<PAGE>
As filed with the Securities and Exchange Commission on August 13, 1996
Registration No. 33-82890
811-8700
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM N-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4
FIRST ING OF NEW YORK SEPARATE ACCOUNT A1
(Exact Name of Registrant)
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
225 Broadway, Suite 1901
New York, New York 10007
(Address of Depositor's Principal Executive Offices)
(303) 860-1290
(Depositor's Telephone Number, including Area Code)
Copy to:
EUGENE L. COPELAND KURT W. BERNLOHR
First ING Life Insurance Company First ING Life Insurance Company of New York
of New York 1290 Broadway
1290 Broadway Denver, Colorado 80203-5699
Denver, Colorado 80203-5699 (303) 894-4923
(Name and Address of Agent for
Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICAL AFTER THE
EFFECTIVE DATE.
________________
DECLARATION PURSUANT TO RULE 24F-2
An indefinite amount of the Registrant's securities has been registered under
the Securities Act of 1933 pursuant to paragraph (b)(2) of Rule 24f-2 under the
Investment Company Act of 1940. That election was originally filed as part of
the Registrant's initial Registration Statement filed on August 16, 1994. In
connection therewith, a filing fee of $500 was paid to the Commission.
Registrant need not file a Form 24f-2 for its fiscal year ended December 31,
1995 because it did not sell any securities during that time.
________________
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
FIRST ING OF NEW YORK SEPARATE ACCOUNT A1 (File No. 33-82890)
Cross-Reference Sheet
Pursuant to Rule 495(a)
Under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-4 Item No. Caption in Prospectus
- ----------------- ---------------------
<S> <C>
1. Cover Page Cover Page
2. Definitions Glossary of Terms
3. Synopsis Summary of the Exchequer
Variable Annuity
4. Condensed Financial Condensed Financial
Information Information
5. General Description of Facts about First ING
Registrant, Depositor Life and the Variable
and Portfolio Companies Account; The Guaranteed
Interest Division
6. Deductions and Expenses Fee Table; Summary of the
Exchequer Variable
Annuity; Contract Charges
and Fees
7. General Description of Facts about the Contract
Variable Annuity
Contracts
8. Annuity Period Choosing an Annuity Option
9. Death Benefit Summary of the Exchequer
Variable Annuity; Values
under the Contract
10. Purchases and Contract Summary of the Exchequer
Value Variable Annuity; Facts
about the Contract;
Values under the Contract
11. Redemptions Summary of the Exchequer
Variable Annuity;
Contract Charges and
Fees; Values under the
Contract; Choosing an
Annuity Option
12. Taxes Summary of the Exchequer
Variable Annuity;
Contract Charges and
Fees; Federal Tax
Considerations
13. Legal Proceedings Regulatory Information
14. Table of Contents of Table of Contents of
Statement of Statement of Additional
Additional Information Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Caption in Statement of Additional
Information (or Prospectus, Where
Form N-4 Item No. Indicated)
- ----------------- --------------------------------------
<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and First ING Life; Prospectus -- Facts
History about First ING Life and the Variable
Account
18. Services First ING Life; The Administrator
19. Purchase of Securities Prospectus -- Facts About the Contract
Being Offered
20. Underwriters First ING Life
21. Calculation of Performance Information; Prospectus -
Performance Data Appendix A, Performance Information
22. Annuity Payouts Performance Information; Prospectus --
Choosing an Annuity Option
23. Financial Statements Financial Statements of First ING
Life Insurance Company of New York
</TABLE>
Part C - Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
2
<PAGE>
THE EXCHEQUER VARIABLE ANNUITY
A FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
issued by
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
AND
FIRST ING OF NEW YORK SEPARATE ACCOUNT A1
This prospectus describes The Exchequer
Variable Annuity, a flexible premium
deferred combination fixed and
variable annuity contract (the
"Contract") offered by First ING Life
Insurance Company of New York ("First
ING Life," "we," "our" or "us"). The
Contract is designed to aid in
long-term financial planning and
generally provides automatic
reinvestment and compounding of any
investment earnings on a tax-deferred
basis for retirement or other
long-term purposes. The Owner ("you"
or "your") purchases the Contract with
an initial Purchase Payment and is
permitted to make additional Purchase
Payments.
The Contract is funded by First ING of
New York Separate Account A1 (the
"Variable Account"). Nineteen
Divisions of the Variable Account are
currently available under the
Contract. Each of the Divisions of the
Variable Account invests in shares of
a corresponding Portfolio of a mutual
fund. A Guaranteed Interest Division,
which guarantees a minimum fixed rate
of interest, is also available.
Investors may utilize both the
Variable Account and the Guaranteed
Interest Division simultaneously.
You may allocate your Purchase Payments
among the Divisions available under
the Contract in any way you choose,
subject to certain restrictions.
During the Accumulation Period, you
may change the allocation of your
Accumulation Value up to 12 times per
Contract Year free of charge.
You may surrender the Contract for its
Cash Surrender Value at any time prior
to the Annuity Date. The Cash
Surrender Value will vary daily with
the investment results of the
Divisions of the Variable Account and
any interest credited to the
Guaranteed Interest Division. We do
not guarantee any minimum Cash
Surrender Value for amounts allocated
to the Divisions of the Variable
Account. You may withdraw some of your
Cash Surrender Value by making partial
withdrawals, subject to certain
restrictions. Surrenders and
withdrawals may be subject to a
surrender charge and a 10% tax penalty.
We will pay a Death Benefit to the
Beneficiary if the Owner dies prior to
the Annuity Date.
This prospectus describes the Contract
and your principal rights and
limitations and sets forth the
information concerning the Variable
Account that investors should know
before investing. A prospectus for
each Portfolio being considered must
accompany this prospectus and should
be read in conjunction with this
prospectus. The prospectuses provide
information regarding investment
activities and objectives of the
Portfolios. A Statement of Additional
Information, dated __________ ____,
1996, about the Variable Account has
been filed with the Securities and
Exchange Commission ("SEC") and is
available without charge. To obtain a
copy of this document, call or write
our Customer Service Center. The Table
of Contents of the Statement of
Additional Information may be found on
page 40 of this prospectus. The
Statement of Additional Information is
incorporated herein by reference.
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.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUS
FOR EACH OF THE PORTFOLIOS BEING CONSIDERED.
<TABLE>
<CAPTION>
<S> <C> <C>
Issued by: Distributed by: Customer Service Center:
First ING Life Insurance ING America Equities, Inc. P.O. Box 173778
Company of New York 1290 Broadway, Attn: Denver, CO 80217-3778
1290 Broadway Variable 1-800-249-9099
Denver, CO 80203-5699 Denver, CO 80203
1-800-525-9852
Date of Prospectus: __________ ____1996
</TABLE>
1
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS........................................................................5
FEE TABLE................................................................................7
SUMMARY OF THE EXCHEQUER VARIABLE ANNUITY...............................................10
General Description.....................................................................10
Purchase Payments.......................................................................11
Guaranteed Death Benefit................................................................11
Partial Withdrawals.....................................................................11
Surrendering Your Contract..............................................................11
Your Right to Cancel the Contract.......................................................11
Contract Charges and Fees...............................................................11
CONDENSED FINANCIAL INFORMATION.........................................................13
FACTS ABOUT FIRST ING LIFE AND THE VARIABLE ACCOUNT.....................................13
First ING Life..........................................................................13
Customer Service Center.................................................................13
The Variable Account....................................................................13
The Portfolios..........................................................................14
Changes Within The Variable Account.....................................................17
FACTS ABOUT THE CONTRACT................................................................17
Your Right to Cancel the Contract.......................................................17
Purchase Payments.......................................................................17
Initial Purchase Payment...............................................................17
Additional Purchase Payments...........................................................17
Where to Make Payments.................................................................18
Crediting and Allocation of Purchase Payments..........................................18
Dollar Cost Averaging...................................................................18
Automatic Rebalancing...................................................................19
Reports to Owners.......................................................................19
Group or Sponsored Arrangements.........................................................20
Offering the Contract...................................................................20
VALUES UNDER THE CONTRACT...............................................................20
Guaranteed Death Benefit................................................................20
Death Benefit Proceeds..................................................................21
How to Claim Payouts to Beneficiary....................................................21
Your Accumulation Value.................................................................21
Measurement of Investment Experience for the Divisions of the Variable Account..........21
Accumulation Unit Value................................................................21
How We Determine the Accumulation Experience Factor....................................21
Net Rate of Return for a Division of the Variable Account..............................22
Division Accumulation Value of Each Division of the Variable Account....................22
Division Accumulation Value of the Guaranteed Interest Division.........................22
Your Right to Transfer Among Divisions..................................................23
Partial Withdrawals.....................................................................23
Demand Withdrawal Option...............................................................24
Systematic Income Program..............................................................24
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FING Exchequer 2
</TABLE>
<PAGE>
<TABLE>
<S> <C>
IRA Income Program -- IRA Contracts Only.............................................25
The Amount You May Withdraw Without a Surrender Charge.................................25
Tax Consequences of Partial Withdrawals................................................26
Surrendering to Receive the Cash Surrender Value........................................26
When We Make Payouts....................................................................26
THE GUARANTEED INTEREST DIVISION........................................................27
OTHER INFORMATION.......................................................................27
The Owner...............................................................................27
The Annuitant...........................................................................27
The Beneficiary.........................................................................28
Change of Owner, Beneficiary or Annuitant...............................................28
Other Contract Provisions...............................................................28
In Case of Errors on the Application or Enrollment Form................................28
Procedures.............................................................................28
Telephone Privileges...................................................................28
Assigning the Contract as Collateral...................................................29
Non-Participating......................................................................29
Authority to Change Contract Terms......................................................29
Contract Changes - Applicable Tax Law..................................................29
CONTRACT CHARGES AND FEES...............................................................29
Deduction of Charges....................................................................29
Charges Deducted from the Accumulation Value............................................29
Surrender Charge.......................................................................29
Partial Withdrawal Transaction Charge..................................................30
Administrative Charge..................................................................30
Excess Transfer Charge.................................................................30
Taxes on Purchase Payments.............................................................30
Charges Deducted From The Divisions.....................................................31
Mortality and Expense Risk Charge......................................................31
Asset-based Administrative Charge......................................................31
Portfolio Expenses......................................................................31
CHOOSING AN ANNUITY OPTION..............................................................31
General Provisions......................................................................31
Supplementary Contract.................................................................31
Election and Changes of Annuity Date...................................................31
Election and Changes of Annuity Option.................................................31
Payout Options..........................................................................32
Variable Annuity Payout................................................................32
Fixed Annuity Payout...................................................................32
Combination Annuity Payout.............................................................32
Frequency and Amount of Annuity Payouts................................................33
Payout Period Options...................................................................33
Payouts Other Than Monthly.............................................................34
Commuting Provisions...................................................................34
REGULATORY INFORMATION..................................................................34
Voting Privileges.......................................................................34
State Regulation........................................................................35
Legal Proceedings.......................................................................35
Legal Matters...........................................................................35
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FING Exchequer 3
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Experts.................................................................................35
FEDERAL TAX CONSIDERATIONS..............................................................35
Introduction............................................................................35
First ING Life Tax Status...............................................................36
Taxation of Annuities...................................................................36
1. Withdrawals Prior to the Annuity Commencement Date..................................36
2. Annuity Payouts after the Annuity Date..............................................36
3. Penalty Tax on Certain Withdrawals or Distributions.................................36
Taxation of Individual Retirement Annuities.............................................37
Distribution-at-Death Rules.............................................................37
Taxation of Death Benefit Proceeds......................................................38
Contracts Owned by Non-Natural Persons..................................................38
Section 1035 Exchanges..................................................................38
Assignments.............................................................................38
Multiple Contracts Rule.................................................................39
Diversification Standards...............................................................39
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION................................40
APPENDIX A..............................................................................41
Example 1: Hypothetical Illustration of Systematic Income Program Withdrawals.........41
Example 2: Hypothetical Illustration of a Series of Demand Withdrawals................41
Example 3: Hypothetical Illustration of a Full Surrender..............................43
APPENDIX B..............................................................................44
Performance Information.................................................................44
Performance Chart.......................................................................46
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
- -------------------------------------------------------------------------------
4
FING Exchequer
<PAGE>
GLOSSARY OF TERMS
As used in this prospectus, the following terms have the indicated meanings.
there are other capitalized terms which are explained or defined in other parts
of this prospectus.
ACCUMULATION EXPERIENCE FACTOR -- The factor which reflects the investment
experience of the Portfolio in which a Division of the Variable Account
invests as well as the asset-based charges assessed against that Division for
a Valuation Period during the Accumulation Period.
ACCUMULATION PERIOD -- The Period of time from the Contract Date to the Annuity
Date.
ACCUMULATION UNIT -- A unit of measurement which we use to calculate the
Accumulation Value during the Accumulation Period.
ACCUMULATION UNIT VALUE -- The Value of the Accumulation Units of the Divisions
of the Variable Account. The Accumulation Unit Value is determined as of each
Valuation Date.
ACCUMULATION VALUE -- The amount that your Contract
provides which is available for investment at any time prior to the Annuity
Date. initially, this amount is equal to the initial Purchase Payment.
Thereafter, the Accumulation Value will reflect additional Purchase Payments
made, investment experience of the Divisions of the Variable Account you
select, interest credited to the guaranteed interest Division, charges deducted
and partial withdrawals taken.
AGE -- The Age on the birthday prior to any date for which Age is to be
determined.
ANNUITANT -- The person designated by the Owner to receive the Annuity Payouts
and on whose life Annuity Payouts are based.
ANNUITY Date -- The date as of which Annuity Payouts begin.
ANNUITY EXPERIENCE FACTOR -- The factor which reflects the investment experience
of the Portfolio in which a Division of the Variable Account invests as well
as the asset-based charges assessed against that Division for a valuation
Period during the Annuity Period.
ANNUITY OPTIONS -- Options the Owner elects consisting of both the payout option
and the payout Period option that determine the Annuity payout.
ANNUITY PAYOUT -- The Periodic Payouts an Annuitant receives. They may be either
a fixed or a variable amount, or a combination of fixed and variable, based on
the payout option elected.
ANNUITY Period -- The Period of time from the Annuity Date until the last
Annuity payout is made to the Annuitant.
ANNUITY UNIT -- A unit of measurement used to calculate any Periodic Annuity
Payouts during the Annuity Period.
ANNUITY UNIT VALUE -- The Value of the Annuity units of the Divisions of the
Variable Account. The Annuity unit Value is determined as of each valuation
date.
BENEFICIARY (OR BENEFICIARIES) -- The person (or persons) designated to receive
the death benefit in the case of the death of the Owner during the
Accumulation Period.
BENCHMARK TOTAL RETURN -- The interest rate assumed for the purposes of
calculating the Annuity payout upon annuitization.
BUSINESS DAY -- Any day which is a Valuation Date.
CASH SURRENDER VALUE -- The amount the Owner receives upon surrendering the
Contract.
CODE -- The internal revenue code of 1986, as amended.
