involuntary
unemployment, single and flexible premium deferred annuity policies, and
variable deferred annuity policies. The Company also writes and assumes
mortgage disability policies. The Company is licensed to issue insurance
in 47 states and the District of Columbia. The majority of the Company's
business is generated through customers of Citicorp and its subsidiaries.
At December 31, 1997, the Company has two wholly owned insurance company
subsidiaries, First Citicorp Life Insurance Company and Citicorp Assurance
Co. (CAC), both of which are accounted for on the statutory equity method.
On January 1, 1996, the credit involuntary unemployment business which had
been assumed by FG Casualty Company, a wholly owned subsidiary of the
Company and FG Insurance Corporation, an affiliate of the Company, prior
to 1996 was transferred to CAC. CAC was dividended to the Company and
became a wholly owned subsidiary during 1996. During the first quarter of
1996, FG Casualty Company and FG Insurance Corporation were sold to an
unrelated third party.
The accompanying statutory financial statements have been prepared in
accordance with insurance accounting practices prescribed or permitted by
the Department of Insurance of the State of Arizona, which vary in some
respects from generally accepted accounting principles (GAAP) as discussed
more fully in note 12. The preparation of statutory financial statements
requires management to make estimates and assumptions which affect the
reported amounts of assets and liabilities as of the date of the financial
statements. Actual results could differ from these estimates.
The significant statutory accounting policies are as follows:
Revenue and Expenses
Life premiums are reflected as earned on the policy anniversary date.
Annuity considerations are reported as income when received. Accident and
health premiums are reported as revenue when due and earned on a pro rata
basis over the period covered by the policy. Deferred life premiums
represent modal premiums (other than annual) to be billed in the year
subsequent to the commencement of the policy year. Uncollected premiums
represent premiums due less accident and health premiums over 90 days past
due. Expenses, including acquisition costs related to acquiring new
business and interest credited to policyholder account balances, are
charged to operations as incurred. Investment income is recognized as
earned.
Policy Reserves
The liability for future life policy benefits is based on statutory
mortality and interest requirements without consideration of withdrawals.
The mortality table and interest assumptions currently being used on the
majority of new ordinary and group life policies are the 1980
Commissioners Standard Ordinary (CSO) table, with 4.5% to 5.25% interest
on a Commissioners Reserve Valuation Method (CRVM) basis. With respect to
in-force ordinary life and group policies, the mortality table and
interest assumptions are from the 1980 CSO table with 4.5% to 6% interest.
The Company utilizes the 1980 CSO table with 5.5% to 6% interest for most
credit life policies. Life reserves are generally calculated on either a
net level or CRVM reserve basis.
For deferred annuities, policyholder account balances are computed on the
Commissioners Annuity Reserve Valuation Method (CARVM) using appropriate
issue-year interest rates ranging from 5.5% to 6.5%.
(Continued)
6
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Future policy benefits on accident and health insurance are based on
unearned premiums computed on a pro rata basis. The Company provides a
liability for accident and health claims which represents an estimate of
the ultimate cost of unpaid claims incurred through December 31 of each
year. Management believes this liability will be adequate to cover such
costs; however, the ultimate liability may be more or less than the
estimated liability.
Investments
Bonds and stocks are valued as prescribed by the National Association of
Insurance Commissioners (NAIC). Bonds and short-term investments, which
consist primarily of U.S. Treasury, corporate, and mortgage-backed
securities, are generally carried at amortized cost, preferred stocks are
generally carried at cost, and common stocks of unaffiliated companies are
generally carried at fair value. Investments in common stock of insurance
affiliates are recorded at their underlying statutory book value with
changes in book value reflected in surplus. Mortgage loans are stated at
the unpaid principal balance and represent first liens on residential
properties located in the United States. Real estate is carried at cost
less accumulated depreciation of $5,704,344, $5,201,971, and $4,699,598 in
1997, 1996, and 1995, respectively, which is calculated on a straight-line
basis over the estimated life of the property (50 years).
Life insurance companies are required to establish an Asset Valuation
Reserve (AVR) and an Interest Maintenance Reserve (IMR). The AVR provides
for a standardized statutory investment valuation reserve for bonds,
preferred stocks, short-term investments, mortgage loans, common stocks,
real estate, and other invested assets for the purpose of stabilizing
surplus against the effect of fluctuations in the value of investments and
is recorded as a direct charge to surplus in accordance with statutory
accounting practices. The IMR is designed to defer net realized capital
gains and losses resulting from changes in the level of interest rates in
the market and to amortize them into income over the remaining life of the
bond or mortgage loan sold. The IMR represents the unamortized portion of
such net unrealized capital gains and losses not yet taken into income.
Capital Gains and Losses
The cost of investments sold is generally determined on the first-in,
first-out method and includes the effects of any related amortization of
premium or accretion of discount. Realized investment gains and losses are
reported net of income taxes of $263,167, $52,836, and $626,923 in 1997,
1996, and 1995, respectively, and are included in the determination of net
income. Realized investment gains exclude $488,739, $(3,171), and
$1,791,210, which were transferred to the IMR in 1997, 1996, and 1995,
respectively, net of federal income taxes.
Separate Account Assets and Liabilities
The assets and liabilities of the Separate Account represent segregated
funds administered and invested by the Company for purposes of funding
variable annuity contracts for the exclusive benefit of variable annuity
contractholders. The Company receives administrative fees from the
Separate Account and retains varying amounts of withdrawal charges to
cover expenses in the event of early withdrawals by contractholders. The
assets and liabilities of the Separate Account are carried at fair value.
During 1997, the Company transferred $43 million from its general fund to
provide initial capital for additional fund options. The Company withdraws
its initial capital as deposits increase from contractholders. At December
31, 1997 and 1996, $11,262,211 and $7,996,834, respectively, represented
the Company's funds on deposit in the separate account and are reflected
as assigned surplus. Beginning in 1996, the Company has reflected the net
gain from operations of the Separate Account, which consists of annuity
considerations and investment income less contractholder reserves and
expenses, in the statement of operations. Prior to 1996, the net gain from
operations of the Separate Account was recorded as an adjustment to
surplus.
(Continued)
7
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Nonadmitted Assets
Assets included in the statutory statements of admitted assets,
liabilities, and capital and surplus are at "admitted asset values."
Nonadmitted assets, principally capitalized expenditures for furniture and
equipment, are excluded from the accompanying statutory financial
statements through a charge against unassigned surplus.
Federal Income Taxes
Federal income taxes are charged to operations based on income that is
currently taxable. No charge to operations is made or liability
established for the tax effects of temporary differences between the
financial reporting and tax basis of assets and liabilities.
Fair Value Disclosures
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Although fair value
estimates are calculated using assumptions that management believes are
appropriate, changes in assumptions could significantly affect the
estimates and such estimates should be used with care. The following
methods and assumptions were used to estimate the fair market value of
each class of financial instrument for which it was practicable to
estimate fair value:
Investment securities - Fixed maturities are based on market prices
obtained from a pricing service which approximates fair value.
Mortgage loans - First mortgages on real estate are carried at the
unpaid principal balance. As discussed in note 3, the Company bears
no credit risk as all mortgage loans were purchased, with recourse,
from an affiliate. The carrying value of mortgage loans approximates
fair value.
Policyholder account balances - The liability for policyholder
account balances is related to investment-type annuity contracts for
which crediting rates are subject to adjustment annually, based on
interest rates currently being offered for similar contracts with
maturities consistent with those remaining for the contracts being
valued. The carrying value approximates fair value at December 31,
1997 and 1996.
Cash and short-term investments - The carrying amount is a
reasonable estimate of fair value.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
represent demand deposits and highly liquid short-term investments,
which include U.S. Treasury bills, commercial paper, and repurchase
agreements with original or remaining maturities of 90 days or less
when purchased.
Reclassifications
Certain reclassifications have been made to the 1996 and 1995
information to conform with the 1997 presentation.
(Continued)
8
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
(2) Reinsurance
Insurance is assumed from other companies in areas where the Company had
or has limited authority to write business. Normally, a commission based
on net written premiums is charged by the ceding company under the terms
of the agreement.
The effect of reinsurance on premiums for the years ended December 31,
1997, 1996, and 1995 is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums:
Annuities $72,200,297 21,559,834 17,404,560
Life 7,122,026 7,908,778 11,180,195
Accident and health 3,507,386 5,266,759 9,039,109
Premiums assumed - life 20,068,879 24,051,178 25,020,842
Premiums assumed - accident and health 44,020,047 43,414,326 42,608,235
Premiums ceded - life (751,536) (3,089,484) (489,974)
Premiums ceded - accident and health (71,593) (168,490) (52,190)
- -----------------------------------------------------------------------------------------
Net premiums earned $146,095,506 98,942,901 104,710,777
- -----------------------------------------------------------------------------------------
</TABLE>
Reserve credits taken with respect to risks ceded to other companies
amounted to approximately $1,148,262, $1,252,712, and $1,345,978 at
December 31, 1997, 1996, and 1995, respectively. The Company remains
contingently liable with respect to any reinsurance ceded and would become
actually liable if the assuming company was unable to meet its obligations
under the reinsurance treaty.