CONTINGENT ANNUITANT -- The person designated by the Owner who becomes the
Annuitant upon the Annuitant's death.
CONTINGENT BENEFICIARY (OR BENEFICIARIES) -- The person (or persons) designated
by the Owner who, upon the beneficiary's death, becomes the beneficiary.
CONTRACT -- The entire Contract consisting of the basic Contract, any
applications and any Riders or Endorsements.
CONTRACT ANNIVERSARY -- The anniversary of the Contract Date.
CONTRACT DATE -- The date as of which we have received and accepted the initial
Purchase Payment and as of which we begin determining the Accumulation Value.
the Contract Date is used to determine Contract Processing Dates, Years and
Anniversaries.
CONTRACT PROCESSING DATE -- The day the annual administrative charge is deducted
from the
5
<PAGE>
Accumulation Value. The Contract Processing Date is as of each
Contract Anniversary. Any Contract Processing Date that is not a Valuation
Date is deemed to occur as of the next succeeding Valuation Date.
CONTRACT YEAR -- A period of 12 months commencing with the Contract Date or any
Contract Anniversary.
CUSTOMER SERVICE CENTER -- Where service is provided to Owners. The mailing
address and telephone number of the Customer Service Center are shown on the
cover.
DEATH BENEFIT -- The amount actually payable due to the death of the Owner
during the Accumulation Period.
DIVISION -- A Sub-account of the Variable Account, the assets of which are
invested in a corresponding Portfolio or the Guaranteed Interest Division.
DIVISION ACCUMULATION VALUE -- The value under a Contract in a particular
Division.
EARNINGS -- For purposes of calculating surrender charges, an amount equal to
the Accumulation Value less Purchase Payments not previously withdrawn.
ENDORSEMENTS -- An Endorsement changes or adds provisions to the Contract.
FREE LOOK PERIOD -- The period of time within which an Owner may examine thE
Contract and return it for a refunD.
GENERAL ACCOUNT -- The account which contains all of our assets other than those
held in our separate accounts.
GROSS PARTIAL WITHDRAWAL -- A partial withdrawal plus any applicable partial
withdrawal transaction charges plus any applicable surrender charges.
GUARANTEED INTEREST DIVISION -- Part of our General Account to which a portion
of your Accumulation Value may be allocated and which provides guarantees of
principal and interest.
IRA CONTRACT -- An Individual Retirement Annuity, an IRA Rollover or an IRA
Transfer offered to an individual for use in connection with Sections 408(a)
and (b) of the Code.
NASD -- The National Association of Securities Dealers, Inc.
NET PURCHASE PAYMENTS -- Total Purchase Payments made less Gross Partial
Withdrawals taken.
OWNER -- The person or persons who own the Contract and are entitled to exercise
all rights under the Contract. This person's death during the Accumulation
Period usually initiates payout of the Death Benefit.
PAYOUT OPTION -- Specifies the type of annuity to be paid and may be either
fixed, variable or a combination of fixed and variable.
PAYOUT PERIOD OPTION -- Determines how long the annuity will be paid and the
amount of the first payout.
PORTFOLIOS -- The investment options available to the Divisions of the Variable
Account. Each Portfolio has a defined investment objective.
PROCEEDS -- The amount to be paid as of the Annuity Date to provide Annuity
Payouts, upon surrender of the Contract prior to the Annuity Date, or as a
Death Benefit prior to the Annuity Date.
PURCHASE PAYMENTS -- The initial Purchase Payment and any future payments made
with respect to your Contract.
RIDER(S) -- A Rider adds benefits to the Contract.
SEC -- The United States Securities and Exchange Commission.
SUPPLEMENTARY CONTRACT -- The Election and Supplementary Agreement for a
Settlement Option amends the entire Contract when an Annuity Option becomes
effective. The Supplementary Contract describes the manner of settlement and
the rights of the Annuitant.
SUPPLEMENTARY CONTRACT EFFECTIVE DATE -- The Annuity Date or the date of other
settlement, whenever the Annuity Option becomes effective.
VALUATION DATE -- Each date as of which the net asset value of the shares of any
of the Portfolios and Unit Values of the Divisions are determined. Valuation
Dates currently occur on each day on which the New York Stock Exchange and
First ING Life's Customer Service Center are open for business, except for
days on which a Division's corresponding Portfolio does not value its shares.
VALUATION PERIOD -- The period that starts at 4 p.m. Eastern Time on a Valuation
Date and ends at 4 p.m. Eastern Time on the next succeeding Valuation Date.
VARIABLE ACCOUNT -- First ING Life Separate Account A1 established by First ING
Life to segregate the assets funding the variable benefits provided by the
Contract from the assets in our General Account.
- --------------------------------------------------------------------------------
FING Exchequer 6
<PAGE>
FEE TABLE
The purpose of the following tables is to assist you in understanding the
various costs and expenses that you may bear directly or indirectly. The tables
reflect charges under the Contracts, expenses of the Divisions and expenses of
the Portfolios. In addition to the charges and expenses described below, we may
also deduct from the Proceeds taxes incurred but not paid to cover any state or
local tax charge on Purchase Payments. See Taxes on purchase Payments, page
30. we may reduce certain charges under group or sponsored arrangements. see
Group or Sponsored Arrangements, page 20.
TRANSACTION EXPENSES
Sales Load Imposed on Purchase
Payments..................................................................... 0%
Surrender Charge/1/
<TABLE>
<CAPTION>
Contract Anniversaries Since Surrender Charge as a Percentage of
Purchase Payment Was Made Purchase Payment Withdrawn
<S> <C>
0...................................7%
1...................................6%
2...................................5%
3...................................4%
4...................................3%
5...................................2%
6+..................................0%
</TABLE>
Partial Withdrawal Transaction Charge/2/....................................$25
Excess Transfer Charge (does not apply to the first 12 transfers
in a Contract Year)/3/....................................................$25
ANNUAL CONTRACT FEES
Administrative Charge (does not apply after the Annuity Date)/4/
If Net Purchase Payments made are less than $100,000....................$30
If Net Purchase Payments made are $100,000 or more......................$ 0
Variable Account Annual Expenses (as a percentage of assets in each
Division of the Variable Account)
Mortality and Expense Risk Charge..........................................1.25%
Asset-based Administrative Charge..........................................0.15%
-----
Total Variable Account Annual Expenses.....................................1.40%
- ------------------------------------
/1/Up to certain limits, partial withdrawals may be taken without incurring a
current surrender charge. See Charges Deducted from the Accumulation Value,
page 29.
/2/The partial withdrawal transaction charge is the lesser of $25 or 2% of the
amount withdrawn, and is assessed on each demand withdrawal after the first in
any Contract Year. See Partial Withdrawal Transaction Charge, page 30.
/3/Any allocation under Dollar Cost Averaging is not considered a transfer for
this purpose. See Dollar Cost Averaging, page 18. After the Annuity Date,
transfers are limited to four each Contract Year, and no transfer charge
applies. See Excess Transfer Charge, page 30.
/4/The administrative charge is deducted as of each Contract Anniversary or upon
surrender. See Administrative Charge, page 30.
7
<PAGE>
<TABLE>
<CAPTION>
Portfolio Annual Expenses (as a percentage of Portfolio average net assets)/5/
Management Other Total Portfolio
Portfolio Fees Expenses Expenses
----------- ---------- -------- ---------------
<S> <C> <C> <C>
Neuberger & Berman Advisers Management
Trust
Limited Maturity Bond Portfolio 0.65% 0.10% 0.75%
Government Income Portfolio 0.00% 1.04% 1.04%
Growth Portfolio 0.84% 0.10% 0.94%
Partners Portfolio 0.85% 0.30% 1.15%
The Alger American Fund
Alger American Small Capitalization 0.85% 0.07% 0.92%
Portfolio
Alger American MidCap Growth 0.80% 0.10% 0.90%
Portfolio
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American Leveraged AllCap 0.85% 0.71% 1.56%/8/
Portfolio
Fidelity Variable Insurance Products
Fund
VIP Growth Portfolio 0.61% 0.09% 0.70%
VIP Overseas Portfolio 0.76% 0.15% 0.91%
VIP Money Market Portfolio 0.24% 0.09% 0.33%
Fidelity Variable Insurance Products
Fund II
VIP II Asset Manager Portfolio 0.56% 0.08% 0.64%
VIP II Index 500 Portfolio 0.00% 0.28% 0.28%
INVESCO Variable Investment Funds, Inc.
INVESCO VIF - Total Return Portfolio 0.75% 0.26% 1.01%
INVESCO VIF - Industrial Income 0.75% 0.28% 1.03%/13/
Portfolio
INVESCO VIF - High Yield Portfolio 0.60% 0.37% 0.97%/13/
INVESCO VIF - Utilities Portfolio 0.60% 1.20% 1.80%/13/
Van Eck Worldwide Insurance Trust
Worldwide Balanced Fund 0.00% 0.00%/16/ 0.00%/16/
Gold and Natural Resources Fund 0.90% 0.18% 1.08%
</TABLE>
- ----------------
/5/ The preceding Portfolio expense information was provided to us by the
Portfolios, and we have not independently verified such information. These
Portfolio expenses are not direct charges against Division assets or reductions
from Contract values; rather these Portfolio expenses are taken into
consideration in computing each underlying Portfolio's net asset value, which is
the share price used to calculate the unit values of the Divisions. For a more
complete description of the Portfolios' costs and expenses, see the prospectuses
for the Portfolios.
/6/ Neuberger & Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust. Expenses
in the table reflect expenses of the Portfolios and include each Portfolio's pro
rata portion of the operating expenses of each Portfolio's corresponding Series.
The Portfolios pay Neuberger & Berman Management, Inc. ("NBMI"), an
administration fee based on the Portfolios' net asset value. Each Portfolio's
corresponding Series pays NBMI a management fee based on the Series' average
daily net assets. Accordingly, this table combines management fees at the
Series level and administration fees at the Portfolio level in a unified fee
rate. See "Expenses" in the Trust's Prospectus.
/7/ Expenses reflect expense reimbursement. NBMI has undertaken to reimburse the
Government Income Portfolio for certain operating expenses, including the
compensation of NBMI and excluding taxes, interest, extraordinary expense,
brokerage commissions and transaction costs, that exceed 1% of the Government
Income Portfolio's average daily net asset value. Absent such reimbursement, the
"Total Portfolio Expenses" for the year ended December 31, 1995, would have been
4.80%. These expense reimbursement policies are subject to termination upon 60
days written notice to the Portfolio.
/8/ The Alger American Leveraged AllCap Portfolio's "Other Expenses" includes
0.06% of interest expense. Absent reimbursements to the Portfolio by its
Manager, the amount of "Other Expenses" and "Total Portfolio Expenses" would
have been 3.07% and 3.92%, respectively.
/9/ A portion of the brokerage commissions the Portfolio paid was used to reduce
its expenses. Without this reduction, "Total Portfolio Expenses" would have been
0.81%.
/10/ The Portfolio's expenses were voluntarily reduced by the Portfolio's
investment adviser. Absent such reimbursement, "Management Fees", "Other
Expenses" and "Total Portfolio Expenses" would have been 0.28%, 0.19% and 0.47%,
respectively.
/11/ The Portfolios' custodian fees were reduced under an expense offset
arrangement. In addition, certain expenses of the Portfolios are being absorbed
voluntarily by INVESCO Funds Group, Inc. ("IFG"). The above ratios reflect total
expenses, less expenses absorbed by IFG, prior to any expense offset.
/12/ In the absence of the voluntary expense limitation, the Total Return
Portfolio's "Other Expenses" and "Total Portfolio Expenses" would have been
1.76% and 2.51%, respectively, based on the Portfolio's actual expenses for the
fiscal year ended December 31, 1995.
/13/ In the absence of the voluntary expense limitation, the Industrial Income
Portfolio's "Other Expenses" and "Total Portfolio Expenses" would have been
1.56% and 2.31%, respectively, based on the Portfolio's actual expenses for the
fiscal year ended December 31, 1995.
/14/ In the absence of the voluntary expense limitation, the High Yield
Portfolio's "Other Expenses" and "Total Portfolio Expenses" would have been
2.11% and 2.71%, respectively, based on the Portfolio's actual expenses for the
fiscal year ended December 31, 1995.
/15/ In the absence of the voluntary expense limitation, the Utilities
Portfolio's "Other Expenses" and "Total Portfolio Expenses" would have been
56.53% and 57.13%, respectively, based on the Portfolio's actual expenses for
the fiscal year ended December 31, 1995.
/16/ The Portfolio's expenses were voluntarily reduced by the Portfolio's
investment manager. Absent such reimbursement, "Management Fees", "Other
Expenses" and "Total Portfolio Expenses" would have been 0.75%, 0.25% and 1.00%,
respectively. "Other Expenses" of 0.25% are based on a net asset estimation of
$30 million.
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8
<PAGE>
<TABLE>
<CAPTION>
EXAMPLES
The following examples depict the dollar amount of expenses that would be incurred under this Contract assuming a $1,000 initial
Purchase Payment and 5% annual return on assets. The expense amounts presented are derived from a formula which allows the maximum
$30 annual administrative charge to be expressed as a percentage of the anticipated average Contract account size. Because the
anticipated average Contract account size is greater than $1,000, the expense effect of the annual administrative charge is reduced
accordingly. Taxes on Purchase Payments may also be applicable but are not reflected in the expenses below. See Taxes on Purchase
Payments, page 30. The Death Benefit Risk Charge and the annual administrative charge do not apply during the Annuity Period.
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If you surrender your Contract If you do not surrender your Contract
at the end of the or if you annuitize at the end of the
applicable time period. applicable time period.
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DIVISION INVESTING IN: 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST
Limited Maturity Bond
Portfolio 92 119 148 253 22 69 118 253
Government Income Portfolio 95 128 162 281 25 78 132 281
Growth Portfolio 94 125 157 271 24 75 127 271
Partners Portfolio 96 131 168 291 26 81 138 291
THE ALGER AMERICAN FUND
Alger American Small
Capitalization Portfolio 94 124 157 269 24 74 127 269
Alger American MidCap
Growth Portfolio 94 123 156 267 24 73 126 267
Alger American Growth Portfolio 93 122 153 263 23 72 123 263
Alger American
Leveraged AllCap Portfolio 100 142 187 329 30 92 157 329
FIDELITY VARIABLE
INSURANCE PRODUCTS FUNDS
VIP Growth Portfolio 92 118 146 248 22 68 116 248
VIP Overseas Portfolio 94 124 156 268 24 74 126 268
VIP Money Market Portfolio 88 107 128 211 18 57 98 211
FIDELITY VARIABLE
INSURANCE PRODUCTS FUNDS II
VIP II Asset Manager Portfolio 93 120 150 257 23 70 120 257
VIP II Index 500 Portfolio 88 105 125 206 18 55 95 206
INVESCO VARIABLE INVESTMENT FUNDS,
INC.