The Company received approximately 97%, 96%, and 98% of its assumed
premiums from three unrelated insurance companies in 1997, 1996, and 1995,
respectively.
(3) Investments
Major categories of net investment income for the years ended December 31,
1997, 1996, and 1995 consist of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $20,831,460 19,749,865 19,038,491
Stocks (subsidiaries) 20,000,000 74,289,520 --
Mortgage loans 117,275 125,648 166,072
Real estate 3,126,593 2,866,044 3,126,593
Short-term investments 4,507,298 6,856,874 2,382,964
Other (80,240) 114,269 2,614
- ---------------------------------------------------------------------------------------
Total investment revenue 48,502,386 104,002,220 24,716,734
Investment expense 1,290,116 1,239,265 1,232,260
- ---------------------------------------------------------------------------------------
Net investment income $47,212,270 102,762,955 23,484,474
- ---------------------------------------------------------------------------------------
</TABLE>
(Continued)
9
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Investment expense includes $502,373 in depreciation on investments in
real estate for 1997, 1996, and 1995.
Investments in bonds at December 31, 1997 and 1996 are summarized below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1997
---------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized fair
value gains losses value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
U.S. Treasury securities $ 17,300,834 65,459 (12,151) 17,354,142
U.S government agency 97,820,711 413,983 (420,059) 97,814,635
Industrial and miscellaneous bonds 238,009,291 2,356,466 (1,599,464) 238,766,293
- -------------------------------------------------------------------------------------------------
Total bonds $353,130,836 2,835,908 (2,031,674) 353,935,070
- -------------------------------------------------------------------------------------------------
1996
---------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized fair
value gains losses value
- -------------------------------------------------------------------------------------------------
Bonds:
U.S. Treasury securities $ 19,898,960 90,486 (1,054,088) 18,935,358
U.S. government agency 89,860,220 430,728 (1,649,602) 88,641,346
Industrial and miscellaneous bonds 186,793,061 1,318,830 (4,003,535) 184,108,356
- -------------------------------------------------------------------------------------------------
Total bonds $296,552,241 1,840,044 (6,707,225) 291,685,060
- -------------------------------------------------------------------------------------------------
</TABLE>
The carrying and estimated fair values of bonds at December 31, 1997, by
contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Estimated
Carrying fair
value value
- --------------------------------------------------------------------------------
<S> <C> <C>
Within 1 year $ 2,999,099 2,988,320
After 1 year through 5 years 15,970,562 16,091,450
After 5 years through 10 years 109,844,697 109,387,548
After 10 years through 20 years 9,135,893 9,082,483
After 20 years 21,607,144 22,015,566
Mortgage-backed and asset-backed securities 193,573,441 194,369,703
- --------------------------------------------------------------------------------
$353,130,836 353,935,070
- --------------------------------------------------------------------------------
</TABLE>
(Continued)
10
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Proceeds from sale of bonds during 1997, 1996, and 1995 were $64,431,719,
$61,066,581, and $51,565,705, respectively. Gross gains of $938,918,
$1,075,411, and $1,857,733, and gross losses of $251,667, $1,081,062, and
$95,496 were realized on those sales in 1997, 1996, and 1995,
respectively.
Investments in mortgage loans were purchased from Citicorp Mortgage, Inc.
(CMI), an affiliate, pursuant to a Mortgage Loan Purchase and Sale
Agreement. In the event of default by the borrower, CMI has agreed to take
back the related loans at current book value.
(4) Investments on Deposit
At December 31, 1997, 1996, and 1995, investments with a carrying value of
$2,808,189, $2,701,958, and $2,695,641, respectively, were on deposit with
various state insurance departments as required by law and $3,728,341,
$4,819,650, and $2,665,960, respectively, were on deposit in escrow
accounts under the terms of certain of the Company's reinsurance
agreements.
(5) Investments in Affiliates
Investments in affiliates is comprised of the following:
Condensed financial information for First Citicorp Life Insurance Company,
on a statutory basis, is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance sheet at December 31:
Admitted assets $515,678,672 291,720,101 200,416,978
Liabilities 490,466,856 272,567,912 182,465,874
- --------------------------------------------------------------------------------
Capital and surplus $ 25,211,816 19,152,189 17,951,104
- --------------------------------------------------------------------------------
Results of operations:
Premiums earned 250,565,989 112,681,329 108,340,895
Benefits and expenses 273,184,335 126,674,439 117,006,106
Investment income, including
realized gains 20,772,942 16,263,882 10,684,469
Other income 943,024 502,543 83,188
- --------------------------------------------------------------------------------
Income (loss) before federal
income taxes (902,380) 2,773,315 2,102,446
Federal income tax expense 1,848,635 1,178,369 2,123,528
- --------------------------------------------------------------------------------
Net income (loss) $ (2,751,015) 1,594,946 (21,082)
- --------------------------------------------------------------------------------
</TABLE>
During 1996, all operations of FG Casualty Company were transferred to
CAC, along with the operations of FG Insurance Corporation, an affiliate
of the Company. During 1996, CAC became a wholly owned subsidiary of the
Company and FG Casualty Company was sold to an unrelated third party (note
1). The sale of FG Casualty Company was insignificant to the financial
position of the Company.
(Continued)
11
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Condensed financial information for CAC, on a statutory basis, is as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance sheet at December 31:
Admitted assets $73,854,894 56,301,892 1,807,771
Liabilities 35,068,000 21,797,022 71,700
- --------------------------------------------------------------------------------
Capital and surplus $38,786,894 34,504,870 1,736,071
- --------------------------------------------------------------------------------
Results of operations:
Net premiums earned 68,420,444 66,903,396 --
Losses and underwriting expenses 33,154,319 25,003,148 --
- --------------------------------------------------------------------------------
Underwriting gain 35,266,125 41,900,248 --
Investment income 2,316,371 825,948 109,369
Other income -- -- --
- --------------------------------------------------------------------------------
Income before federal income taxes 37,582,496 42,726,196 109,369
Federal income tax expense 13,300,474 14,957,396 38,855
- --------------------------------------------------------------------------------
Net income $24,282,022 27,768,800 70,514
- --------------------------------------------------------------------------------
Condensed financial information for FG Casualty Company, on a statutory
basis, is as follows:
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Balance sheet at December 31:
Admitted assets $ -- -- 88,552,358
Liabilities -- -- 12,745,798
- --------------------------------------------------------------------------------
Capital and surplus $ -- -- 75,806,560
- --------------------------------------------------------------------------------
Results of operations:
Net premiums earned $ -- -- 17,297,323
Losses and underwriting expenses -- -- 9,057,292
- --------------------------------------------------------------------------------
Underwriting gain -- -- 8,240,031
Investment income, including
realized gains -- -- 4,165,601
- --------------------------------------------------------------------------------
Income before federal income taxes -- -- 12,405,632
Federal income tax expense -- -- 4,554,315
- --------------------------------------------------------------------------------
Net income $ -- -- 7,851,317
- --------------------------------------------------------------------------------
</TABLE>
(Continued)
12
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
(6) Accident and Health Insurance Policy and Contract Claims
Activity in the liability for accident and health insurance policy and
contract claims is summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1 $20,237,540 17,094,210 10,793,721
- --------------------------------------------------------------------------------
Incurred related to:
Current year 21,833,053 25,334,054 21,893,536
Prior years (2,038,251) (3,071,930) (3,297,260)
- --------------------------------------------------------------------------------
Total incurred 19,794,802 22,262,124 18,596,276
- --------------------------------------------------------------------------------
Paid related to:
Current year 8,113,616 10,574,937 7,366,024
Prior years 11,891,865 8,543,857 4,929,763
- --------------------------------------------------------------------------------
Total paid 20,005,481 19,118,794 12,295,787
- --------------------------------------------------------------------------------
Balance at December 31 $20,026,861 20,237,540 17,094,210
- --------------------------------------------------------------------------------
</TABLE>
The schedule above reflects the due and unpaid, in the course of
settlement, and incurred but not reported components of the unpaid claims
reserves for the Company's health and disability coverages. The schedule
also includes unpaid claims reserves recorded in future policy benefits
which represent the present value of amounts not yet due on claims.
(7) Federal Income Taxes
The Company files a consolidated Federal income tax return with its
ultimate parent, Citicorp, and its other subsidiaries. The Company
participates in a tax-sharing agreement with the Parent whereby it is
liable to the Parent for Federal income taxes as if it filed on a stand
alone basis.
Under the Life Insurance Company Income Tax Act of 1959, a portion of
income prior to 1984 is not subject to Federal income taxes, within
certain limits, until it is distributed to stockholders, at which time the
distribution is taxed at ordinary corporate rates. The untaxed income is
accumulated in a memorandum tax account designated as "Policyholders'
Surplus Account." The accumulated "Policyholders' Surplus Account," as
reported in the Federal income tax returns at December 31, 1997, 1996, and
1995, was approximately $10,532,900. Based on the current tax rate, if
such accumulated amounts were distributed to stockholders, the income tax
would be approximately $3,686,500. Since the Company does not intend to
make any significant taxable distributions in the foreseeable future, no
provision for such taxes has been made in the accompanying statutory
financial statements.
At December 31, 1997, the Company had a stockholder's surplus account
balance of approximately $244,721,000 from which it could pay dividends to
the stockholder without incurring additional federal income tax liability.
(Continued)
13
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Federal income tax expense on income from operations varies from amounts
computed by applying the current federal corporate income tax rate to
income from operations before federal income tax expense and net realized
capital gains (losses). The reasons for these differences, and the tax
effects thereof, are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1997 1996 1995
------------ ------------ ------------
Amount Percent Amount Percent Amount Percent
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax
at U.S. corporate tax rate $22,140,586 35.00% $40,891,529 35.00% $16,108,560 35.00%
Difference between
changes in
statutory reserves
as compared to
tax reserves 164,199 .26 (100,513) (.10) 254,169 .55
Policy acquisition
expenses
capitalized, net
of amortization 248,167 .39 (48,558) (.05) 171,520 .37
Dividend exclusion (7,000,000) (11.07) (26,001,332) (22.26) -- --
Amortization of IMR (337,411) (.53) (455,017) (.39) (522,773) (1.14)
Prior year taxes (758,857) (1.20) -- -- -- --
Other, net 5,640,743 8.92 (45,652) (.01) (529,839) (1.15)
- --------------------------------------------------------------------------------------------------------
$20,097,427 31.77% $14,240,457 12.19% $15,481,637 33.63%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(8) Related Party Transactions
The Company leases two buildings to an affiliate and rental income
received from this affiliate of $3,127,000, $2,866,000, and $3,127,000 in
1997, 1996, and 1995, respectively, is included in net investment income.
These leases expire at various dates and contain options for renewal. The
future minimum rental income for the year ending December 31, 1998 is
$3,127,000 under the terms of the leases.
The Company has entered into various service contracts with affiliates of
the Company which cover management, investment, and information processing
services. Expenses incurred under such agreements were $2,377,645,
$2,766,904, and $2,865,000 in 1997, 1996, and 1995, respectively.
The Company utilizes the services of Citicorp Insurance Services, Inc. and
CMI. Employees of these companies are eligible to participate in defined
benefit plans provided by Citicorp. Charges for these services are based
on the actual salary and benefit costs of employees providing service to
the Company. Included in these charges are costs associated with
Citicorp's benefit plans.
(9) Dividend Restrictions
The maximum amount of dividends which can be paid by Arizona insurance
companies without the prior approval of the Arizona Director of Insurance
is not to exceed the lesser of 10% of policyholder surplus as of December
31 of the preceding year or net gain from operations. The Company requires
prior approval from the Arizona Department of Insurance prior to declaring
any dividends in 1998.
(Continued)
14
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Dividends totaling $100 million were paid in 1997.
A dividend of $16 million was declared in 1995 and paid in 1996.
(10) Risk-Based Capital
The insurance departments of various states, including the Company's
domiciliary state of Arizona, impose risk-based capital (RBC) requirements
on insurance enterprises. The RBC calculation serves as a benchmark for
the regulation of life insurance companies by state insurance regulators.
The requirements apply various weighted factors to financial balances or
activity levels based on their perceived degree of risk.
The RBC guidelines define specific capital levels where action by the
Company or regulatory intervention is required based on the ratio of a
Company's actual total adjusted capital (sum of capital and surplus and
asset valuation reserve) to control levels determined by the RBC formula.
At December 31, 1997, the Company's actual total adjusted capital exceeded
all regulatory requirements; thus, no action by the Company or its
regulators is required.
(11) Commitments and Contingencies
The Company is involved in various litigation arising in the ordinary
course of operations. Management is of the opinion, after reviewing these
matters with legal counsel, that the ultimate liability, if any, resulting
from any or all of the above matters would not have a material adverse
effect on the Company's financial position.
(12) Differences Between Generally Accepted Accounting Principles and
Statutory Accounting Practices
Statutory accounting practices differ in some respects from generally
accepted accounting principles. Under GAAP, the following applies:
(a) The liability for future policy benefits is computed using the
rule-of-78s and pro rata methods.
(b) Life premiums are reflected as earned when due. Annuity considerations
and other fund deposits are reflected as deposits rather than revenue.
(c) Acquisition costs are capitalized and amortized generally over the
premium paying period for individual life contracts and in relation to
the estimated present value of gross profits of the underlying
business for interest-sensitive life and investment contracts.
(d) Deferred income taxes are provided for the tax effects of temporary
differences between the financial reporting and tax basis of assets
and liabilities.
(e) Nonadmitted assets, less applicable allowance accounts, are restored
to the balance sheet.
(f) Asset valuation and interest maintenance reserves are not provided.
(g) Realized investment gains (losses) resulting from changes in interest
rates are recognized when the related security is sold.
(Continued)
15
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- -------------------------------------------------------------------------------
(h) Majority-owned subsidiaries are consolidated and the Company's
investment in subsidiaries is eliminated in consolidation.
(i) Debt securities are classified into one of three categories:
held-to-maturity, trading, or available-for-sale. Held-to-maturity
securities are carried at amortized cost. Trading securities are
reported at fair value with unrealized gains and losses included in
earnings. Available-for-sale securities are reported at fair value
with unrealized gains and losses excluded from earnings and reported
as a separate component of equity, net of tax.
(j) Reinsurance premiums, commissions, expense reimbursements, and
reserves would be presented on a gross basis consistent with terms of
the reinsurance contracts.
The statutory financial statements do not include any adjustments that
might result from differences between statutory accounting practices
and GAAP.
16
<PAGE>
Schedule 1
CITICORP LIFE INSURANCE COMPANY
Schedule of Selected Financial Data From Annual Statement
Year ended December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Investment income earned:
Government bonds $ 4,654,857
Other bonds (unaffiliated) 16,176,603
Bonds of affiliates --
Preferred stocks (unaffiliated) --
Preferred stocks of affiliates --
Common stocks (unaffiliated) --
Common stocks of affiliates 20,000,000
Mortgages loans 117,275
Real estate 3,126,593
Premium notes, policy loans and liens --
Collateral loans --
Cash on hand and on deposit 557
Short-term investments 4,507,298
Other invested assets --
Derivative instruments (80,891)
Aggregate write-in for investment income 94
- --------------------------------------------------------------------------------
Gross investment income $48,502,386
- --------------------------------------------------------------------------------
Real estate owned - book value less encumbrances $26,054,375
- --------------------------------------------------------------------------------
Mortgage loans - book value:
Farm mortgages $ --
Residential mortgages 1,311,377
Commercial mortgages --
- --------------------------------------------------------------------------------
Total mortgage loans $ 1,311,377
- --------------------------------------------------------------------------------
Mortgage loans by standing - book value:
Good standing $ 1,311,377
Good standing with restructured terms --
Interest overdue more than three months, not in
foreclosure --
Foreclosure in process --
Other long-term assets - statement value --
Collateral loans --
Bonds and stocks of parents, subsidiaries,
and affiliates - book value:
Bonds --
Preferred stocks --
Common stocks 21,500,000
- --------------------------------------------------------------------------------
</TABLE>
(Continued)
17
<PAGE>
Schedule 1, Cont.
CITICORP LIFE INSURANCE COMPANY
Schedule of Selected Financial Data From Annual Statement
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Bonds and short-term investments by class and maturity:
Bonds by maturity - statement value:
Due within one year or less $ 90,904,365
Over 1 year through 5 years 99,595,833
Over 5 years through 10 years 137,503,846
Over 10 years through 20 years 44,103,632
Over 20 years 39,935,265
- --------------------------------------------------------------------------------
Total by maturity $412,042,941
- --------------------------------------------------------------------------------
Bonds by class - statement value
Class 1 $362,843,904
Class 2 47,193,910
Class 3 2,005,127
Class 4 --
Class 5 --
Class 6 --
- --------------------------------------------------------------------------------
Total by class 412,042,941
Total bonds publicly traded 403,748,776
- --------------------------------------------------------------------------------
Total bonds privately placed $ 8,294,165
- --------------------------------------------------------------------------------
Preferred stocks - statement value $ --
Common stocks - market value 63,998,710
Short-term investments - book value 58,912,105
Financial options owned - statement value 1,346,215
Financial options written and in force - statement value --
Financial futures contracts open - current price --
Cash on deposit 6,929,415
Life insurance in force (in thousands):
Industrial --
Ordinary 216,527
Credit life 2,477,492
Group life 1,477,517
Amount of accidental death insurance in force under
ordinary policies --
Life insurance policies with disability provisions in force:
Industrial --
Ordinary --
Credit Life --
Group Life --
- --------------------------------------------------------------------------------
</TABLE>
(Continued)
18
<PAGE>
Schedule 1, Cont.