INVESCO VIF - Total Return
Portfolio 95 127 161 278 25 77 131 278
INVESCO VIF - Industrial Income
Portfolio 95 127 162 280 25 77 132 280
INVESCO VIF - High Yield
Portfolio 95 126 159 274 25 76 129 274
INVESCO VIF - Utilities
Portfolio 103 149 198 350 33 99 168 350
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Balanced Fund 85 97 111 177 15 47 81 177
Gold and Natural Resources Fund 96 129 164 285 26 79 134 285
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THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN, SUBJECT TO THE GUARANTEES UNDER THE CONTRACT.
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FING Exchequer
</TABLE>
9
<PAGE>
SUMMARY OF THE EXCHEQUER VARIABLE ANNUITY
GENERAL DESCRIPTION
This prospectus provides you with the necessary information to make a decision
on purchasing the Exchequer Variable Annuity offered by First ING Life and
funded by the Variable Account as well as by our General Account. The
description of the Contracts in this prospectus is subject to the terms of the
Contract purchased by an Owner and any Endorsement or Rider to it. An applicant
may review a copy of the Contract and any Endorsement or Rider to it on request.
This summary provides a brief overview of the more significant aspects of the
Contract. Further detail is provided in this prospectus, the related Statement
of Additional Information, the Contract, and the prospectuses of the Portfolios
being considered. The description of the Contract in this prospectus, together
with any applications and any Riders or Endorsements, constitute the entire
agreement between you and us and should be retained. For further information
about the Contract, contact the First ING Life Customer Service Center.
We can issue a Contract if the Owner and Annuitant are not older than Age 85,
and we can accept additional Purchase Payments prior to the Annuity Date until
the Owner reaches Age 86. For an IRA Contract, you generally may not make
Purchase Payments after March 31 of the year following the year in which you
reach Age 70 1/2.
The Contract may be used as an Individual Retirement Annuity, an IRA Rollover,
or an IRA Transfer ("IRA Contracts"). IRA Contracts are offered to individuals
for use in connection with Sections 408(a) and (b) of the Code. See your tax
adviser concerning these matters.
Purchase Payments or Accumulation Value may be allocated among one or more of
nineteen Divisions of the Variable Account, a separate account of First ING
Life, or to the Guaranteed Interest Division. We do not promise that your
Accumulation Value will increase. Depending on the Contract's investment
experience for funds invested in the Divisions of the Variable Account and
interest credited to the Guaranteed Interest Division, the Accumulation Value,
Cash Surrender Value and Death Benefit may increase or decrease on any day.
Furthermore, any investment earnings under the Contract generally accumulate
free from annual taxation under current tax law until distributed.
Each Division of the Variable Account invests its assets without sales charge in
a corresponding mutual fund Portfolio. The Portfolios have their own distinct
investment objectives and are managed by experienced fund investment advisers.
You bear the investment risk for funds invested in the Divisions of the Variable
Account; you receive the benefits from favorable experience but also bear the
risk of poor investment experience. These Portfolios are available only to serve
as the underlying investment for variable annuity and variable life insurance
contracts issued through separate accounts of First ING Life as well as other
life insurance companies, and to certain qualified pension and retirement plans.
They are not directly available to individual investors. For more information
regarding the Variable Account, the Divisions and the Portfolios, see The
Variable Account, page 13, and The Portfolios, page 14.
The Guaranteed Interest Division is a part of our General Account and guarantees
principal and a minimum interest rate of 3%. This interest will be paid
regardless of the actual investment experience of the General Account; we bear
the full amount of the investment risk for any amounts allocated to the
Guaranteed Interest Division. For more information about The Guaranteed Interest
Division, see THE GUARANTEED INTEREST DIVISION, page 27.
The Contract also offers a choice of Annuity Options to which you may apply the
Accumulation Value less taxes incurred but not deducted as of the Annuity Date.
These Annuity Options are also available to the Beneficiary to apply the Death
Benefit as of the Supplementary Contract Effective Date. You have the option to
change the Annuity Date within certain limits.
The ultimate effect of Federal income taxes on the amounts held under a
Contract, on Annuity Payouts and on the economic benefits to the Owner,
Annuitant or Beneficiary depends on First ING Life's tax status and upon the tax
status of the parties concerned. In general, an Owner is not taxed on increases
in value under an annuity Contract until some form of distribution is made under
it. There may be tax penalties if you make a partial withdrawal or surrender the
Contract before reaching Age 59 1/2. See FEDERAL TAX CONSIDERATIONS, page 35.
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FING Exchequer
10
<PAGE>
Purchase Payments
The minimum initial Purchase Payment is $5,000 ($1,000 for an IRA Contract). The
minimum additional Purchase Payment we will accept is $500 ($250 for an IRA
Contract or $90 if you have set up your IRA on a monthly program of Purchase
Payments). We will take under consideration and may refuse to accept a Purchase
Payment if it would cause the sum of all Net Purchase Payments received under
the Contract to exceed $1,500,000.
The initial Purchase Payment is allocated to each Division according to your
most recent allocation instructions unless the Contract is issued in a state
that requires the return of Purchase Payments during the Free Look Period. In
those states, your initial Purchase Payment allocated to the Guaranteed Interest
Division will be allocated to that Division upon receipt; your initial Purchase
Payment allocated to the Divisions of the Variable Account will be allocated to
the Division investing in the Fidelity VIP Money Market Portfolio during the
Free Look Period and then transferred to the Divisions of the Variable Account
according to your most recent allocation instructions. See Your Right to Cancel
the Contract, page 17.
All percentage allocations must be in whole numbers. We allocate any additional
Purchase Payments among the Divisions in accordance with your most recent
allocation instructions, or as otherwise instructed by you. You may designate a
different allocation with respect to any Purchase Payment by sending us a
written notice with the Purchase Payment or by telephone, if the proper
telephone authorization form is on file with us. See Crediting and Allocation
of Purchase Payments, page 18.
You may choose to have a specified dollar amount transferred from the Divisions
investing in the Fidelity VIP Money Market Portfolio or the Neuberger & Berman
AMT Limited Maturity Bond Portfolio to the other Divisions of the Variable
Account on a monthly basis during the Accumulation Period with the objective of
shielding your investment from short-term price fluctuations. See Dollar Cost
Averaging, page 18.
You may transfer or reallocate your Accumulation Value among the Divisions of
the Variable Account any time after the end of the Free Look Period. There is no
charge for the first 12 transfers per Contract Year during the Accumulation
Period. A $25 charge will be assessed for each transfer in excess of 12 during a
Contract Year. During the Annuity Period, you may make up to four transfers per
Contract Year and no transfer charge will be assessed.
Guaranteed Death Benefit
The Contract provides a Guaranteed Death Benefit to the Beneficiary if the Owner
dies prior to the Annuity Date. For more details, see Guaranteed Death Benefit,
page 20, and Death Benefit Proceeds, page 21.
Partial Withdrawals
After the Free Look Period, prior to the Annuity Date and while the Contract is
in effect, you may take partial withdrawals under any of three options: the
Demand Withdrawal Option, the Systematic Income Program or the IRA Income
Program.
A penalty tax may be assessed upon partial withdrawals. See Taxation of
Annuities, page 36.
Surrendering Your Contract
You may surrender the Contract at any time prior to the Annuity Date and receive
its Cash Surrender Value. No Annuity Options are available upon surrender. No
surrender may be made on or after the Annuity Date or with respect to any
amounts applied under an Annuity Option. See Surrendering to Receive the Cash
Surrender Value, page 26.
A penalty tax may be assessed upon surrender. See Taxation of Annuities, page
36.
Your Right to Cancel the Contract
At any time during the Free Look Period, you may cancel your Contract and
receive a refund equal to your Accumulation Value plus charges deducted.
However, if required by state law, we will return the Purchase Payments made.
The Free Look Period is a ten day period of time beginning when the Contract is
delivered to you. See Your Right to Cancel the Contract, page 17.
Contract Charges and Fees
We deduct charges for certain transactions and make deductions from the
Divisions of the Variable Account and the Guaranteed Interest Division in the
same proportion that the Division Accumulation Value of each Division bears to
the total Accumulation Value. We may
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FING Echequer 11
<PAGE>
reduce certain charges for group or sponsored arrangements. See Group or
Sponsored Arrangements, page 20. A description of the charges we deduct
follows.
If a Purchase Payment is withdrawn or surrendered within five full Contract
Years since the Contract Anniversary at the end of the Contract Year in which
the Purchase Payment was made, a surrender charge is assessed. If a Purchase
Payment is made as of the first day of a Contract Year, a surrender charge will
apply against this Purchase Payment for six full years. For purposes of
determining the amount of Purchase Payments withdrawn and the surrender charge,
withdrawals will be allocated first to the Earnings, then to Purchase Payments
held for at least five full Contract Years since the Contract Anniversary at the
end of the Contract Year in which the Purchase Payment was made, then to the
amount by which 15% of the Accumulation Value as of the last Contract
Anniversary (less any Gross Partial Withdrawals already made during the Contract
Year which are not considered to be withdrawals of Purchase Payments) exceeds
the Earnings in the Contract, if any, and finally to Purchase Payments to which
the lowest surrender charge applies. The surrender charge is 7% of the Purchase
Payment if withdrawn in the Contract Year during which the Purchase Payment was
made, reduced by 1% each year for the next five Contract Years and is 0% in the
sixth Contract Year following the Contract Year in which the Purchase Payment
was made. See Surrender Charge, page 29.
If you take more than one demand withdrawal in a Contract Year or take a demand
withdrawal in the same Contract Year while the Systematic Income Program is in
effect, we impose a partial withdrawal transaction charge equal to the lesser of
$25 or 2% of the amount withdrawn. See Partial Withdrawal Transaction Charge,
page 30.
We charge each Division of the Variable Account with a daily asset-based charge
equivalent to an annual rate of 1.250% for mortality and expense risks. See
Charges Deducted from the Accumulation Value, page 29.
We charge each Division of the Variable Account with a daily asset-based charge
equivalent to an annual rate of 0.15% to cover a portion of Contract
administration costs. See Asset-based Administrative Charge, page 31.
During the Accumulation Period, we deduct an annual administrative charge of $30
per Contract Year if Net Purchase Payments are less than $100,000. If Net
Purchase Payments equal $100,000 or more, the charge is zero. We also deduct
this charge when determining the Cash Surrender Value payable if you surrender
the Contract prior to the end of a Contract Year. See Administrative Charge,
page 30.
A $25 charge will be assessed for each transfer in excess of 12 during a
Contract Year during the Accumulation Period. See Excess Transfer Charge, page
30.
Generally, taxes on Purchase Payments, if any, are incurred as of the Annuity
Date, and a charge for taxes on Purchase Payments is deducted from the
Accumulation Value as of that date. Some jurisdictions impose a tax on Purchase
Payments at the time a Purchase Payment is paid. In these jurisdictions, our
current practice is to pay the tax on Purchase Payments for you and then deduct
the charge for these taxes from the payout of Proceeds. See Taxes on Purchase
Payments, page 30.
There are fees and expenses deducted from the Portfolios. The investment
experience of the Portfolios and deductions for fees and expenses from the
Portfolios underlying the Divisions in which you are invested will affect your
Accumulation Value. Please read the prospectus for each of the Portfolios you
are considering for details.
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FING Exchequer 12
<PAGE>
CONDENSED FINANCIAL INFORMATION
The audited financial statements of First ING Life at December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995, (as
well as the auditor's reports thereon) are in the Statement of Additional
Information. These financial statements have been prepared according to
generally accepted accounting principles. There are no financial statements
included for the Variable Account because, as of December 31, 1995, the
Divisions of the Variable Account offered by this prospectus had not yet
commenced operations.
FACTS ABOUT FIRST ING LIFE AND THE VARIABLE ACCOUNT
First ING Life
First ING Life is a stock life insurance company originally organized under the
laws of the State of New York in 1973 as The Urbaine Life Reinsurance Company.
The name of the company was changed in 1994 to First ING Life Insurance Company
of New York. Our headquarters are located at 225 Broadway, Suite 1901, New
York, New York 10007. Our total assets exceeded $33 million, and our
shareholder's equity exceeded $21 million, on a generally accepted accounting
principles basis as of December 31, 1995. We are admitted to do business in
twenty states and the District of Columbia. Our primary current focus is the
marketing of direct life insurance and annuity business.
First ING Life actively manages its General Account investment portfolio to meet
both long-term and short-term contractual obligations. The General Account
portfolio invests primarily in investment-grade bonds and low-risk policy loans.
In 1993, the company was purchased and became a wholly owned indirect subsidiary
of ING Groep, N.V. ("ING"), one of the world's three largest diversified
financial services organizations. ING is headquartered in Amsterdam,
Netherlands, and had consolidated assets exceeding $247 billion on a Dutch
(modified U.S.) generally accepted accounting principles basis as of December
31, 1995.
The principal underwriter and distributor of the Contracts is ING America
Equities, Inc. ("ING America Equities"), an affiliate of First ING Life. ING
America Equities is registered as a broker-dealer with the SEC and is a member
of the NASD. The current address for ING America Equities is 1290 Broadway,
Attn: Variable, Denver, Colorado 80203-5699.
Customer Service Center
Financial Administrative Services Corporation provides administrative services
for First ING Life at our Customer Service Center at P.O. Box 173778, Denver, CO
80217-3778. The administrative services include processing Purchase Payments,
Annuity Payouts, Death Benefits, surrenders, partial withdrawals and transfers;
preparing confirmation notices and periodic reports; calculating mortality and
expense risk charges; calculating Accumulation and Annuity Unit Values and
distributing voting materials and tax reports.
The Variable Account
All obligations under the Contract are general obligations of First ING Life.
The Variable Account is a separate investment account used to support our
variable annuity contracts and for other purposes as permitted by applicable
laws and regulations. The assets of the Variable Account are our property, but
are kept separate from our General Account and our other variable accounts. We
may offer other variable annuity contracts investing in the Variable Account
which are not discussed in this prospectus. The Variable Account may also invest
in other portfolios which are not available to the Contract described in this
prospectus.
We own all the assets in the Variable Account. Income and realized and
unrealized gains or losses from assets in the Variable Account are credited to
or charged against the Variable Account without regard to other income, gains or
losses in our other investment accounts. That portion of the assets of the
Variable Account which is equal to the reserves and other contract liabilities
with respect to the Variable Account is not chargeable with liabilities arising
out of any other business we may conduct. It may, however, be subject to
liabilities arising from Divisions of the Variable Account whose assets are
attributable to other variable annuity contracts offered by the Variable
Account. If the assets exceed the required reserves and other contract
liabilities, we may transfer the excess to our General Account. The assets in
the Variable Account will at all times equal or exceed the sum of the
accumulation values of all contracts funded by this Variable Account.
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FING Exchequer 13
<PAGE>
The Variable Account was established on March 15, 1994, and it may invest in
mutual funds or other investment portfolios which we determine to be suitable
for the contracts' purposes. The Variable Account is treated as a unit
investment trust under Federal securities laws. It is registered with the SEC
under the Investment Company Act of 1940 (the "1940 Act") as an investment
company. Such registration does not involve any supervision by the SEC of the
management of the Variable Account or First ING Life. The Variable Account is
governed by the laws of New York, our state of domicile, and may also be
governed by laws of other states in which we do business.