CITICORP LIFE INSURANCE COMPANY
Schedule of Selected Financial Data From Annual Statement
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Supplementary contracts in force:
Ordinary - not involving life contingencies:
Amount on deposit $ 7,291
Income payable 2,895
Ordinary - involving life contingencies -
income payable --
Group - not involving life contingencies:
Amount of deposit --
Income payable --
Group - involving life contingencies -
income payable --
Annuities:
Ordinary:
Immediate - amount of income payable --
Deferred - fully paid account balance 147,644,236
Deferred - not fully paid account balance --
Immediate - amount of income payable --
Fully paid account balance --
Not fully paid account balance --
Accident and health insurance - premium in force:
Ordinary --
Group 8,435,118
Credit 38,120,516
Deposits funds and dividend accumulations:
Deposit funds account balance --
Dividend accumulations account balance --
Claim payments 1997:
Group accident and health year ended
December 31, 1997:
1997 2,739,362
1996 1,439,949
1995 332,526
1994 29,506
Other accident and health:
1997 --
1996 --
1995 --
1994 --
Other coverages that use developmental methods
to calculate claims reserves:
1997 5,374,254
1996 7,700,616
1995 1,453,914
1994 556,854
- --------------------------------------------------------------------------------
</TABLE>
See accompanying independent auditors' report.
19
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Financial Statements and Schedule
December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
Citicorp Life Insurance Company and Policyholders
of Citicorp Life Insurance Company
Variable Annuity Separate Account:
We have audited the accompanying statement of net assets of the AIM V.I.
Capital Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I. Growth
Fund, AIM V.I. Growth and Income Fund, AIM V.I. International Equity Fund,
AIM V.I. Value Fund, CitiSelect VIP Folio 200, CitiSelect VIP Folio 300,
CitiSelect VIP Folio 400, CitiSelect VIP Folio 500, Fidelity VIP Equity
Income Portfolio, Fidelity VIP Growth Portfolio, Fidelity VIP High Income
Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP II Contrafund
Portfolio, Fidelity VIP II Index 500 Portfolio, Landmark Small Cap Equity
VIP Fund, Landmark VIP Balanced Fund, Landmark VIP Equity Fund, Landmark
VIP International Equity Fund, Landmark VIP U.S. Government Fund, MFS Bond
Series, MFS Emerging Growth Series, MFS Money Market Series, MFS Research
Series, MFS Total Return Series, and MFS World Governments Series
Portfolios of Citicorp Life Insurance Company Variable Annuity Separate
Account as of December 31, 1997, and the related statement of operations
for the year then ended and related statements of changes in net assets for
each of the years in the two-year period ended December 31, 1997. These
financial statements are the responsibility of Citicorp Life Insurance
Company Variable Annuity Separate Account's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned at
December 31, 1997, by correspondence with the Landmark Variable Insurance
Products Fund, A.I.M. Variable Insurance Funds, Inc., CitiSelect Variable
Insurance Products Fund, Fidelity Variable Insurance Products Fund, and MFS
Variable Insurance Trust. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the AIM V.I. Capital
Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I. Growth Fund,
AIM V.I. Growth and Income Fund, AIM V.I. International Equity Fund, AIM
V.I. Value Fund, CitiSelect VIP Folio 200, CitiSelect VIP Folio 300,
CitiSelect VIP Folio 400, CitiSelect VIP Folio 500, Fidelity VIP Equity
Income Portfolio, Fidelity VIP Growth Portfolio, Fidelity VIP High Income
Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP II Contrafund
1
<PAGE>
Portfolio, Fidelity VIP II Index 500 Portfolio, Landmark Small Cap Equity
VIP Fund, Landmark VIP Balanced Fund, Landmark VIP Equity Fund, Landmark
VIP International Equity Fund, Landmark VIP U.S. Government Fund, MFS Bond
Series, MFS Emerging Growth Series, MFS Money Market Series, MFS Research
Series, MFS Total Return Series, and MFS World Governments Series
Portfolios of Citicorp Life Insurance Company Variable Annuity Separate
Account as of December 31, 1997, and the results of their operations for
the year then ended and changes in their net assets for each of the years
in the two-year period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
January 21, 1998
2
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth International V.I.
Appreciation Series Growth and Income Equity Value
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $ 2,159,256 608,044 381,596 979,807 2,469,830 2,499,501
Payable to Citicorp Life
Insurance Company 1,261 370 224 580 1,494 1,496
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $ 2,157,995 607,674 381,372 979,227 2,468,336 2,498,005
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 2,157,995 607,674 381,372 979,227 2,468,336 2,498,005
Citicorp Life Insurance
Company equity -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $ 2,157,995 607,674 381,372 979,227 2,468,336 2,498,005
- ------------------------------------------------------------------------------------------------------------------------------------
Total units held by contractholders 1,293,126 573,525 315,240 827,506 2,357,251 2,102,285
Accumulated unit value $ 1.67 1.06 1.21 1.18 1.05 1.19
Cost of investments $ 2,087,287 582,309 354,976 928,320 2,530,929 2,406,762
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares 99,276 56,986 19,243 51,924 144,182 119,995
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
3
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $4,795,116 3,584,345 3,089,900 8,019,224 2,756,355 1,306,923
Payable to Citicorp Life
Insurance Company 1,474 2,157 1,724 654 1,618 744
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $4,793,642 3,582,188 3,088,176 8,018,570 2,754,737 1,306,179
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 2,430,519 3,582,188 3,088,176 1,144,192 2,754,737 1,306,179
Citicorp Life Insurance
Company equity 2,363,123 -- -- 6,874,378 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $4,793,642 3,582,188 3,088,176 8,018,570 2,754,737 1,306,179
- ------------------------------------------------------------------------------------------------------------------------------------
Total units held by contractholders 2,283,189 3,338,546 2,863,311 1,046,036 2,265,460 725,424
Accumulated unit value $ 1.06 1.07 1.08 1.09 1.22 1.80
Cost of investments $4,803,342 3,579,678 3,059,993 7,712,322 2,476,697 1,223,875
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares 467,816 345,313 300,574 765,193 113,524 35,227
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
4
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $932,623 1,163,031 1,917,367 2,738,478 2,191,034 --
Payable to Citicorp Life
Insurance Company 572 704 1,114 1,603 98 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $932,051 1,162,327 1,916,253 2,736,875 2,190,936 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 932,051 1,162,327 1,916,253 2,736,875 166,226 --
Citicorp Life Insurance
Company equity -- -- -- -- 2,024,710 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $932,051 1,162,327 1,916,253 2,736,875 2,190,936 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total units held by contractholders 819,371 1,070,184 1,585,128 2,215,225 150,143 --
Accumulated unit value $ 1.14 1.09 1.21 1.24 1.11 --
Cost of investments $ 857,638 1,150,630 1,710,443 2,486,081 1,961,540 --
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares 68,676 60,575 96,157 23,940 195,454 --
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
5
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $ -- -- -- 928,930 2,709,759 3,681,200
Payable to Citicorp Life
Insurance Company -- -- -- 556 1,595 1,352
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $ -- -- -- 928,374 2,708,164 3,679,848
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders -- -- -- 928,374 2,708,164 3,679,848
Citicorp Life Insurance
Company equity -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $ -- -- -- 928,374 2,708,164 3,679,848
- ------------------------------------------------------------------------------------------------------------------------------------
Total units held by contractholders -- -- -- 861,145 2,322,481 3,362,150
Accumulated unit value $ -- -- -- 1.08 1.17 1.09
Cost of investments $ -- -- -- 879,610 2,442,188 3,681,200
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares -- -- -- 83,838 167,891 3,681,200
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
6
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets:
Investments at market value $2,961,502 1,854,575 332,922
Payable to Citicorp Life
Insurance Company 1,768 1,125 206
- ------------------------------------------------------------------------------------------
Total net assets $2,959,734 1,853,450 332,716
- ------------------------------------------------------------------------------------------
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 2,959,734 1,853,450 332,716
Citicorp Life Insurance
Company equity - - -
- ------------------------------------------------------------------------------------------
Total net assets represented $2,959,734 1,853,450 332,716
- ------------------------------------------------------------------------------------------
Total units held by contractholders 2,569,829 1,592,342 303,642
Accumulated unit value $ 1.15 1.16 1.10
Cost of investments $2,771,107 1,681,593 331,494
- ------------------------------------------------------------------------------------------
Number of shares 187,556 111,520 32,607
- ------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
7
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Operations
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth International V.I.