Nineteen Divisions of the Variable Account are currently available under the
Contract. Each of the Divisions invests in shares of a corresponding Portfolio
of a mutual fund. Therefore, the investment experience of your Contract depends
on the experience of the Divisions you select. These Portfolios are available
only to serve as the underlying investment for variable annuity and variable
life insurance contracts issued through separate accounts of First ING Life as
well as other life insurance companies, and to certain qualified pension and
retirement plans. They are not available directly to individual investors.
The Portfolios
Currently, each Division of the Variable Account offered pursuant to this
prospectus invests in a corresponding Portfolio. See the prospectus for each of
the Portfolios being considered for details.
Shares of these Portfolios are sold to separate accounts of insurance companies,
which may or may not be affiliated with First ING Life or each other, a practice
known as "shared funding." These shares may also be sold to separate accounts
funding both variable annuity contracts and variable life insurance policies, a
practice known as "mixed funding." As a result, there is a possibility that a
material conflict may arise between the interests of Owners of Contracts in
which Division Accumulation Values are allocated to the Variable Account and of
owners of contracts in which accumulation values are allocated to one or more
other separate accounts investing in any one of the Portfolios. Shares of these
Portfolios may also be sold to certain qualified pension and retirement plans
qualifying under Section 401 of the Code that include cash or deferred
arrangements under Section 401(k) of the Code. As a result, there is a
possibility that a material conflict may arise between the interests of owners
generally or certain classes of owners, and such retirement plans or
participants in such retirement plans. In the event of a material conflict,
First ING Life will consider what action may be appropriate, including removing
the Portfolio from the Variable Account. There are certain risks associated with
mixed and shared funding and with the sale of shares to qualified pension and
retirement plans, as disclosed in each Portfolio's prospectus.
Each of the Portfolios is part of a separate series of an open-end diversified
management investment company which receives investment advice from a registered
investment adviser. The Neuberger & Berman Advisers Management Trust utilizes a
master feeder structure. See the prospectus for the Neuberger & Berman Advisers
Management Trust for more details.
The Portfolios as well as their investment objectives are described below. There
is no guarantee that any Portfolio will meet its investment objectives. Meeting
objectives depends on various factors, including, in certain cases, how well the
portfolio manager anticipates changing economic and market conditions.
Please refer to the prospectus for each of the Portfolios you are considering
for more information. A description of each Portfolio, its objectives and
investments of each Portfolio follows.
Neuberger & Berman Advisers Management Trust
The Neuberger & Berman Advisers Management Trust (the "Trust") is a registered,
open-end management investment company organized as a Delaware business trust
pursuant to a Trust Instrument dated May 23, 1994. The Trust is comprised of
separate Portfolios, each of which invests all of its net investable assets in a
corresponding series of Advisers Managers Trust ("Managers Trust"), a
diversified, open-end management investment company organized as of May 24, 1994
as a New York common law trust. This master feeder structure is different from
that of many other investment companies which directly acquire and manage their
own portfolios of securities. Neuberger & Berman Management Incorporated acts
as investment manager to Managers Trust and Neuberger & Berman, L.P. as sub-
adviser.
Limited Maturity Bond Portfolio -- seeks the highest level of current income
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return. The Limited Maturity
Bond Portfolio pursues its investment objectives primarily by investing in a
diversified portfolio of short-to-intermediate term U.S. Government and
Agency securities and debt securities issued by financial institutions,
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FING Exchequer 14
<PAGE>
corporations and others, primarily of investment grade. The Limited Maturity
Bond Portfolio may invest up to 10% of its net assets, measured at the time
of investment, in debt securities rated below investment grade or in
comparable unrated securities. The Limited Maturity Bond Portfolio's dollar
weighted average portfolio duration may range up to five years.
Government Income Portfolio -- seeks a high level of current income and total
return, consistent with safety of principal. The Portfolio invests at least
65% of its total assets in U.S. Government and Agency securities, with an
emphasis on U.S. Government mortgage-backed securities. In addition, the
Portfolio invests at least 25% of its total assets in mortgage-backed
securities (including U.S. Government mortgage-backed securities) and asset-
backed securities. The investment manager follows a flexible investment
strategy depending on market conditions and interest rate trends.
Growth Portfolio -- seeks capital appreciation without regard to income. Invests
in securities believed to have maximum potential for long-term capital
appreciation. To maximize this potential, securities convertible into common
stocks and warrants and options to purchase stocks may be utilized. This
investment program involves greater risks and share price volatility than
programs that invest in more conservative securities.
Partners Portfolio -- seeks capital growth through an investment approach that
is designed to increase capital with reasonable risk. Its investment program
seeks securities believed to be undervalued based on strong fundamentals such
as low price-to-earnings ratio, consistent cash flow, and support from asset
values. Up to 15% of the series net assets, measured at the time of
investment, may be invested in corporate debt securities rated below
investment grade.
The Alger American Fund
The Alger American Fund is a registered investment company organized on April 6,
1988 as a multi-series Massachusetts business trust. The Fund's investment
manager is Fred Alger Management, Inc., which has been in the business of
providing investment advisory services since 1964.
Alger American Small Capitalization Portfolio -- seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities, primarily of companies that, at the time of purchase of
the securities, have "total market capitalization" - present market value per
share multiplied by the number of shares outstanding - within the range of
companies included in the Russell 2000 Growth Index, updated quarterly. The
Russell 2000 Growth Index is designed to track the performance of small
capitalization companies. As of December 31, 1995, the range of market
capitalization of these companies was $20 million to $2.2 billion.
Alger American MidCap Growth Portfolio -- seeks long-term capital appreciation
by investing in a diversified, actively managed portfolio of equity
securities, primarily of companies that, at the time of purchase of the
securities, have total market capitalization within the range of companies
included in the S&P MidCap 4000 Index, updated quarterly. The S&P MidCap 400
Index is designed to track the performance of medium capitalization
companies. As of December 31, 1995, the range of market capitalization of
these companies was $118 million to $7.5 billion.
Alger American Growth Portfolio -- seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies with a total market capitalization of $1 billion or
greater.
Alger American Leveraged AllCap Portfolio -- seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities. The Portfolio may engage in leveraging (up to 33 1/3% of
its assets) and options and futures transactions, which are deemed to be
speculative and which may cause the Portfolio's net asset value to be more
volatile than the net asset value of a fund that does not engage in these
activities.
Fidelity Variable Insurance Products Fund and Variable Insurance Products Fund
II
Fidelity Variable Insurance Products Fund and Variable Insurance Products Fund
II are open-end, diversified, management investment companies organized as
Massachusetts business trusts on November 13, 1981 and March 21, 1988,
respectively. The funds are managed by Fidelity Management & Research Company
("FMR") which handles the Funds' business affairs. FMR is the management arm of
Fidelity Investments, which was established in 1946 and is now America's
largest mutual fund manager.
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FING Exchequer 15
<PAGE>
VIP Growth Portfolio -- seeks capital appreciation by investing in common
stocks, although the Portfolio is not limited to any one type of security.
VIP Overseas Portfolio -- seeks long term growth of capital primarily through
investments in foreign securities. The Overseas Portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
VIP Money Market Portfolio -- seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Portfolio will
invest only in high quality U.S. dollar-denominated money market securities of
domestic and foreign issuers.
VIP II Asset Manager Portfolio -- seeks high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign stocks,
bonds, and short-term fixed-income instruments.
VIP II Index 500 Portfolio -- seeks to provide investment results that
correspond to the total return (i.e., the combination of capital changes and
income) of common stocks publicly traded in the United States. In seeking this
objective, the Portfolio attempts to duplicate the composition and total
return of the Standard & Poor's Composite Index of 500 Stocks while keeping
transaction costs and other expenses low. The Portfolio is designed as a long-
term investment option.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a registered, open-end management
investment company that was organized as a Maryland corporation on August 19,
1993, and is currently comprised of four diversified investment Portfolios,
described below. INVESCO Funds Group, Inc., the Fund's investment adviser, is
primarily responsible for providing the Portfolios with various administrative
services and supervising the Fund's daily business affairs. Portfolio management
is provided to each Portfolio by its sub-adviser. INVESCO Trust Company serves
as sub-adviser to the Industrial Income, High Yield and Utilities Portfolios.
INVESCO Capital Management, Inc. serves as sub-adviser to the Total Return
Portfolio.
INVESCO VIF Total Return Portfolio -- seeks a high total return on investment
through capital appreciation and current income. The Total Return Portfolio
seeks to achieve its investment objective by investing in a combination of
equity securities (consisting of common stocks and, to a lesser degree,
securities convertible into common stock) and fixed income securities.
INVESCO VIF Industrial Income Portfolio -- seeks the best possible current
income, while following sound investment practices. Capital growth potential
is an additional consideration in the selection of portfolio securities. The
Portfolio normally invests at least 65% of its total assets in dividend-
paying common stocks. Up to 10% of the Portfolio's total assets may be
invested in equity securities that do not pay regular dividends. The
remaining assets are invested in other income-producing securities, such as
corporate bonds. The Portfolio also has the flexibility to invest in other
types of securities.
INVESCO VIF High Yield Portfolio -- seeks a high level of current income by
investing substantially all of its assets in lower rated bonds and other debt
securities and in preferred stock. Under normal circumstances, at least 65%
of the Portfolio's total assets will be invested in debt securities having
maturities at the time of issuance of at least three years. Potential capital
appreciation is a factor in the selection of investments, but is secondary to
the Portfolio's primary objective. This Portfolio may not be appropriate for
all Owners due to the higher risk of lower rated bonds commonly known as
"junk bonds." See the prospectus for the INVESCO VIF High Yield Portfolio for
more information concerning these risks.
INVESCO VIF Utilities Portfolio -- seeks capital appreciation and income through
investments primarily in equity securities of companies principally engaged
in the public utilities business.
Van Eck Worldwide Insurance Trust
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a "business trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Van Eck Associates Corporation serves as
investment adviser and manager to the Gold and Natural Resources Fund, and
Fiduciary International Inc. serves as sub-investment adviser to the Worldwide
Balanced Fund.
Van Eck Worldwide Balanced Fund -- seeks long-term capital appreciation together
with current income by investing in stocks, bonds and money market
instruments worldwide.
Van Eck Gold and Natural Resources Fund -- seeks long-term capital appreciation
by investing in equity and debt securities of companies engaged in the
exploration, development, production and
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distribution of gold and other natural resources, such as strategic and other
metals, minerals, forest products, oil, natural gas and coal. Current income
is not an investment objective.
Changes Within The Variable Account
We may from time to time make the following changes to the Variable Account:
1) Make additional Divisions available. These Divisions will invest in
portfolios we find suitable for the Contract.
2) Eliminate Divisions from the Variable Account, combine two or more
Divisions, or substitute a new Portfolio for the Portfolio in which a
Division invests. A substitution may become necessary if, in our judgment,
a Portfolio no longer suits the purposes of the Contract. This may also
happen due to a change in laws or regulations, or a change in a
Portfolio's investment objectives or restrictions, or because the
Portfolio is no longer available for investment, or for some other reason,
such as a declining asset base.
3) Transfer assets of the Variable Account, which we determine to be
associated with the class of contracts to which your Contract belongs, to
another variable account.
4) Withdraw the Variable Account from registration under the 1940 Act.
5) Operate the Variable Account as a management investment company under the
1940 Act.
6) Cause one or more Divisions to invest in a mutual fund other than or
in addition to the Portfolios.
7) Discontinue the sale of Contracts and certificates.
8) Terminate any employer or plan trustee agreement with us pursuant to
its terms.
9) Restrict or eliminate any voting rights as to the Variable Account.
10) Make any changes required by the 1940 Act or the rules or regulations
thereunder.
No such changes will be made without any necessary approval of the SEC and
applicable state insurance departments. Owners will be notified of any changes.
FACTS ABOUT THE CONTRACT
Your Right to Cancel the Contract
You may cancel the Contract within your Free Look Period, which is ten days
after you receive your Contract. We deem this period to expire 15 days after the
Contract is mailed from our Customer Service Center. Some states may require a
longer Free Look Period. If you decide to cancel, you may mail or deliver the
Contract to us at our Customer Service Center. We will refund the Accumulation
Value plus any charges we deducted. If you have purchased a Contract in a state
that requires the return of Purchase Payments during the Free Look Period and
you choose to exercise your Free Look right, we will return the greater of
Purchase Payments or the Accumulation Value plus any charges we deducted.
Purchase Payments
Initial Purchase Payment
You purchase the Contract with an initial Purchase Payment. The minimum initial
Purchase Payment is $5,000 ($1,000 for an IRA). We may reduce the minimum
initial Purchase Payment requirements for certain group or sponsored
arrangements. See Group or Sponsored Arrangements, page 20. We will take under
consideration and may refuse to accept an initial Purchase Payment in excess of
$1,500,000.
Additional Purchase Payments
We can accept additional Purchase Payments until the Owner reaches the Age of 86
or the Annuity Date if earlier. The minimum additional Purchase Payment we will
accept is $500 ($250 for an IRA or $90 if you have set up your IRA on a monthly
program of Purchase Payments). We may reduce the minimum additional Purchase
Payment requirements for certain group or sponsored arrangements. We may refuse
to accept a Purchase Payment if it would cause the sum of all Net Purchase
Payments to exceed $1,500,000.
For IRA Contracts, the Purchase Payment in any year on behalf of an individual
Contract may not exceed $2,000. Provided your spouse does not make a
contribution to an IRA, you may set up a spousal IRA even if your spouse has
earned some compensation during the year. The maximum amount we will accept for
a spousal IRA is the lesser of $2,250 or 100% of compensation reduced by the
contribution (if any) made by you for the taxable year to
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<PAGE>
your own IRA. However, no more than $2,000 can go to either your IRA or your
spouse's IRA in any one year. For example, $1,750 may go to your IRA and $500 to
your spouse's IRA. These maximums are not applicable to any Purchase Payment
which is the result of a rollover or transfer from another qualified plan.
Where to Make Payments
Send Purchase Payments to our Customer Service Center at the address shown on
the cover. We will send you a confirmation notice upon receipt. Make checks
payable to Exchequer Annuity/First ING Life.
Crediting and Allocation of Purchase Payments
We will credit the initial Purchase Payment within two business days of receipt
at our Customer Service Center of a completed application. We may retain the
initial Purchase Payment for up to five business days while attempting to
complete an incomplete application. If the application cannot be made complete
within five business days, the applicant will be informed of the reasons for the
delay and the initial Purchase Payment will be returned immediately unless the
applicant specifically consents to our retaining the initial Purchase Payment
until the application is made complete. The initial Purchase Payment will then
be credited within two business days of the proper completion of the
application.
We will credit additional Purchase Payments that are accepted by us as of the
Valuation Period of receipt at our Customer Service Center.