Appreciation Series Growth and Income Equity Value
Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $ 1,970 277 1,534 491 10,964 21,555
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 14,297 3,387 2,554 5,175 15,047 13,972
Daily administrative charges 1,697 397 300 610 1,768 1,638
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 15,994 3,784 2,854 5,785 16,815 15,610
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (14,024) (3,507) (1,320) (5,294) (5,851) 5,945
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain distribution 25,326 -- 11,577 736 38,581 66,177
Realized gain (loss) on sale
of investments 13,462 528 3,283 915 1,552 1,188
Change in unrealized gain
(loss) on investments 67,869 25,735 26,620 51,487 (61,099) 92,739
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 106,657 26,263 41,480 53,138 (20,966) 160,104
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 92,633 22,756 40,160 47,844 (26,817) 166,049
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
8
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Operations
December 31, 1997
<TABLE>
<CAPTION>
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $252,499 155,326 160,785 416,730 -- 1,002
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 11,384 23,931 22,551 7,190 15,950 7,786
Daily administrative charges 1,332 2,816 2,650 845 1,864 917
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 12,716 26,747 25,201 8,035 17,814 8,703
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 239,783 128,579 135,584 408,695 (17,814) (7,701)
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain distribution -- -- -- -- -- 4,494
Realized gain (loss) on sale
of investments 406,331 416,225 591,490 289,938 11,275 27,616
Change in unrealized gain
(loss) on investments (8,226) 4,667 29,907 306,902 279,658 77,797
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 398,105 420,892 621,397 596,840 290,933 109,907
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $637,888 549,471 756,981 1,005,535 273,119 102,206
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
9
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $ - - - - - 32,783
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 5,997 8,057 11,580 14,894 1,091 246
Daily administrative charges 701 947 1,359 1,743 128 29
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 6,698 9,004 12,939 16,637 1,219 275
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (6,698) (9,004) (12,939) (16,637) (1,219) 32,508
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain distribution - - - - - 216,898
Realized gain (loss) on sale
of investments 10,454 903 4,118 2,533 70,406 (95,900)
Change in unrealized gain
(loss) on investments 74,985 12,401 206,924 252,397 229,494 (126,072)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 85,439 13,304 211,042 254,930 299,900 (5,074)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $78,741 4,300 198,103 238,293 298,681 27,434
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
10
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $16,729 32,151 33,661 - - 62,533
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 41 399 259 5,364 16,871 17,593
Daily administrative charges 5 48 31 629 1,997 2,067
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 46 447 290 5,993 18,868 19,660
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 16,683 31,704 33,371 (5,993) (18,868) 42,873
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain distribution 497,237 34,624 - - - 8,975
Realized gain (loss) on sale
of investments (206,783) 11,138 (53,223) 4,085 3,481 -
Change in unrealized gain
(loss) on investments (252,777) (194,481) 16,093 49,320 267,571 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 37,677 (148,719) (37,130) 53,405 271,052 8,975
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $54,360 (117,015) (3,759) 47,412 252,184 51,848
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
11
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income-- dividends $ -- -- 2,521
- -----------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 17,431 11,542 2,611
Daily administrative charges 2,049 1,351 308
- -----------------------------------------------------------------------------------------------------
Total expenses 19,480 12,893 2,919
- -----------------------------------------------------------------------------------------------------
Net investment income (loss) (19,480) (12,893) (398)
- -----------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain distribution -- -- --
Realized gain (loss) on sale
of investments 1,784 4,051 449
Change in unrealized gain
(loss) on investments 190,395 172,982 (1,796)
- -----------------------------------------------------------------------------------------------------
Net gain (loss) on investments 192,179 177,033 (1,347)
- -----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $172,699 164,140 (1,745)
- -----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
12
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth International V.I.
Appreciation Series Growth and Income Equity Value
Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ (14,024) (3,507) (1,320) (5,294) (5,851) 5,945
Realized gain distribution 25,326 -- 11,577 736 38,581 66,177
Realized gain (loss) on sale
of investments 13,462 528 3,283 915 1,552 1,188
Change in unrealized gain
(loss) on investments 67,869 25,735 26,620 51,487 (61,099) 92,739
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 92,633 22,756 40,160 47,844 (26,817) 166,049
- -----------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 1,861,129 427,259 322,951 925,509 2,116,404 2,148,867
Transfers between funds 133,734 168,348 40,708 8,561 373,137 164,471
Transfers to (from) Citicorp Life
Insurance Company (21,269) (10,689) (22,447) 3,261 17,147 21,363
Annual administrative charges (19) -- -- -- -- --
Death benefits -- -- -- -- (481) --
Contract withdrawals (23,936) -- -- (5,948) (11,054) (2,745)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital
transactions 1,949,639 584,918 341,212 931,383 2,495,153 2,331,956
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,042,272 607,674 381,372 979,227 2,468,336 2,498,005
Net assets at beginning of period 115,723 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $2,157,995 607,674 381,372 979,227 2,468,336 2,498,005
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
13
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ 239,783 128,579 135,584 408,695 (17,814) (7,701)
Realized gain distribution -- -- -- -- -- 4,494
Realized gain (loss) on sale
of investments 406,331 416,225 591,490 289,938 11,275 27,616
Change in unrealized gain
(loss) on investments (8,226) 4,667 29,907 306,902 279,658 77,797
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 637,888 549,471 756,981 1,005,535 273,119 102,206
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 2,401,340 3,312,960 2,954,710 1,086,664 2,116,829 1,085,062
Transfers between funds 23,801 128,048 16,016 11,810 235,669 43,852
Transfers to (from) Citicorp Life
Insurance Company 1,768,348 (382,008) (598,743) 5,923,423 144,921 (55,737)
Annual administrative charges -- -- -- -- (14) (35)
Death benefits -- (496) -- -- (517) --
Contract withdrawals (37,735) (25,787) (40,788) (8,862) (15,270) (14,907)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital
transactions 4,155,754 3,032,717 2,331,195 7,013,035 2,481,618 1,058,235
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 4,793,642 3,582,188 3,088,176 8,018,570 2,754,737 1,160,441
Net assets at beginning of period -- -- -- -- -- 145,738
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $4,793,642 3,582,188 3,088,176 8,018,570 2,754,737 1,306,179
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
14
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $(6,698) (9,004) (12,939) (16,637) (1,219) 32,508
Realized gain distribution -- -- -- -- -- 216,898
Realized gain (loss) on sale
of investments 10,454 903 4,118 2,533 70,406 (95,900)
Change in unrealized gain
(loss) on investments 74,985 12,401 206,924 252,397 229,494 (126,072)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 78,741 4,300 198,103 238,293 298,681 27,434
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 820,108 1,062,266 1,641,264 2,391,045 154,300 11,588
Transfers between funds 40,099 95,513 107,565 126,147 1,999 (67,856)
Transfers to (from) Citicorp Life
Insurance Company 24,227 1,903 (1,638) (7,068) 1,735,956 (1,233,209)
Annual administrative charges -- -- -- -- -- --
Death benefits -- -- -- (518) -- --
Contract withdrawals (31,124) (1,655) (29,041) (11,024) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets resulting from
capital transactions 853,310 1,158,027 1,718,150 2,498,582 1,892,255 (1,289,477)
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 932,051 1,162,327 1,916,253 2,736,875 2,190,936 (1,262,043)
Net assets at beginning of period -- -- -- -- -- 1,262,043
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $932,051 1,162,327 1,916,253 2,736,875 2,190,936 --
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
15
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ 16,683 31,704 33,371 (5,993) (18,868) 42,873)
Realized gain distribution 497,237 34,624 -- -- -- 8,975
Realized gain (loss) on sale
of investments (206,783) 11,138 (53,223) 4,085 3,481 --
Change in unrealized gain
(loss) on investments (252,777) (194,481) 16,093 49,320 267,571 --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 54,360 (117,015) (3,759) 47,412 252,184 51,848
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 11,588 100 -- 736,413 2,261,039 6,327,835
Transfers between funds (13,028) (107,251) (69,541) 173,284 184,924 (2,264,257)
Transfers to (from) Citicorp Life
Insurance Company (1,364,903) (4,259,003) (1,081,533) (22,790) 17,964 5,563
Annual administrative charges -- -- -- -- -- --
Death benefits -- -- -- -- -- --
Contract withdrawals -- -- -- (5,945) (7,947) (491,241)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital
transactions (1,366,343) (4,366,154) (1,151,074) 880,962 2,455,980 3,577,900
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets (1,311,983) (4,483,169) (1,154,833) 928,374 2,708,164 3,629,748
Net assets at beginning of period 1,311,983 4,483,169 1,154,833 -- -- 50,100
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ -- -- -- 928,374 2,708,164 3,679,848
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. (Continued)
</TABLE>
16
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1997
- --------------------------------------------------------------------------------
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- --------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from operations:
Net investment income (loss) $ (19,480) (12,893) (398)
Realized gain distribution -- -- --
Realized gain (loss) on sale
of investments 1,784 4,051 449
Change in unrealized gain
(loss) on investments 190,395 172,982 (1,796)
- --------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 172,699 164,140 (1,745)
- --------------------------------------------------------------------------------
Capital transactions:
Contract deposits 2,403,116 1,636,629 278,054
Transfers between funds 398,099 67,561 (21,407)
Transfers to (from) Citicorp Life
Insurance Company 15,817 13,308 3,801
Annual administrative charges -- -- --
Death benefits -- (515) --
Contract withdrawals (29,997) (27,673) --
- --------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital
transactions 2,787,035 1,689,310 260,448
- --------------------------------------------------------------------------------
Total increase (decrease) in
net assets 2,959,734 1,853,450 258,703
Net assets at beginning of period -- -- 74,013
- --------------------------------------------------------------------------------
Net assets at end of period $2,959,734 1,853,450 332,716
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
A.I.M. V.I. Fidelity Landmark Landmark Landmark Landmark
Capital VIP VIP VIP VIP VIP U.S.