The initial Purchase Payment is allocated among the Divisions according to your
most recent allocation instructions, unless the Contract is issued in a state
that requires the return of Purchase Payments during the Free Look Period. See
Your Right to Cancel the Contract, page 17. In those states, your initial
Purchase Payment allocated to the Guaranteed Interest Division will be allocated
to that Division upon receipt; your initial Purchase Payment allocated to the
Divisions of the Variable Account will be allocated to the Division investing in
the Fidelity VIP Money Market Portfolio during the Free Look Period and then
transferred to the Divisions of the Variable Account according to your most
recent instructions.
You may allocate your Purchase Payments among any or all Divisions available.
All percentage allocations must be in whole numbers. We allocate any additional
Purchase Payments among the Divisions in accordance with your most recent
allocation instructions, or as otherwise instructed by you. You may designate a
different allocation with respect to any Purchase Payment by sending us a
written notice with the Purchase Payment or by telephone, if the proper
telephone authorization form is on file with us.
Dollar Cost Averaging
The main objective of Dollar Cost Averaging is to protect your investment from
short-term price fluctuations. Because the same dollar amount is transferred to
a Division each month, more units are purchased in a Division if the value per
unit that month is low, and fewer units are purchased if the value per unit that
month is high. This plan of investing keeps you from investing too much when the
price of shares is high and too little when the price of shares is low.
During the Accumulation Period only, if you have at least $10,000 of Division
Accumulation Value in either the Division investing in the Fidelity VIP Money
Market Portfolio or the Neuberger & Berman AMT Limited Maturity Bond Portfolio,
you may choose to transfer a specified dollar amount each month from one of
these Divisions to other Divisions of the Variable Account. Dollar cost
averaging transfers may not be made to the Guaranteed Interest Division. The
minimum amount that you may elect to transfer each month under this option is
$100. The maximum amount that you may transfer under this option is equal to the
Division Accumulation Value in the Division from which the transfer is taken
when the election is made, divided by 12. Percentage allocations of the transfer
amount must be designated as whole number percentages; no specific dollar
designation may be made to the Divisions of the Variable Account. You may
specify a date for Dollar Cost Averaging to terminate. You may also specify a
dollar amount so that when the Division Accumulation Value in the Division from
which dollar cost averaging transfers are made reaches this dollar amount,
Dollar Cost Averaging will terminate.
The transfer date will be the same calendar day each month as the Contract Date.
If this calendar day is not a Valuation Date, the next Valuation Date will be
used. If, on any transfer date, the value in the chosen Division is equal to or
less than the amount you have elected to transfer, the entire amount will be
transferred, and this option will end.
You may change the transfer amount or the Divisions to which transfers are to be
made once each Contract Year, subject to the above limitations. You may cancel
this election by notifying our Customer Service Center at least seven days
before the next transfer date. Any
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transfer under this option will not be included for purposes of the excess
transfer charge.
Dollar Cost Averaging will end as of the Valuation Date immediately preceding
the Annuity Date.
If you elect both Dollar Cost Averaging and Automatic Rebalancing, Dollar Cost
Averaging will take place first. As of the first Valuation Date of the next
calendar quarter after Dollar Cost Averaging has terminated, Automatic
Rebalancing will begin. Dollar Cost Averaging is available without charge.
If you elect telephone privileges in an application or send written notice to
our Customer Service Center requesting this privilege, you may elect or make
changes to your Dollar Cost Averaging options by telephoning our Customer
Service Center. See Telephone Privileges, page 28.
Automatic Rebalancing
The Automatic Rebalancing feature provides a method for maintaining a balanced
approach to investing your Accumulation Value and simplifying the process of
asset allocation over time. There is no charge for this feature. Any transfers
as a result of the operation of this feature are not counted toward the limit of
12 transfers per Contract Year without an additional transfer charge. If you
wish to transfer among the Divisions during the operation of the Automatic
Rebalancing feature, you must change your Automatic Rebalancing allocation
instructions to achieve the transfer.
When you apply for the Contract, or at any subsequent time during the
Accumulation Period, you may elect Automatic Rebalancing by electing this
feature on the application or notifying us in writing or by telephone, if the
proper telephone authorization form is on file with us. Automatic Rebalancing
allows you to match your Division Accumulation Value allocations over time with
the allocation percentages you have selected. As of the first Valuation Date of
each calendar quarter, we will automatically rebalance the amounts in each of
the Divisions into which you allocate Purchase Payments to match your allocation
percentages. This will rebalance any Division Accumulation Values that may be
out of line with the allocation percentages you initially indicated, which may
result, for example, from Divisions which do not perform as well as the other
Divisions in certain months.
If you elect this feature, as of the first Valuation Date of the next calendar
quarter we will transfer amounts among the Divisions so that the ratio of your
Division Accumulation Value in each Division to your total Accumulation Value
matches your selected allocation percentage for that Division.
If you elect Automatic Rebalancing with your application, the first transfer
will occur as of the first Valuation Date of the next calendar quarter following
the end of the Free Look Period. If you elect this feature after the Contract
Date, the first transfer will be processed as of the first Valuation Date of the
next calendar quarter after we receive the notification at our Customer Service
Center and the Free Look Period has ended.
You may change the allocation percentages for Automatic Rebalancing at any time
and your Accumulation Value will be reallocated as of the Valuation Date that we
receive your allocation instructions at our Customer Service Center. Any
reduction in your allocation to the Guaranteed Interest Division, however, will
be considered a transfer from that Division and, therefore, must comply with the
maximum transfer amount and time limitations on transfers from the Guaranteed
Interest Division, as described in Your Right to Transfer Among Divisions, page
23. We will not process a request which is in conflict with these requirements.
Automatic Rebalancing may be terminated at any time, so long as we receive
notice of the termination at least seven days prior to the first Valuation Date
of the next calendar quarter.
If you elect both Automatic Rebalancing and Dollar Cost Averaging, Dollar Cost
Averaging will take place first. As of the first Valuation Date of the next
calendar quarter after Dollar Cost Averaging has terminated, Automatic
Rebalancing will begin.
If you elect telephone privileges in an application or send written notice to
our Customer Service Center requesting this privilege, you may elect or make
changes to your Automatic Rebalancing options by telephoning our Customer
Service Center. See Telephone Privileges, page 28.
Reports to Owners
During the Accumulation Period, we will send you a report within 31 days after
the end of each calendar quarter. This report will show the current Division
Accumulation Value in each Division, the total Accumulation Value, the Cash
Surrender Value and the Death Benefit, as of the end of the calendar quarter, as
well as activity under the Contract since the last report. During the Annuity
Period, we will send you a report within 31 days after the end of each calendar
year showing any information required by law. The reports
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will include any information that may be required by the SEC or the insurance
supervisory official of the jurisdiction in which the Contract is delivered.
We will also send you copies of any shareholder reports of the Portfolios in
which the Divisions invest, as well as any other reports, notices or documents
required by law to be furnished to Owners.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce or eliminate the
surrender charge, the length of time a surrender charge applies, the
administrative charge, the minimum initial Purchase Payment and the minimum
additional Purchase Payment requirements, as well as other fees or charges. See
CONTRACT CHARGES AND FEES, page 29. We may also increase the amount of partial
withdrawals which may be withdrawn without surrender charge. For example, group
arrangements include those in which a trustee, an employer or an association
purchase Contracts covering a group of individuals on a group basis or special
exchange programs First ING Life may offer, including programs to officers,
directors and employees (and their families) of First ING Life or its
affiliates. Sponsored arrangements include those in which an employer or
association allows us to offer Contracts to its employees or members on an
individual basis.
Our costs for sales, administration, and mortality generally vary with the size
and stability of the group, among other factors. We take all these factors into
account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements. We will make any
reductions according to our rules in effect when an application form for a
Contract is approved. We may change these rules from time to time. Any variation
in the surrender charge, administrative charge or other charges, fees and
privileges will reflect differences in costs or services and will not be
unfairly discriminatory.
OFFERING THE CONTRACT
ING America Equities is principal underwriter and distributor of the Contract as
well as of other contracts issued through the Variable Account and other
variable accounts of First ING Life and its affiliates. ING America Equities is
a wholly owned subsidiary of First ING Life. It is registered with the SEC as a
broker-dealer and is a member of the NASD. First ING Life pays ING America
Equities for acting as principal underwriter under a distribution agreement. The
offering of the Contract will be continuous.
ING America Equities will enter into sales agreements with broker-dealers to
solicit for the sale of the Contract through registered representatives who are
licensed to sell securities and variable insurance products including variable
annuities. The broker-dealer involved will generally receive commissions based
on a percent of Purchase Payments made (up to a maximum of 6.5%). Compensation
arrangements may vary among broker-dealers. In addition, we may also pay
override payments, expense allowances, bonuses, wholesaler fees, and training
allowances. Certain registered representatives who meet specified production
levels may qualify, under our sales incentive programs, to receive non-cash
compensation such as expense-paid trips, educational seminars and merchandise.
The writing registered representative will receive a percentage of these
commissions from the respective broker-dealer, depending on the practice of that
broker-dealer. These commissions will be paid to the broker-dealer by ING
America Equities and will not be charged to the Owner.
VALUES UNDER THE CONTRACT
GUARANTEED DEATH BENEFIT
The Death Benefit payable under the Contract provides for a Guaranteed Death
Benefit amount which is greater than the traditional basic death benefit payable
under annuity contracts. The Guaranteed Death Benefit is the greatest of the
following amounts as of the Valuation Date Guaranteed Death Benefit Proceeds are
determined:
1) The Accumulation Value; or
2) The Step-Up Benefit, plus Net Purchase Payments since the last step-up
anniversary.
The Step-Up Benefit at issue is the initial Purchase Payment. As of each
step-up anniversary, the current Accumulation Value is compared to the
prior determination of the Step-Up Benefit increased by Net Purchase
Payments since the last step-up anniversary. The greater of these becomes
the new Step-Up Benefit.
The step-up anniversaries are every 6th Contract Anniversary for the
duration of the Contract. (i.e., the 6th, 12th, 18th, etc.)
The Death Benefit payable to the Beneficiary is the Guaranteed Death Benefit as
calculated above minus taxes incurred but not deducted.
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DEATH BENEFIT PROCEEDS
Proceeds payable to the Beneficiary upon the death of the Owner before the
Annuity Date will be the Death Benefit and will be paid according to the
provisions in Distribution-at-Death Rules, page 37. If the Owner is not an
individual, Proceeds are payable upon the death of the Annuitant.
The Death Benefit will be determined as of the Valuation Date we receive both
due proof of death and all information needed to process the claim, including
designation of a Beneficiary and the election of a one sum payout or election
under an Annuity Option.
We will pay the Proceeds in one lump sum unless the Beneficiary elects an
Annuity Option within 60 days of our receipt of due proof of death but prior to
the date on which we pay the Proceeds. See CHOOSING AN ANNUITY OPTION, page
31. If a one sum payout is elected, the Proceeds will be paid within 7 days of
determination of the amount of the Death Benefit described above. Interest will
be paid on the Proceeds from the date of determination of the Death Benefit to
the date of payout. Interest is at the rate we declare, or any higher rate
required by law, but not less than 3% per year. If the Proceeds are paid under
an Annuity Option, the Beneficiary becomes the Annuitant, and the Contingent
Beneficiary becomes the Contingent Annuitant. Contact our Customer Service
Center or your agent for more information.
HOW TO CLAIM PAYOUTS TO BENEFICIARY
Before we will make any payouts to the Beneficiary, we must receive due proof of
the death of the Owner in the form of a certified death certificate and all
information necessary to process the claim including designation of a
Beneficiary and the election of a one sum payout or election under an Annuity
Option. The Beneficiary should contact our Customer Service Center for
instructions. For information on tax matters relating to death benefit Proceeds,
see FEDERAL TAX CONSIDERATIONS, page 35.
YOUR ACCUMULATION VALUE
The Accumulation Value of your Contract is the sum of the Division Accumulation
Values of all the Divisions of the Variable Account in which your Contract is
invested, plus any Division Accumulation Value of the Guaranteed Interest
Division. Your Division Accumulation Value in a Division of the Variable Account
as of any day is determined by multiplying the number of your Accumulation Units
in that Division by the Accumulation Unit Value as of that day for that
Division. We adjust your Accumulation Value as of each Valuation Date to reflect
Purchase Payments and transfers made, partial withdrawals taken, deduction of
certain charges, earned interest of the Guaranteed Interest Division, and the
investment experience of the Divisions of the Variable Account. The Accumulation
Value, less applicable taxes, is applied under the elected Annuity Option as of
the Annuity Date. See CHOOSING AN ANNUITY OPTION, page 31.
You may allocate your Accumulation Value among all the Divisions available,
subject to the restrictions on the percentages and amounts allocated from a
Purchase Payment or a transfer to or from any Division.
MEASUREMENT OF INVESTMENT EXPERIENCE FOR THE DIVISIONS OF THE VARIABLE ACCOUNT
ACCUMULATION UNIT VALUE
The investment experience of a Division of the Variable Account is determined as
of each Valuation Date. We use an Accumulation Unit Value to measure the
experience of each of the Variable Account Divisions during a Valuation Period.
The Accumulation Unit Value for a Valuation Period equals the Accumulation Unit
Value for the preceding Valuation Period multiplied by the Accumulation
Experience Factor for the Valuation Period.
We determine the number of Accumulation Units related to a given transaction in
a Division of the Variable Account as of a Valuation Date by dividing the dollar
value of that transaction in that Division by that Division's Accumulation Unit
Value for that date.
For a description of the method of calculating the Accumulation Unit Value, see
the Statement of Additional Information.
HOW WE DETERMINE THE ACCUMULATION EXPERIENCE FACTOR
For each Division of the Variable Account, the Accumulation Experience Factor
reflects the investment experience of the Portfolio in which that Division
invests and the charges assessed against that Division for a Valuation Period.
The Accumulation Experience Factor is calculated as follows:
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1) The net asset value of the Portfolio in which that Division invests as
of the end of the current Valuation Period; plus
2) The amount of any dividend or capital gains distribution declared and
reinvested in that Portfolio during the current Valuation Period;
minus
3) A charge for taxes, if any.
4) The result of 1), 2), and 3) divided by the net asset value of that
Portfolio as of the end of the preceding Valuation Period; minus
5) The daily mortality and expense risk charge for that Division for each
day in the Valuation Period; minus
6) The daily asset-based administrative charge for that Division for each
day in the Valuation Period.
NET RATE OF RETURN FOR A DIVISION OF THE VARIABLE ACCOUNT
The Net Rate of Return for a Division of the Variable Account during a Valuation
Period is the Accumulation Experience Factor for that Valuation Period minus
one.
DIVISION ACCUMULATION VALUE OF EACH DIVISION OF THE VARIABLE ACCOUNT
The Division Accumulation Value of each Division of the Variable Account as of
the Contract Date is equal to the amount of the initial Purchase Payment
allocated to that Division.