Appreciation Growth Balanced Equity International Government
Fund Portfolio Fund Fund Equity Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ (440) (771) 43,883 24,470 54,943 69,120
Realized gain distribution -- 413 17,355 20,976 75,006 --
Realized gain on sale of
investments 5 124 44 -- 22 12
Change in unrealized gain
(loss) on investments 4,100 4,380 38,580 117,485 122,500 (50,069)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from operations 3,665 4,146 99,862 162,931 252,471 19,063
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 110,664 134,244 47,895 1,531 107,779 66,291
Transfers from Citicorp Life
Insurance Company 1,394 1,394 -- -- -- --
Annual administrative charges -- (16) (14) -- -- --
Contract withdrawals -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from capital transactions 112,058 135,622 47,881 1,531 107,779 66,291
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 115,723 139,768 147,743 164,462 360,250 85,354
Net assets at beginning of period -- 5,970 1,114,300 1,147,521 4,122,919 1,069,479
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $115,723 145,738 1,262,043 1,311,983 4,483,169 1,154,833
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statement of Changes in Net Assets
For the year ended December 31, 1996
- --------------------------------------------------------------------------------
MFS
Money MFS World
Market Governments
Series Series
- --------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from operations:
Net investment income (loss) $255 (526)
Realized gain distribution -- --
Realized gain on sale of
investments -- 15
Change in unrealized gain
(loss) on investments -- 3,224
- --------------------------------------------------------------------------------
Increase in net assets resulting
from operations 255 2,713
- --------------------------------------------------------------------------------
Capital transactions:
Contract deposits 49,845 71,300
Transfers from Citicorp Life
Insurance Company -- --
Annual administrative charges -- --
Contract withdrawals -- --
- --------------------------------------------------------------------------------
Increase in net assets resulting
from capital transactions 49,845 71,300
- --------------------------------------------------------------------------------
Total increase in net assets 50,100 74,013
Net assets at beginning of period -- --
- --------------------------------------------------------------------------------
Net assets at end of period $50,100 74,013
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
19
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
December 31, 1997
================================================================================
(1) History
Citicorp Life Insurance Company Variable Annuity Separate Account (the
Account) is a separate investment account maintained under the
provisions of Arizona Insurance Law by Citicorp Life Insurance Company
(the Company). The Account operates as a unit investment trust
registered under the Investment Company Act of 1940, as amended, and
supports the operations of the Company's individual flexible premium
deferred variable annuity contracts (the contracts). The Account invests
in portfolios of the following funds:
o Variable Annuity Portfolios:
o CitiSelect VIP Folio 200*,
o CitiSelect VIP Folio 300*,
o CitiSelect VIP Folio 400*,
o CitiSelect VIP Folio 500, and
o Landmark Small Cap Equity VIP Fund.
o Landmark Variable Insurance Products (VIP) Funds:
o Landmark VIP Balanced Fund,
o Landmark VIP Equity Fund,
o Landmark VIP International Equity Fund, and
o Landmark VIP U.S. Government Fund.
o AIM Variable Insurance Funds, Inc.:
o AIM V.I. Capital Appreciation Fund,
o AIM V.I. Government Series Fund*,
o AIM V.I. Growth Fund*,
o AIM V.I. Growth and Income Fund*,
o AIM V.I. International Equity Fund*, and
o the AIM V.I. Value Fund*.
o Fidelity Variable Insurance Products Funds: o Fidelity VIP
Equity Income Portfolio*, o Fidelity VIP Growth Portfolio, o
Fidelity VIP High Income Portfolio*, o Fidelity VIP Overseas
Portfolio*, o Fidelity VIP II Contrafund Portfolio*, o and
Fidelity VIP II Index 500 Portfolio*.
o MFS Variable Insurance Trust: o MFS Bond Series*, o MFS Emerging
Growth Series*, o MFS Money Market Series, o MFS Research
Series*, o MFS Total Return Series*, and o MFS World Governments
Series.
* Available to the Account beginning February 3, 1997.
The CitiSelect Variable Insurance Products Funds had no assets or
operations until February 10, 1997, when the Company transferred
$40,000,000 from its general fund to provide initial capital. Also at
this time, the Company transferred $3,000,000 from its general fund to
the Landmark Small Cap Equity VIP Fund for the same purpose.
As of April 30, 1997, several funds were no longer available to the
Account, including Landmark VIP Balanced Fund, Landmark VIP Equity Fund,
(Continued)
20
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
================================================================================
Landmark VIP International Equity Fund, and Landmark VIP U.S. Government
Fund. In conjunction with the removal of these Landmark Variable
Insurance Products Funds from the Account, the Company transferred
$7,000,000 in initial capital back to its general fund.
21
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
The assets of the Account are the property of the Company. The portion
of the Account's assets applicable to the contracts is not chargeable
with liabilities arising out of any other business conducted by the
Company.
In addition to the Account, a contract owner may also allocate funds to
the General Account, which is part of the Company's general account.
Amounts allocated to the General Account are credited with a guaranteed
rate of interest for one year. Because of exemptive and exclusionary
provisions, interests in the General Account have not been registered
under the Securities Act of 1933, and the General Account has not been
registered as an investment company under the Investment Company Act of
1940.
(2) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed
by the Account in preparation of the financial statements in conformity
with generally accepted accounting principles.
Investment Valuation
The investment in the Fund is stated at market value, which is the net
asset value of each of the respective series as determined by the Fund
at the close of business on the last working day of the period.
Accounting for Investments
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date. The cost of investments sold
is generally determined on the specific identification method.
Federal Income Taxes
The Company is taxed under federal law as a life insurance company. The
Account is part of the Company's total operations, and is not taxed
separately. Under existing law, no taxes are payable on investment
income and realized capital gains of the Account.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease
in net assets from operations during the period. Actual results could
differ from those estimates.
(3) Contract Charges
Daily charges for mortality and expense risks assumed by the Company are
assessed through the daily unit value calculation, and are equivalent on
an annual basis to 1.25% of the net assets of the contracts.
An annual contract fee of $30 is assessed against each contract on its
anniversary date by surrendering units. Daily charges for administrative
(Continued)
22
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
expenses are assessed through the daily unit value calculation, and are
equivalent on an annual basis to 0.15% of the net assets of the
contracts.
The contracts provide that in the event that a contract owner withdraws
all or a portion of the contract value within five contract years, a
deferred sales charge will be assessed. The deferred sales charge is
based on a table of charges, of which the maximum charge is currently 7%
of the purchase payments withdrawn. During each contract year, up to 10%
of purchase payments less any prior withdrawal of purchase payments may
be withdrawn without a deferred sales charge.
Premium taxes may be applicable, depending on the laws of various
jurisdictions. Various states and other governmental entities levy a
premium tax on annuity contracts issued by insurance companies.
(4) Purchases of Investments
For the year ended December 31, 1997, investment activity in each of the
respective Funds was as follows:
- --------------------------------------------------------------------------------
Cost of Proceeds
Shares of purchases from sales
- --------------------------------------------------------------------------------
Variable Annuity Portfolios:
CitiSelect VIP Folio 200 $ 12,795,433 8,398,423
CitiSelect VIP Folio 300 13,669,901 10,506,449
CitiSelect VIP Folio 400 13,251,140 10,782,637
CitiSelect VIP Folio 500 11,553,686 4,131,303
Landmark Small Cap Equity VIP Fund 3,156,495 1,265,361
Landmark Variable Insurance Products Funds:
Landmark VIP Balanced Fund 261,270 1,301,370
Landmark VIP Equity Fund 525,555 1,377,978
Landmark VIP International Equity Fund 66,875 4,366,759
Landmark VIP U.S. Government Fund 33,661 1,151,402
AIM Variable Insurance Funds, Inc. :
AIM V.I. Capital Appreciation Fund 2,068,813 106,674
AIM V.I. Government Series Fund 609,841 28,060
AIM V.I. Growth Fund 399,397 47,704
AIM V.I. Growth and Income Fund 938,538 11,133
AIM V.I. International Equity Fund 2,565,454 36,077
AIM V.I. Value Fund 2,414,875 9,302
Fidelity Variable Insurance Products Funds:
Fidelity VIP Equity Income Portfolio 2,566,211 100,788
Fidelity VIP Growth Portfolio 1,219,682 163,988
Fidelity VIP High Income Portfolio 951,879 104,694
Fidelity VIP Overseas Portfolio 1,158,614 8,887
Fidelity VIP II Contrafund Portfolio 1,734,957 28,630
Fidelity VIP II Index 500 Portfolio 2,505,310 21,761
MFS Variable Insurance Trust:
MFS Bond Series 939,738 64,213
MFS Emerging Growth Series 2,465,722 27,014
MFS Money Market Series 5,997,724 2,366,650
MFS Research Series 2,815,957 46,634
(Continued)
23
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
MFS Total Return Series 1,730,571 53,028
MFS World Governments Series 441,338 181,122
- --------------------------------------------------------------------------------
(Continued)
24
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
1997
---------------------------------------------------------------------------------------------
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth and International V.I.
Appreciation Series Growth Income Equity Value
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 1,162,380 419,758 302,312 822,814 1,995,901 1,946,925
Units withdrawn and
contract charges (14,524) -- -- (5,199) (11,071) (2,388)
Units transferred
between funds 67,659 153,767 12,928 9,891 372,421 157,748
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 1,215,515 573,525 315,240 827,506 2,357,251 2,102,285
Units at beginning
of period 77,611 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Units at end of period 1,293,126 573,525 315,240 827,506 2,357,251 2,102,285
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997
----------------------------------------------------------------------------------------------
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 2,296,533 3,216,778 2,906,175 1,039,064 1,925,885 644,857
Units withdrawn and
contract charges (35,890) (24,862) (37,494) (8,003) (13,505) (8,500)
Units transferred
between funds 22,546 146,630 (5,370) 14,975 353,080 (9,483)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase 2,283,189 3,338,546 2,863,311 1,046,036 2,265,460 626,874
Units at beginning
of period -- -- -- -- -- 98,550
- ---------------------------------------------------------------------------------------------------------------------------------
Units at end of period 2,283,189 3,338,546 2,863,311 1,046,036 2,265,460 725,424
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
26
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997
---------------------------------------------------------------------------------------------
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 789,414 984,950 1,515,643 2,127,252 148,286 9,479
Units withdrawn and
contract charges (29,938) (1,495) (24,919) (9,879) -- --
Units transferred
between funds 59,895 86,729 94,404 97,852 1,857 (55,954)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 819,371 1,070,184 1,585,128 2,215,225 150,143 (46,475)
Units at beginning
of period -- -- -- -- -- 46,475
- ------------------------------------------------------------------------------------------------------------------------------------
Units at end of period 819,371 1,070,184 1,585,128 2,215,225 150,143 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
27
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
- -----------------------------------------------------------------------------------------------------------------------------
1997
--------------------------------------------------------------------------------------
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 8,546 94 -- 724,554 2,147,071 5,856,833
Units withdrawn and
contract charges -- -- -- (5,747) (7,257) (453,780)
Units transferred
between funds (9,711) (101,857) (65,380) 142,338 182,667 (2,088,279)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,165) (101,763) (65,380) 861,145 2,322,481 3,314,774
Units at beginning
of period 1,165 101,763 65,380 -- -- 47,376
- -----------------------------------------------------------------------------------------------------------------------------
Units at end of period -- -- -- 861,145 2,322,481 3,362,150
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
28
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
- --------------------------------------------------------------------------------
1997
-----------------------------------------------
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- --------------------------------------------------------------------------------
Units purchased 2,226,580 1,541,024 253,499
Units withdrawn and
contract charges (25,571) (24,995) --
Units transferred
between funds 368,820 76,313 (15,705)
- --------------------------------------------------------------------------------
Net increase (decrease) 2,569,829 1,592,342 237,794
Units at beginning
of period -- -- 65,848
- --------------------------------------------------------------------------------
Units at end of period 32,569,829 1,592,342 303,642
- --------------------------------------------------------------------------------
(Continued)
29
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996
-------------------------------------------------------------------------------------------
A.I.M. V.I. Fidelity Landmark Landmark Landmark Landmark
Capital VIP VIP VIP VIP VIP U.S.
Appreciation Growth Balanced Equity International Government
Fund Portfolio Fund Fund Equity Fund Fund
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 76,664 93,044 41,393 1,165 101,764 65,380
Units withdrawn and
contract charges -- (11) (12) -- -- --
Units transferred
between funds 947 952 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 77,611 93,985 41,381 1,165 101,764 65,380
Units at beginning
of period -- 4,565 5,094 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Units at end of period 77,611 98,550 46,475 1,165 101,764 65,380
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
30
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
1996
----------------------------------
MFS MFS World
Money Governments
Market Series Series
- ---------------------------------------------------------------------------
Units purchased 47,376 65,848
Units withdrawn and
contract charges -- --
Units transferred
between funds -- --
- ---------------------------------------------------------------------------
Net increase 47,376 65,848
Units at beginning
of period -- --
- ---------------------------------------------------------------------------
Units at end of period 47,376 65,848
- ---------------------------------------------------------------------------
31
<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.
(f) Roth Individual Retirement Annuity Endorsement.
(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).
<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*
Benjamin G. 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*
Kenneth E. Nelson Vice President*
Walter C. 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
INSURANCE COMPANY
(Arizona Corporation)
100% 100%
FIRST CITICORP LIFE CITICORP ASSURANCE
INSURANCE CO
COMPANY (Delaware Corporation)
(New York Corporation)
<PAGE>
Item 27. Number of Contract owners
As of December 31, 1997 there were 835 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 this amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and 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
23rd day of April, 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 April 23, 1998
- -------------------------- -------------
/s/ Charles H. Masland, IV Director, SVP April 23, 1998
- -------------------------- -------------
/s/ Marc J. Fink Director, SVP April 23, 1998
- -------------------------- -------------
/s/ Daniel F. Forcade Treasurer, SVP April 23, 1998
- -------------------------- --------------
(PAO)
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the registrant certifies that this amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and 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
23rd day of April, 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/ Alan F. Liebowitz Director, President, CEO April 23, 1998
- --------------------- ------------------------
/s/ Joseph E. Madalon Director, CFO April 23, 1998
- --------------------- ------------------------
<PAGE>
EXHIBIT INDEX
4(e). Variable Annuity Endorsement: Amendment of Contract Provisions
4(f). Roth Individual Retirement Annuity Endorsement
9. Opinion and Consent of Catherine S. Mulholland.
10(a). Consent of Sutherland, Asbill & Brennan.
10(b). Consent of KPMG Peat Marwick LLP.
EXHIBIT 4(e)
CITICORP LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Home Office: Phoenix, AZ
Administrative Office: 800 Silver Lake Boulevard
P.O. Box 7031
Dover, DE 19903
VARIABLE ANNUITY ENDORSEMENT
AMENDMENT OF CONTRACT PROVISIONS
The contract to which this endorsement is attached is amended as follows:
The second paragraph of the "Allocation of Premium" provision is deleted
and replaced by the following:
You may change the premium allocation at any time by notifying us in
writing. We may require allocations to any Account to be expressed
in whole percent and be at least $100 of any premium payment.
Sub-paragraph 2. of the "Transfer" provision is deleted in its entirety.
Sub-paragraph 3. of the "Dollar Cost Averaging (Automatic Transfers)"
provision is deleted and replaced by the following:
3. The amount of such transfers from the Fixed Account must be
equal to or less than 1/6 of the Account value when this
option is elected.
The last paragraph of the "Net Investment Factor" provision is deleted and
replaced by the following:
"c" is a factor representing the sum of the daily Mortality and Expense
Risk Charge and the daily Administration Charge deducted from the Sub-Account.
The "Mortality and Expense Risk Charge" provision is deleted in its entirety and
replaced by the following:
The Mortality and Expense Risk Charge is a daily charge made to compensate
us for assuming the mortality and expense risks under this contract. It is
equivalent to not more than 1.25% per annum of the average daily net asset
value held in each Sub-Account.
The following is added to the third paragraph of the "Annual Contract Fee"
provision:
The Annual Contract Fee will be waived in its entirety for any Contract
Year in which premium of at least $2,500 ($2,000 for Qualified Plans as
defined under the I.R.S. Code), exclusive of the initial premium, are
paid.
The "Administration Charge" provision is deleted in its entirety and
replaced by the following:
Our charge for administering this contract is equivalent to not more than
0.15% per annum of the average daily net asset value held in each
Sub-Account. This charge is calculated and deducted on a daily basis.
In all other respects, the contract is unchanged.