On subsequent Valuation Dates, the amount of Division Accumulation Value of each
Division of the Variable Account is calculated as follows:
1) The number of Accumulation Units in that Division of the Variable
Account as of the end of the preceding Valuation Period multiplied by
that Division's Accumulation Unit Value for the current Valuation
Period; plus
2) Any additional Purchase Payments allocated to that Division during the
current Valuation Period; plus
3) Any Division Accumulation Value transferred to such Division during
the current Valuation Period; minus
4) Any Division Accumulation Value transferred from such Division during
the current Valuation Period; minus
5) Any excess transfer charge allocated to such Division during the
current Valuation Period; minus
6) Any Gross Partial Withdrawals allocated to that Division during the
current Valuation Period; minus
7) The portion of the annual administrative charge applicable to that
Division if a Contract Anniversary occurs during the Valuation Period.
DIVISION ACCUMULATION VALUE OF THE GUARANTEED INTEREST DIVISION
The Division Accumulation Value of the Guaranteed Interest Division as of the
Contract Date is equal to the amount of the initial Purchase Payment allocated
to that Division.
On subsequent Valuation Dates, the Division Accumulation Value of the Guaranteed
Interest Division is calculated as follows:
1) The Division Accumulation Value of the Guaranteed Interest Division as
of the end of the preceding Valuation Period plus earned interest
during the Valuation Period; plus
2) Any additional Purchase Payments allocated to the Guaranteed Interest
Division during the current Valuation Period; plus
3) Any Division Accumulation Value transferred to the Guaranteed Interest
Division during the current Valuation Period; minus
4) Any Division Accumulation Value transferred from the Guaranteed
Interest Division during the current Valuation Period; minus
5) Any excess transfer charge allocated to the Guaranteed Interest
Division during the current Valuation Period; minus;
6) Any Gross Partial Withdrawals allocated to the Guaranteed Interest
Division during the current Valuation Period; minus
7) The portion of the annual administrative charge applicable to the
Guaranteed Interest Division if a Contract Anniversary occurs during
the current Valuation Period.
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YOUR RIGHT TO TRANSFER AMONG DIVISIONS
Prior to the Annuity Date, while the Contract is in effect and after the Free
Look Period, you may transfer your Accumulation Value among the Divisions of the
Variable Account and the Guaranteed Interest Division. The minimum amount that
may be transferred from each Division is the lesser of $100 or the balance of a
Division. Percentages must be in whole numbers. Transfers due to the operation
of Dollar Cost Averaging or Automatic Rebalancing are not included in
determining the limit on transfers without a charge. Each request to transfer
for your Contract is considered one transfer regardless of how many Divisions
are affected by the transfer. The table below summarizes the number of transfers
available and any associated charges during any Contract Year:
<TABLE>
<CAPTION>
Accumulation Annuity
Period Period
------ ------
<S> <C> <C>
Free Transfer 12 4
Total Number of
Transfers Permitted Unlimited 4
Excess Transfer Charge $25 for each Not
Transfer in Applicable
excess of 12
</TABLE>
Except for Contracts issued in certain states, we reserve the right to limit the
number of transfers per Contract Year to 12 and to limit excessive trading
activity, which can disrupt Portfolio management strategy and increase Portfolio
expenses. For example, we may refuse to accept or to place certain restrictions
on transfers made by third-party agents acting on behalf of multiple Owners or
made pursuant to market timing services when we determine, at our sole
discretion, that such transfers will be detrimental to the Portfolios and the
Owners as a whole. Such transfers may cause increased trading and transaction
costs, disruption of planned investment strategies, forced and unplanned
portfolio turnover, and lost opportunity costs, and may subject the Portfolios
to large asset swings that diminish the Portfolios' ability to provide maximum
investment return to all Owners.
Once during the first 30 days of each Contract Year, you may transfer amounts
from the Guaranteed Interest Division. Transfer requests received within 30 days
prior to the Contract Anniversary will be deemed to occur as of the Contract
Anniversary. Transfer requests received on the Contract Anniversary or within
the following 30 days will be processed; transfer requests received at any other
time will not be processed. Transfers of your Accumulation Value to the
Guaranteed Interest Division are not limited to this 30-day period.
The maximum transfer amount from the Guaranteed Interest Division to the
Divisions of the Variable Account in any Contract Year is the greatest of:
1) 25% of the balance in the Guaranteed Interest Division immediately
prior to the transfer;
2) $100; or
3) the sum of the amounts that were transferred or withdrawn from the
Guaranteed Interest Division in the prior Contract Year. For purposes
of calculating the maximum transfer amount from the Guaranteed
Interest Division, all partial withdrawals (including Systematic
Income Program partial withdrawals) and transfers from the Guaranteed
Interest Division in a Contract Year are summed.
When a transfer involving the Divisions of the Variable Account is made, we
redeem Accumulation Units in the Divisions you are transferring from, and
purchase Accumulation Units in the Divisions you are transferring to, at their
values next computed after receipt of your request at our Customer Service
Center.
If you elect telephone privileges in an application or send written notice to
our Customer Service Center requesting this privilege, you may make transfers
by telephoning our Customer Service Center. See Telephone Privileges, page 28.
PARTIAL WITHDRAWALS
Prior to the Annuity Date, while the Contract is in effect and after the Free
Look Period, you may withdraw in cash all or a part of the Cash Surrender Value
of your Contract. Partial withdrawals may be subject to a 10% tax penalty. See
Tax Consequences of Partial Withdrawals, page 26.
Partial withdrawals from the Divisions of the Variable Account will be made by
redeeming Accumulation Units in the affected Divisions at their values as next
computed after we receive your request at our Customer Service Center. A partial
withdrawal will result in a decrease in the Accumulation Value of this Contract.
The decrease is equal to the amount of the Gross Partial Withdrawal. A surrender
charge and a partial withdrawal transaction charge could be incurred for
withdrawals in excess of certain amounts. See Charges Deducted from the
Accumulation Value, page 29, and The Amount You May Withdraw Without a
Surrender Charge, page 25.
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Certain plans or programs sold on a group or sponsored basis to employee or
professional groups may have different withdrawal privileges. See Group or
Sponsored Arrangements, page 20.
Withholding of Federal income taxes on all distributions may be required unless
you elect not to have any such amounts withheld and properly notify First ING
Life of that election. Even if you elect no withholding, special "back-up
withholding" rules may require First ING Life to disregard your election if you
fail to supply First ING Life with a taxpayer identification number ("TIN") or
social security number for individuals, or if the Internal Revenue Service
notifies First ING Life that the TIN provided by you is incorrect. In addition,
withholding is required for all payees with addresses outside the United States.
Some states also impose withholding requirements.
If you elect telephone privileges in an application or send written notice to
our Customer Service Center requesting this privilege, you may make demand
withdrawals by telephoning our Customer Service Center. Any telephone request
for a demand withdrawal must be for an amount less than $25,000. See Telephone
Privileges, page 28.
There are three options available for selecting partial withdrawals: the Demand
Withdrawal Option, the Systematic Income Program and the IRA Income Program. All
three options are described below.
Partial withdrawals may be subject to a 10% tax penalty. See Tax Consequences
of Partial Withdrawals, page 26.
DEMAND WITHDRAWAL OPTION
The minimum amount you may withdraw under this option is $100, and the maximum
demand withdrawal amount is the Cash Surrender Value minus $500. If the amount
of the demand withdrawal you specify exceeds the maximum level, the amount of
the demand withdrawal will automatically be adjusted to leave $500 remaining as
Cash Surrender Value. See Surrendering to Receive the Cash Surrender Value,
page 26.
Unless you specify otherwise, the amount of the partial withdrawal will be taken
from each Division in the same proportion that the amount of Division
Accumulation Value in that Division bears to the Accumulation Value in all of
the Divisions immediately before the withdrawal.
We impose a partial withdrawal transaction charge for each demand withdrawal
after the first in any Contract Year. See Partial Withdrawal Transaction
Charge, page 30. In addition, a surrender charge could be incurred for demand
withdrawals in excess of certain amounts. See Charges Deducted from the
Accumulation Value, page 29, The Amount You May Withdraw Without a Surrender
Charge, page 25, and APPENDIX A, page 41.
You may not withdraw from the Guaranteed Interest Division an amount that is
greater than the total demand withdrawal multiplied by the ratio of the Division
Accumulation Value in the Guaranteed Interest Division to the total Accumulation
Value immediately before the withdrawal.
SYSTEMATIC INCOME PROGRAM
You may choose to receive Systematic Income Program partial withdrawals on a
monthly or quarterly basis from the Accumulation Value. Withdrawals will be
taken from each Division of the Variable Account and the Guaranteed Interest
Division in the same proportion that the Division Accumulation Value of that
Division bears to the total Accumulation Value. The payouts under this option
may not start sooner than one month after the Contract Date.
You may select the day of the month when the withdrawals will be made. If no day
is selected, the withdrawals will be made on the same calendar day of the month
as the Contract Date. If this calendar day is not a Valuation Date, the next
Valuation Date will be used. You may select a dollar amount or a percentage
amount for your withdrawal subject to the following maximums:
<TABLE>
<CAPTION>
Frequency Maximum Income Payment Percentage
- --------- ---------------------------------
<S> <C>
Monthly 1.25% of Accumulation Value
Quarterly 3.75% of Accumulation Value
</TABLE>
Except as described in the following sections, in no event will a payout be
less than $100.
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage as of the withdrawal date, the
amount withdrawn will be reduced to equal such percentage. If the amount to be
withdrawn is then less than $100, the withdrawal will be made and the Systematic
Income Program will be canceled. See APPENDIX A, page 41.
If a percentage is selected and the amount to be systematically withdrawn based
on that percentage would be less than $100, the amount withdrawn will be
increased to the lesser of $100 or the maximum percentage. If this amount to be
withdrawn is then less
- --------------------------------------------------------------------------------
FING Exchequer 24
<PAGE>
than $100, the withdrawal will be made and the Systematic Income Program will be
canceled.
During any Contract Year, if a demand withdrawal is made while the Systematic
Income Program is in effect, the remaining payouts to be made under the
Systematic Income Program for that Contract Year will be considered demand
withdrawals for purposes of calculating partial withdrawal transaction charges
and any applicable surrender charges. If a demand withdrawal is not made in the
same Contract Year, Systematic Income Program partial withdrawals will not be
assessed a surrender charge. IRA Income Program withdrawals will not be assessed
a surrender charge. However, the amount available for Systematic Income Program
partial withdrawals and IRA Income Program partial withdrawals is never greater
than the Cash Surrender Value.
You may change the amount or percentage of your Systematic Income Program
partial withdrawal once each Contract Year. You may cancel your election at any
time by sending notice to our Customer Service Center at least seven days prior
to the next scheduled withdrawal date.
In no event will you be allowed to withdraw more than the Cash Surrender Value.
IRA INCOME PROGRAM -- IRA CONTRACTS ONLY
If you have an IRA Contract, we will provide payout of amounts required to be
distributed by the Internal Revenue Service unless the minimum distributions are
otherwise satisfied. See Taxation of Individual Retirement Annuities, page 37.
Amounts taken pursuant to the IRA Income Program are not subject to a surrender
charge.
We will determine the amount that is required to be distributed from your
Contract each year based on the information you give us and various choices you
make. For information regarding the calculation and choices you must make, see
the Statement of Additional Information. The minimum dollar amount of each
distribution is $100. At any time while minimum distributions are being made, if
your Cash Surrender Value falls below $2,000, we will cancel the Contract and
send you the amount of your Cash Surrender Value. See Taxation of Individual
Retirement Annuities, page 37.
In no event will you be allowed to withdraw more than the Cash Surrender Value.
THE AMOUNT YOU MAY WITHDRAW WITHOUT A SURRENDER CHARGE
You may withdraw each Contract Year after the first without a surrender charge
the greater of Earnings (as of the date of receipt of the written request) or
15% of the Accumulation Value as of the last Contract Anniversary (less any
Gross Partial Withdrawals already made during the Contract Year which are not
considered to be withdrawals of Purchase Payments) as well as Purchase Payments
held beyond the surrender charge period. Any unused portion of a partial
withdrawal amount not subject to a surrender charge is non-cumulative and does
not apply to a partial withdrawal made in subsequent Contract Years.
Demand withdrawals and any Systematic Income Program partial withdrawals which
occur in the same Contract Year as a demand withdrawal are deemed to be made in
the following order:
1) Any Earnings in the Contract;
2) Purchase Payments held for at least five full Contract Years since the
Contract Anniversary at the end of the Contract Year in which the Purchase
Payment was made;
3) The amount by which 15% of the Accumulation Value as of the last Contract
Anniversary (less any Gross Partial Withdrawals already made during the
Contract Year which are not considered to be withdrawals of Purchase
Payments) exceeds the Earnings in the Contract, if any;
4) Any Purchase Payments remaining on a first-in, first-out basis.
A surrender charge applies only to the withdrawal of Purchase Payments held less
than five full Contract Years since the Contract Anniversary at the end of the
Contract Year in which the Purchase Payment was made. If a Purchase Payment is
made as of the first day of a Contract Year, a surrender charge will apply
against this Purchase Payment for six full years. See Surrender Charge, page 29.
Certain plans or programs sold on a group or sponsored basis to employee or
professional groups may have different withdrawal privileges. See Group or
Sponsored Arrangements, page 20.
For an example illustrating how we would determine the surrender charge (and the
amounts that may be withdrawn without a surrender charge) for a hypothetical
series of demand withdrawals, see APPENDIX A, page 41.
25
<PAGE>
TAX CONSEQUENCES OF PARTIAL WITHDRAWALS
CONSULT YOUR TAX ADVISER REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAKING
PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer reaches Age
59 1/2 may result in imposition of a tax penalty of 10% of the taxable portion
withdrawn. Please refer to FEDERAL TAX CONSIDERATIONS, page 35, for more
details.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
You may surrender the Contract for its Cash Surrender Value at any time prior to
the Annuity Date.
Your Contract's Cash Surrender Value fluctuates daily with the investment
experience of the Divisions of the Variable Account in which you are invested.
We do not guarantee any minimum Cash Surrender Value for amounts invested in the
Divisions of the Variable Account. The amount allocated to the Guaranteed
Interest Division and a minimum interest rate are guaranteed for amounts
allocated to the Guaranteed Interest Division; the amount allocated to the
Guaranteed Interest Division will vary depending on any partial withdrawals,
transfers, surrenders, and charges deducted. As of any Valuation Date while the
Contract is in effect, the Cash Surrender Value is calculated as follows:
1) We take the Contract's Accumulation Value as of that date less any
taxes incurred but not deducted (see Taxes on Purchase Payments, page
30);
2) We deduct any surrender charge (see Surrender Charge, page 29);
3) We deduct the $30 annual administrative charge, if any, due at the end
of the Contract Year (see Administrative Charge, page 30).
For an example illustrating how we determine Cash Surrender Value in certain
hypothetical situations, see APPENDIX A, page 41.
When a Contract is surrendered, we redeem Accumulation Units in the Divisions of
the Variable Account at their value next computed after we receive at our
Customer Service Center your written request along with the Contract. All
benefits under the Contract are then terminated. We will normally pay the Cash
Surrender Value within seven days but we may delay payout as described in When
We Make Payouts on this page.