/s/ Richard M. Zuckerman
Secretary
63-1721(09-97)
EXHIBIT 4(f)
CITICORP LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
PHOENIX, ARIZONA
ROTH INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This page changes certain items in the annuity contract issued to you so that it
will qualify as a "Roth Individual Retirement Annuity" pursuant to Section 408A
of the Internal Revenue Code of 1986, as amended (the Code). The changes to your
annuity contract are as follows:
"Life expectancy" means an individual's predicted life span using the Expected
Return Multiples in Table V in Section 1.72-9 of the Income Tax Regulations.
You are the owner and Annuitant of this contract. The contract will remain in
force until all benefits have been paid to you or your Beneficiary(ies). None of
your rights in this contract may be forfeited. The contract may not be assigned,
pledged or otherwise transferred. It may not be used as security for a loan.
Payment of Annuity Income Benefits: Benefits paid under this contract will be
distributed to you under the Annuity Income Option selected.
Upon Your Death: Upon your death, all contract values must be distributed by:
(1) December 31 of the year containing the fifth anniversary of your death; or
(2) if payable to an individual Beneficiary, the remaining value may be paid in
substantially equal installments over a period not to exceed the life or life
expectancy of the Beneficiary beginning no later than December 31 of the
calendar year following the date of your death.
However, if your spouse is the Beneficiary, he/she may elect either: (1) to
treat the contract as his or her own Roth Individual Retirement Annuity; or (2)
receive equal or substantially equal payments over a period not exceeding his or
her life or life expectancy starting on or before the later of: (a) December 31
of the year in which you would have attained age 70 1/2; or (b) December 31 of
the first full calendar year immediately following the date of your death. Such
election must be made not later than five years after the date of your death. If
your surviving spouse makes any contribution to the contract after your death,
or fails to elect to begin distributions, it will be assumed that he/she has
elected to treat the contract as his or her own Roth Individual Retirement
Annuity.
If distribution is to be made over the life or life expectancy(ies) of the
Beneficiary(ies), the amount distributed each year must be equal to the value
obtained by dividing the contract value to be distributed, as of December 31
preceding distribution, by the life expectancy(ies) of the Beneficiary(ies).
The Beneficiary shall have the sole responsibility for requesting a distribution
that complies with this endorsement and applicable law.
No premium payments will be accepted under this contract after your death unless
the Beneficiary is your surviving spouse.
Calculation of Beneficiary(ies) Life Expectancy: The life expectancy of a
surviving spouse Beneficiary shall be calculated annually unless he/she elects
not to recalculate life expectancy by the time distributions are required to
begin. An election not to recalculate by your spouse shall be irrevocable.
Annual recalculation of life expectancy will reflect estimated years of life
remaining.
The life expectancy of a non-spouse Beneficiary is calculated at the time of the
first payment and thereafter is reduced by the number of whole years elapsed
since that date. The life expectancy of a non-spouse Beneficiary may not be
recalculated.
63-1717(02-98) Page 1
<PAGE>
Payment to Your Child During His/Her Minority: Any payment to your child will be
considered to have been paid to your spouse if the remainder of the contract
values become payable to your spouse when the child reaches the age of majority.
Premium Payments: Unless this contract is issued as a "spousal IRA" (see below),
annual premium payments cannot exceed the lesser of 100% of your earned income
for the tax year or $2,000, reduced by the aggregate contributions during that
tax year to all other individual retirement plans maintained for your benefit.
This limitation does not apply to premiums which represent any portion of a
transfer or qualifying rollover as defined in Sections 408A(d)(3) and 408A(e) of
the Code, subject to the limitations set forth therein.
The $2,000 limit is gradually reduced to $0 between certain levels of adjusted
gross income ("AGI"). In accordance with Code Section 408A(c)(3), if you are
single, the $2,000 limit is phased out between AGI of $95,000 and $110,000; if
you are married and file a joint federal income tax return, it is phased out
between $150,000 and $160,000; and if you are married and file a separate
federal income tax return, it is phased out between $0 and $10,000. Also, a
rollover or transfer from an Individual Retirement Account or Annuity will not
be permitted if your AGI for the tax year exceeds $100,000 or if you are married
and file a separate federal income tax return. Adjusted Gross Income is defined
in Code Section 408(c)(3) and does not include amounts transferred or rolled
over to Individual Retirement Accounts or Annuities or Roth IRA's.
You have the sole responsibility for determining whether any premium payment
meets applicable income tax requirements. Any refund of premiums (other than
those attributable to excess contributions) will be applied before the close of
the calendar year following the year of the refund toward payment of additional
premiums or the purchase of additional benefit.
All premium payments must be in cash or cash equivalents.
Spousal IRA's: The Code provides for the establishment of a Roth IRA for the
benefit of a taxpayer's spouse with earned income of less than $2,000 a year
("spousal IRA"). The annual contributions to a spousal IRA cannot exceed the
lesser of $2,000 or 100% of the earned income of the working spouse, reduced by
the aggregate contributions during that tax year for all other individual
retirement plans maintained for said spouse. If the combined annual earned
income of the taxpayer and spouse is less than $4,000, the total contributions
to all IRA's for the taxpayer and spouse is limited to the combined earned
income.
Changes and Modifications: Both we and you agree to amend this contract to
comply with changes in the Code and any Department of Labor and Internal Revenue
Regulations. Any other changes to this contract will be made only with the
mutual agreement of us and you and will be subject to the conditions stated in
the contract. A copy of each amendment will be furnished to you for attachment
to the contract.
The Contract: Refer to the contract to which this endorsement is attached for
the definition of terms and additional contract provisions not otherwise amended
hereby.
/s/ Richard M. Zuckerman
Secretary
63-1717(02-98) Page 2
EXHIBIT 9
CITICORP LIFE INSURANCE COMPANY LETTERHEAD
With reference to Form N-4 Registration Statement filed on behalf of Citicorp
Life Insurance Company and the Citicorp Life Variable Annuity Separate Account
with the Securities and Exchange Commission covering flexible premium variable
deferred annuity policies, I have examined such documents and such law and have
made due inquiries as I considered necessary and appropriate, and on the basis
of such examination and inquiries, it is my opinion that:
1. The Citicorp Life Insurance Company is duly organized and validly
existing under the laws of the State of Arizona and has been duly
authorized to issue flexible premium variable deferred annuity
policies by the Department of Insurance of the State of Arizona.
2. The Citicorp Life Variable Annuity Separate Account is a duly
authorized and existing separate account established pursuant to the
provisions of the Revised Statutes of the state of Arizona;
3. The flexible premium variable deferred annuity policies, when issued
as contemplated by said Form N-4 Registration Statement, will
constitute legal, validly issued and binding obligations of Citicorp
Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to Post-Effective
Amendment No. 8 to the Form N-4 Registration Statement.
Citicorp Life Insurance Company
/s/ Catherine S. Mulholland
-----------------------------------
Catherine S. Mulholland
Sr. Vice President, General Counsel
April 23, 1998
--------------
(Date)
<PAGE>
CITICORP LIFE INSURANCE COMPANY LETTERHEAD
I hereby consent to the use of my name under the caption "Legal Matters" in the
Statement of Additional Information contained in this Post-Effective Amendment
to the Form N-4 Registration Statement, filed on behalf of Citicorp Life
Insurance Company and the Citicorp Life Variable Annuity Separate Account with
the Securities and Exchange Commission.
Citicorp Life Insurance Company
/s/ Catherine S. Mulholland
-----------------------------------
Catherine S. Mulholland
Sr. Vice President, General Counsel
April 23, 1998
--------------
(Date)
EXHIBIT 10(a)
Sutherland, Asbill & Brennan LLP
Atlanta o Austin o New York o Washington
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
April 23, 1998
VIA EDGARLINK
- -------------
Board of Directors
Citicorp Life Insurance Company
800 Silver Lake Boulevard
Dover, DE 19904
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of
Post-Effective Amendment No. 8 to the registration statement on Form N-4 for
Citicorp Life Variable Annuity Separate Account (File No. 33-81626). In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Stephen E. Roth
--------------------
Stephen E. Roth
EXHIBIT 10(b)
Independent Auditors' Consent
-----------------------------
The Board of Directors
Citicorp Life Insurance Company:
We consent to the use of our reports included herein and to the reference of our
firm under the headings "Experts" and "Financial Statements" in the Statement of
Additional Information filed as part of Post Effective Amendment No. 8 to the
registration statement on Form N-4 for Citicorp Life Variable Annuity Separate
Account (File No. 33-81626).
Our report dated April 23, 1998, covering the financial statements of Citicorp
Life Insurance Company, contains an explanatory paragraph which states that the
financial statements are presented in conformity with accounting practices
prescribed or permitted by the State of Arizona Department of Insurance. These
practices differ in some respects from generally accepted accounting principles.
The financial statements do not include any adjustments that might result from
the differences.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
April 27, 1998