Withholding of Federal income taxes on all distributions may be required unless
you elect not to have any such amounts withheld and properly notify First ING
Life of that election. Even if you elect no withholding, special "back-up
withholding" rules may require First ING Life to disregard your election if you
fail to supply First ING Life with a taxpayer identification number ("TIN") or
social security number for individuals, or if the Internal Revenue Service
notifies First ING Life that the TIN provided by you is incorrect. In addition,
withholding is required for all payees with addresses outside the United States.
Some states also impose withholding requirements.
If you do not wish to receive your Cash Surrender Value in a one sum payout and
you are also the Annuitant, you may avoid a surrender charge by applying the
Accumulation Value, less any taxes incurred but not deducted, to Payout Period
Options II or III by accelerating the Annuity Date under the Contract. See
CHOOSING AN ANNUITY OPTION, page 31.
WHEN WE MAKE PAYOUTS
Partial withdrawals or payout of Proceeds from the Divisions of the Variable
Account will usually be processed within seven days of receipt of the request in
proper form at our Customer Service Center. However, we may postpone the
processing of any such transactions for any of the following reasons:
1) When the New York Stock Exchange ("NYSE") is closed for trading;
2) When trading on the NYSE is restricted by the SEC;
3) When an emergency exists such that it is not reasonably practical to
dispose of securities in the applicable Division of the Variable
Account or to determine the value of its assets; or
4) When a governmental body having jurisdiction over the Variable Account
permits such suspension by order.
Rules and regulations of the SEC are applicable and will govern as to whether
conditions described in 2), 3), or 4) exist.
We may defer for up to six months the payout of any partial withdrawal or
Proceeds from the Guaranteed Interest Division.
26
<PAGE>
THE GUARANTEED INTEREST DIVISION
You may allocate all or a portion of your Purchase Payments and transfer your
Accumulation Value subject to certain restrictions to or from the Guaranteed
Interest Division, which is part of our General Account and which pays interest
at a declared rate. See Your Right to Transfer Among Divisions, page 23. The
General Account supports our non-variable insurance and annuity obligations.
Because of exemptive and exclusionary provisions, interests in the Guaranteed
Interest Division have not been registered under the Securities Act of 1933, and
neither the Guaranteed Interest Division nor the General Account has been
registered as an investment company under the Investment Company Act of 1940.
Accordingly, neither the General Account, the Guaranteed Interest Division nor
any interest therein are generally subject to regulation under these Acts. As a
result, the staff of the SEC has not reviewed the disclosures which are included
in this prospectus which relate to the General Account and the Guaranteed
Interest Division. These disclosures, however, may be subject to certain
provisions of the Federal securities laws relating to the accuracy and
completeness of statements made in this prospectus. For more details regarding
the General Account, see your Contract.
You may accumulate amounts in the Guaranteed Interest Division by (i) allocating
Purchase Payments, (ii) transferring amounts from the Divisions of the Variable
Account, and (iii) earning interest on amounts you already have in the
Guaranteed Interest Division.
The amount you have in the Guaranteed Interest Division at any time is the sum
of all Purchase Payments allocated to this Division, all transfers, and earned
interest. This amount is reduced by amounts transferred out of or withdrawn from
the Guaranteed Interest Division and deductions allocated to the Guaranteed
Interest Division.
We pay a declared interest rate on all amounts that you have in the Guaranteed
Interest Division. These interest rates will never be less than the minimum
guaranteed interest rate of 3%. We may declare rates higher than the guaranteed
minimum that will apply to amounts in the Guaranteed Interest Division. Any
higher rate is guaranteed to be in effect for at least 12 months. Interest is
compounded daily at an effective annual rate that equals this declared rate. The
interest is credited as of each Valuation Date to the amount you have in the
Guaranteed Interest Division. This interest will be paid regardless of the
actual investment experience of the General Account; we bear the full amount of
the investment risk for the amount allocated to the Guaranteed Interest
Division.
OTHER INFORMATION
THE OWNER
You are the Owner. You are also the Annuitant unless another Annuitant is named
in the application. You have the rights and options described in the Contract.
You and your spouse may be joint Owners; no other joint ownership is allowed.
You (and your spouse, in the case of joint ownership) must be younger than Age
86 as of the Contract Date.
Subject to the applicable provisions of Distribution-at-Death Rules, page 37, if
the Owner (or a Deemed Owner as defined in Distribution-at-Death Rules, page 37)
dies prior to the Annuity Date, and:
1) If the Owner's spouse is the Joint Owner, then the spouse becomes the
new Owner and no Death Benefit is payable; or
2) If the Owner's spouse is the Beneficiary, then the spouse may elect to
become the Owner (in which case there is no Death Benefit payable) by
so electing within 60 days of the death; if there is no such election,
the Death Benefit is payable to the Beneficiary; or
3) If the Owner's spouse is not the Joint Owner or the Beneficiary, then
the Death Benefit is payable to the Beneficiary.
See Guaranteed Death Benefit, page 20.
THE ANNUITANT
The Annuitant will receive the annuity benefits of the Contract as of the
Annuity Date if the Annuitant is living and the Contract is then in force. If
the Annuitant dies before the Annuity Date and a Contingent Annuitant is named,
the Contingent Annuitant becomes the Annuitant (unless the Owner is not an
individual, in which case the Proceeds become payable). If no Contingent
Annuitant has been named, the Owner must designate a new Annuitant. If no
designation is made within 30 days of the Annuitant's death, the Owner will
become the Annuitant.
Upon the death of the Annuitant after the Annuity Date, any remaining designated
period payouts will be continued to any Contingent Annuitant. Upon the death of
both the Annuitant and all Contingent Annuitants, any
27
<PAGE>
remaining designated period payouts will be paid to the estate of the last to
die of the Annuitant and Contingent Annuitants. Amounts may be released in one
sum if the Owner's election allows. See CHOOSING AN ANNUITY OPTION, page 31.
THE BENEFICIARY
The Beneficiary is the person to whom we pay Proceeds upon the death of the
Owner (or of the Annuitant, if the Owner is not an individual) prior to the
Annuity Date.
The original Beneficiary and any Contingent Beneficiaries are named in the
application. Surviving Contingent Beneficiaries are paid death benefit Proceeds
only if no Beneficiary survives. If more than one Beneficiary in a class
survives, they will share the Proceeds equally, unless the Owner's designation
provides otherwise. If there is no designated Beneficiary or Contingent
Beneficiary surviving, we will pay the Proceeds to the Owner's estate. The
Beneficiary designation will be on file with us. We will pay Proceeds according
to the most recent Beneficiary designation on file.
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT
Prior to the Annuity Date and while the Contract is in effect after the Free
Look Period, you may transfer Ownership of the Contract (unless the Contract is
an IRA Contract) subject to our published rules at the time of the change. A new
Owner must be younger than Age 86.
You may name a new Annuitant prior to the Annuity Date. Any Annuitant or
Contingent Annuitant must be younger than Age 86 when named. An Annuitant or
Contingent Annuitant that is not an individual may not be named without our
consent. If the Owner is not an individual, the Annuitant may not be changed
without our consent.
The Owner may name a new Beneficiary unless an irrevocable Beneficiary has been
named. When an irrevocable Beneficiary has been designated, the Owner and the
irrevocable Beneficiary must act together to make any Beneficiary changes. If
the Contract is an IRA Contract and a Beneficiary change is being made, the
Owner's spouse must sign a statement agreeing to this designation.
To make any of these changes, you must send us written notice of the change to
our Customer Service Center. The change will take effect as of the day the
notice is signed and dated provided that the request was received at our
Customer Service Center prior to any payout. The change will not affect any
payout made or action taken by us before recording the change at our Customer
Service Center. There may be tax consequences, see FEDERAL TAX CONSIDERATIONS,
page 35.
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS ON THE APPLICATION OR ENROLLMENT FORM
If the Age or sex given in the application is misstated, the amounts payable or
benefits provided by the Contract shall be those that the Purchase Payment would
have bought at the correct Age or sex.
PROCEDURES
We must receive any election, designation, change, assignment, or any other
change request you make in writing, except those you have chosen to request by
telephone. We may require a return of your Contract for any Contract change or
for paying Proceeds. We may require proof of Age, death, or survival of an
Annuitant or Beneficiary when such proof is relevant to the payout of a benefit,
claim, or settlement under the Contract. If your Contract has been lost, we will
require that you complete and return a Contract Replacement Form. The effective
date of any change in provisions of the Contract will be the date the request
was signed. Any change will not affect payouts made or action taken by us before
the change is recorded at our Customer Service Center.
In the event of the Owner's death prior to the Annuity Date, we should be
informed as soon as possible. Claim procedure instructions will be sent to your
Beneficiary immediately. We require a certified copy of the death certificate
and may require proof of the Owner's Age. We may require the Beneficiary and the
Owner's next of kin to sign all authorizations as part of due proof.
TELEPHONE PRIVILEGES
If you have elected this privilege in a form required by us, you may make
transfers, changes in your Dollar Cost Averaging and Automatic Rebalancing
options, or request partial withdrawals by telephoning our Customer Service
Center.
Our Customer Service Center will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include,
among others, requiring some form of personal identification prior to acting
upon instructions received
28
<PAGE>
by telephone, providing written confirmation of such transactions, and/or tape
recording telephone instructions. Your request for telephone privileges
authorizes us to record telephone calls. If reasonable procedures are not used
in confirming instructions, we may be liable for any losses due to unauthorized
or fraudulent instructions. We reserve the right to discontinue this privilege
at any time.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign this Contract as collateral security upon written notice to us.
Once it is recorded with us, the rights of the Owner and Beneficiary are subject
to the assignment. It is your responsibility to make sure the assignment is
valid. There may be tax consequences for an assignment. IRA Contracts may not be
assigned. See Assignments, page 38.
NON-PARTICIPATING
The Contract does not participate in First ING Life's surplus earnings.
AUTHORITY TO CHANGE CONTRACT TERMS
All agreements made by us must be signed by our president or an officer and by
our secretary or assistant secretary. No other person, including an insurance
agent or broker, can change any of the Contract's terms or make any agreements
binding on us.
CONTRACT CHANGES - APPLICABLE TAX LAW
This Contract is intended to qualify as an annuity contract under the Code. To
that end, all terms and provisions of the Contract shall be interpreted to
ensure or maintain such qualification, notwithstanding any other provisions to
the contrary. Payouts and distributions under this Contract shall be made in the
time and manner necessary to maintain such qualification under the applicable
provisions of the Code in existence at the time this Contract is issued.
We reserve the right to amend this Contract, to reflect any clarifications or
changes that may be needed or are appropriate, or to conform it to any
applicable changes in the tax requirements to qualify the Contract as an
annuity. Any such changes will apply uniformly to all Contracts that are
affected. We will send you written notice of such changes.
CONTRACT CHARGES AND FEES
DEDUCTION OF CHARGES
We invest the entire amount of the initial and any additional Purchase Payments
in the Divisions of the Variable Account and the Guaranteed Interest Division.
We then periodically deduct certain amounts from your Accumulation Value
invested in the Divisions of the Variable Account and the Guaranteed Interest
Division. We may reduce certain charges under group or sponsored arrangements.
See Group or Sponsored Arrangements, page 20. A description of the charges we
deduct follows.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
SURRENDER CHARGE
The withdrawal of Purchase Payments held less than five full Contract Years
since the Contract Anniversary at the end of the Contract Year in which the
Purchase Payment was made, either by surrender or partial withdrawal, is subject
to a surrender charge. The surrender charge will not apply to partial
withdrawals made pursuant to the Systematic Income and IRA Income Programs
unless a demand withdrawal occurs while the Systematic Income Program is in
effect. If a Purchase Payment is made as of the first day of a Contract Year, a
surrender charge will apply against this Purchase Payment for six full years.
The surrender charge that applies is calculated as follows.
<TABLE>
<CAPTION>
Contract
Anniversaries Since Surrender Charge as a
Purchase Payment Percentage of Purchase
was Made Payment Withdrawal
- ------------------- ----------------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6+ 0%
</TABLE>
Up to certain limits, partial withdrawals may be taken without a surrender
charge. See The Amount You May Withdraw Without a Surrender Charge, page 25.
Any applicable surrender charges will reduce the Division Accumulation Value of
each Division in the same proportion that the Division Accumulation Value in
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<PAGE>
each Division bears to the total Accumulation Value immediately after the
withdrawal.
Proceeds from the surrender charge may not cover the expected costs of
distributing the Contracts. Any shortfall will be recovered from First ING
Life's general assets, which may include revenues from the mortality and expense
risk charge deducted from the Variable Account.
PARTIAL WITHDRAWAL TRANSACTION CHARGE
Prior to the Annuity Date and while the Contract is in effect after the Free
Look Period, you may take one demand withdrawal each Contract Year without a
partial withdrawal transaction charge. We impose a partial withdrawal
transaction charge to each additional demand withdrawal in that Contract Year,
equal to the lesser of $25 or 2% of the amount withdrawn. The partial withdrawal
transaction charge will reduce the Division Accumulation Value of each Division
in the same proportion that the Division Accumulation Value in each Division
bears to the total Accumulation Value immediately after the withdrawal. The
partial withdrawal transaction charge will not apply to withdrawals made
pursuant to the Systematic Income and IRA Income Programs unless a demand
withdrawal occurs while the Systematic Income Program is in effect. Then, the
remaining payouts to be made under the Systematic Income Program for that year
will be considered demand withdrawals for purposes of calculating partial
withdrawal transaction charges and surrender charges.
We do not expect that the total revenue from the partial withdrawal transaction
charge will be greater than the total expected cost of administering demand
withdrawals, on average, over the period that the Contracts are in force.
ADMINISTRATIVE CHARGE
The administrative charge is deducted each year during the Accumulation Period
as of the Contract Processing Date. We deduct this charge when determining the
Cash Surrender Value payable if you surrender the Contract prior to the end of a
Contract Year. The amount deducted is $30 per Contract Year if Net Purchase
Payments are less than $100,000. If Net Purchase Payments equal $100,000 or
more, the charge is zero. This charge covers a portion of our administrative
expenses. See Asset-based Administrative Charge, page 31.
The administrative charge is allocated to a Division in the same proportion that
the amount of Division Accumulation Value in that Division bears to the total
Accumulation Value immediately after the withdrawal. For Contracts issued in
certain states, the administrative charge is allocated only among the Divisions
of the Variable Account.
EXCESS TRANSFER CHARGE
We allow you 12 free transfers among Divisions per Contract Year during the
Accumulation Period. For each additional transfer, we will charge you $25 at the
time the transfer is processed. The charge will be deducted from each of the
Divisions in which you are invested in the same proportion that the amount of
Division Accumulation Value in that Division bears to the total Accumulation
Value of all the Divisions immediately after the transfer. We do not expect that
the total revenues from the excess transfer charge will be greater than the
total expected cost of administering transfers, on average, over the period that
the Contracts are in force. Any transfer(s) due to the election of Dollar Cost
Averaging, Automatic Rebalancing and/or pursuant to Changes Within The Variable
Account, page 17, will not be included in determining if the excess transfer
charge should apply.
After the Annuity Date, only four transfers each Contract Year are allowed, and
no transfer charge will be deducted.
TAXES ON PURCHASE PAYMENTS
We make a charge for state and local taxes on Purchase Payments in certain
states, which can range from 0% to 3.5% of the Purchase Payment (5% for the
Virgin Islands). The charge depends on the Annuitant's state of residence.
Taxes on Purchase Payments, if any, are generally incurred as of the Annuity
Date, and we deduct the charge for taxes on Purchase Payments from your
Accumulation Value as of the Annuity Date. Some jurisdictions impose a tax on
Purchase Payments at the time the Purchase Payments are paid, regardless of the
Annuity Date. In those states, our current practice is to advance the payment of
your taxes on Purchase Payments and charge it against your Accumulation Value
either upon surrender of the Contract, payout of death benefit Proceeds, or upon
the Annuity Date. We reserve the right to deduct any state and local taxes on
Purchase Payments from your Accumulation Value at the time such tax is due.
30
<PAGE>
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
We will deduct a daily charge from the assets in the Divisions of the Variable
Account to compensate First ING Life for mortality and expense risks we assume
under the Contract. The daily charge is at the rate of 0.003425% (equivalent to
an annual rate of 1.25%) on the assets in the Divisions of the Variable Account.
Approximately 0.90% of this annual charge is allocated to the mortality risk and
0.35% is allocated to the expense risk. This charge is not deducted from the
Guaranteed Interest Division. We will realize a gain from this charge to the
extent it is not needed to provide for benefits and expenses under the Contract.
The mortality risk assumed is the risk that Annuitants as a group will live for
a longer time than our actuarial tables predict. As a result, we would be paying
more in annuity income than we planned. First ING Life also assumes a risk for
paying a Guaranteed Death Benefit, which in periods of declining value and
higher mortality rates, could result in a loss for First ING Life. The expense
risk assumed is the risk that it will cost us more to issue and administer the
Contract than we expected in setting the charge levels guaranteed in the
Contract.
ASSET-BASED ADMINISTRATIVE CHARGE
We will deduct a daily charge from the assets in each Division of the Variable
Account to compensate First ING Life for a portion of the administrative
expenses under the Contract. The daily charge is at a rate of 0.000411%
(equivalent to an annual rate of 0.15%) on the assets in each Division of the
Variable Account. This charge is not deducted from the Guaranteed Interest
Division.
We do not expect that the total revenues from the administrative charges will be
greater than the total expected cost of administering the Contracts, on average,
excluding costs that are properly categorized as distribution expenses, over the
period that the Contracts are in force.
PORTFOLIO EXPENSES
There are fees and charges deducted from the Portfolios as described in the FEE
TABLE on page 7. Please read the prospectus for the Portfolios you are
considering for complete details.
CHOOSING AN ANNUITY OPTION
GENERAL PROVISIONS
SUPPLEMENTARY CONTRACT
When an Annuity Option becomes effective, your Contract will be amended to
include a Supplementary Contract which will put the Annuity Option elected into
effect. The Supplementary Contract Effective Date will be the date the Annuity
Option becomes effective. The computation of the first payout will be made as of
the Supplementary Contract Effective Date. The first payout will be paid within
10 days of this date.
ELECTION AND CHANGES OF ANNUITY DATE
The Annuity Date is the date as of which Annuity Payouts begin. It may be
elected on your application. Your Annuity Date election must follow the second
Contract Anniversary but may not be later than the Annuitant's 85th birthday or
the tenth Contract Anniversary, whichever is later. In certain states, the
latest Annuity Date may be limited to an earlier date. If no Annuity Date is
elected in the application, the Annuity Date will be the first day of the month
following the Annuitant's 85th birthday or the first day of the month following
the tenth Contract Anniversary, whichever is later. However, the Annuity Date
limitations may vary according to state regulation. Please refer to your
Contract for a description of these limitations. For an IRA Contract,
distribution must commence no later than April 1st of the calendar year
following the calendar year in which you attain Age 70 1/2 unless the minimum
distributions are otherwise satisfied. Consult your tax adviser. You may change
the Annuity Date by sending a written request to our Customer Service Center at
least 60 days prior to the currently elected Annuity Date of the Contract.
ELECTION AND CHANGES OF ANNUITY OPTION
The Annuity Option is composed of both the Payout Option which specifies the
type of annuity to be paid and the Payout Period Option which determines how
long the annuity will be paid, the frequency, and the amount of the first
payout. The Owner elects the Annuity Option that applies upon annuitization. The
Owner may change that Annuity Option at any time prior to the Annuity Date. The
Beneficiary may select an Annuity Option for any payouts to be made pursuant to
Death Benefit
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Proceeds. Any Death Benefit Proceeds to be applied under a Payout Option will be
allocated to each of the Divisions of the Variable Account or the Guaranteed
Interest Division as instructed by the Beneficiary. The available options are
described in the Annuity Option provisions of the Contract.
The various methods of settlement are shown below.
PAYOUT OPTIONS
Proceeds applied as of the Annuity Date to provide an annuity under an Annuity
Option will be the Accumulation Value minus taxes incurred but not deducted. The
taxes will be taken from each of the Divisions in the same proportion that the
Division Accumulation Value in each Division bears to the Division Accumulation
Value in all Divisions immediately prior to the Annuity Date.
If no Annuity Option has been chosen upon annuitization, we will apply Proceeds
to Payout Period Option Table I, using a Benchmark Total Return of 3%, with a
designated period of 30 years. The Annuity Option will be allocated among the
Guaranteed Interest Division and the Divisions of the Variable Account in the
same proportion that the Accumulation Value was allocated prior to the Annuity
Date. For example, if all of the Accumulation Value is allocated to the
Guaranteed Interest Division, the Annuity Payout will be a Fixed Annuity Payout.
VARIABLE ANNUITY PAYOUT
A Variable Annuity Payout is an annuity with payouts which: 1) are not pre-
determined or guaranteed as to dollar amount; and 2) vary in amount with the
investment experience of the Divisions of the Variable Account in which you
invest.
As of the Annuity Date, any Division Accumulation Value invested in the
Guaranteed Interest Division will be allocated among the Divisions of the
Variable Account in the same proportion that the Division Accumulation Value of
each Division bears to the total Division Accumulation Value of all the
Divisions of the Variable Account.
The first Variable Annuity Payout for each Division of the Variable Account will
be the amount that the Proceeds will provide as of the close of business on the
Valuation Date immediately preceding the Supplementary Contract Effective Date
at the Benchmark Total Return elected. If you have elected to receive payouts
less frequently than monthly, the payout amount is then adjusted according to
the factors in Payouts Other Than Monthly, page 34.
After the first payout, Variable Annuity Payouts vary in amount with the
investment experience of the Divisions of the Variable Account. The dollar
amount of each Variable Annuity Payout after the first payout is calculated by
adding the amount due for each Division of the Variable Account.
The Owner may transfer, up to four times each Contract Year, all or a portion of
the Annuity Units in a Division of the Variable Account to another Division of
the Variable Account.
For a description of the method for determining the amount of Annuity Payouts,
the Annuity Unit Value and transfer provisions during the Annuity Period, see
the Statement of Additional Information.
FIXED ANNUITY PAYOUT
A Fixed Annuity Payout is an annuity with payouts which remain fixed as to
dollar amount throughout the Payout Period. As of the Annuity Date, any Division
Accumulation Value invested in the Divisions of the Variable Account will be
allocated to the Guaranteed Interest Division. The Fixed Annuity Payouts will be
that amount that the Proceeds will provide as of the Supplementary Contract
Effective Date at the Benchmark Total Return of 3%. If the Fixed Annuity Payout
is credited at an interest rate above the guaranteed minimum, the installment
dollar amount will be greater than the determined installment dollar amount for
the time period that the higher rate is declared. If you have elected to receive
payouts less frequently than monthly, the payout amount is adjusted according to
the factors in Payouts Other Than Monthly, page 34.
For Fixed Annuity Payouts, First ING Life guarantees that, after the
Supplementary Contract Effective Date, monies held under an Annuity Option will
be credited with interest at a minimum guaranteed effective rate of 3%. We may
declare that Fixed Annuity Payouts are to be credited at an interest rate above
the guaranteed minimum. We guarantee that any higher rate will be in effect for
at least 12 months.
COMBINATION ANNUITY PAYOUT
A Combination Annuity Payout is an annuity where a portion of the payout is
variable and a portion of the payout is fixed as to dollar amount throughout the
Payout Period. You can split the Proceeds among Fixed and Variable Annuity
Payouts in any proportion you choose, with the exception that a minimum of 25%
must be
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allocated to either option you elect as of the Supplementary Contract
Effective Date. As of the Supplementary Contract Effective Date, we will
allocate Accumulation Value between the Guaranteed Interest Division and the
Divisions of the Variable Account to meet the proportions selected.
The potential benefit of splitting the Proceeds between a Fixed and a Variable
Annuity Payout is that you will have a portion of your Annuity Payout fixed and
guaranteed and a portion which may increase over time, helping to offset
inflation. Of course, the payouts attributable to the Variable Annuity Payout
could decrease and are not guaranteed, since their value is determined by the
investment experience of the Divisions of the Variable Account you select. Once
you elect your Combination Annuity Payout, you may subsequently increase your
allocation to a Fixed Annuity Payout, but you may not increase your allocation
to the Variable Annuity Payout.
FREQUENCY AND AMOUNT OF ANNUITY PAYOUTS
Annuity Payouts will be made to the Annuitant based on the Annuity Option and
frequency elected. They may be made monthly, quarterly, semiannually or
annually. If we do not receive written notice from you, the Annuity Payouts will
be made monthly. There may be certain restrictions on minimum payouts that we
will allow. We may require that a one sum payout be made if the Proceeds to be
applied are less than $2,000 or, if the payouts to the Annuitant are ever less
than $20, we may change the frequency of payouts to result in payouts of at
least that amount or require a one sum payout.
PAYOUT PERIOD OPTIONS
Under each Payout Option, the Payout Period is elected from one of the following
options:
OPTION I. Payouts for a Designated Period. Payouts will be made in 1, 2,
4, or 12 installments per year as elected for a designated period, which
may be 5 to 30 years. If a Fixed Annuity Payout is elected, the installment
dollar amounts will be equal except for any excess interest as described in
Fixed Annuity Payout, page 41. If a Variable Annuity Payout is elected, the
number of Annuity Units of each installment will be equal, but the dollar
amounts of each installment will vary based on the Annuity Unit Values of
the Divisions chosen. If the Annuitant dies before the end of the
designated period, payouts will be continued to the Contingent Annuitant,
if one has been named, until the end of the designated period. The amount
of each payout will depend upon the designated period elected and, if a
Variable Annuity Payout is elected, the investment experience of the
Divisions of the Variable Account selected. The amount of the first monthly
payout for each $1,000 of Accumulation Value applied is shown in Payout
Option Table I in the Contract.
OPTION II. Life Income With Payouts for a Designated Period. Payouts will
be made in 1, 2, 4, or 12 installments per year throughout the Annuitant's
lifetime or, if longer, for a period of 5, 10, 15, or 20 years as elected.
If a Fixed Annuity Payout is elected, the installment dollar amounts will
be equal except for any excess interest as described in Fixed Annuity
Payout, page 32. If a Variable Annuity Payout is elected, the number of
Annuity Units of each installment will be equal, but the dollar amounts of
each installment will vary based on the Annuity Unit Values of the
Divisions chosen. If the Annuitant dies before the end of the designated
period, payouts will be continued to the Contingent Annuitant, if one has
been named, until the end of the designated period. The amount of each
payout will depend upon the Annuitant's sex (unless otherwise prohibited by
state law), Age at the time the first payout is due, the designated period
elected and, if a Variable Annuity Payout is elected, the investment
experience of the Divisions of the Variable Account selected. The amount of
the first monthly payout for each $1,000 of Accumulation Value applied is
shown in Payout Option Table II in the Contract. This option is not
available for Ages not shown in these Tables.
OPTION III. Joint and Last Survivor. Payouts will be made in 1, 2, 4, or 12
installments per year while both Annuitants are living. Upon the death of
one Annuitant, the Survivor's Annuity Payout will be paid throughout the
lifetime of the Surviving Annuitant.
If a Fixed Annuity Payout is elected, the installment dollar amount will be
equal while both Annuitants are living and, upon the death of one
Annuitant, will be reduced to 2/3 of the installment dollar amount while
both Annuitants were living, excluding any excess interest as described in
Fixed Annuity Payout, page 32.
If a Variable Annuity Payout is elected, the number of Annuity Units
applied to each installment will be level while both Annuitants are living
and, upon the death of one Annuitant, will be reduced to 2/3 of the number
of Annuity Units applied to each installment
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while both Annuitants were living. The dollar amounts of each installment
will vary based on the Annuity Unit Values of the Divisions chosen.
The amount of each payout will depend upon the Age and sex (unless
otherwise prohibited by state law) of each Annuitant at the time the first
payout is due and, if a Variable Annuity Payout is elected, the investment
experience of the Divisions of the Variable Account selected.
A description of how the first monthly installment for Payout Period Option
III is calculated is provided in your Contract.
OPTION IV. Other. Payouts will be made in any other manner as agreed upon
in writing between you or the Beneficiary and us.
PAYOUTS OTHER THAN MONTHLY
The Payout Option Tables in your Contract show the first monthly installments
for Payout Period Options I and II. To arrive at the first annual, semiannual or
quarterly payouts, multiply the appropriate figures by 11.839, 5.963 or 2.993 if
the Benchmark Total Return is 3% and by 11.736, 5.939 or 2.988 if the Benchmark
Total Return is 5%, respectively. Factors for other designated periods or for
other options that may be provided by mutual agreement will be provided upon
reasonable request.
COMMUTING PROVISIONS
The Annuitant may commute remaining designated period installments under Payout
Period Option I. The Contingent Annuitant may commute remaining designated
period installments after the death of the Annuitant under Payout Period Options
I or II. If no Contingent Annuitant is named, any remaining designated period
installments may be commuted by the estate. Any computation shall be at the
appropriate Benchmark Total Return rate.
REGULATORY INFORMATION
VOTING PRIVILEGES
We invest the assets in the Divisions of the Variable Account in shares of the
corresponding Portfolios. See The Portfolios, page 14. First ING Life is the
legal owner of the shares held in the Variable Account and, as such, has the
right to vote on certain matters. Among other things, we may vote on any matters
described in the Fund's current prospectus or requiring a vote by shareholders
under the 1940 Act.
Even though we own the shares, to the extent required by the interpretations of
the SEC, we give you the opportunity to tell us how to vote the number of shares
that are attributable to your Contract. We will vote those shares at meetings of
Portfolio shareholders according to your instructions. We will also vote any
Portfolio shares that are not attributable to the Contracts and shares for which
instructions from Owners were not received in the same proportion that Owners
vote. If the Federal securities laws or regulations or interpretations of them
change so that we are permitted to vote shares of a Portfolio in our own right
or to restrict Owner voting, we reserve the right to do so.
You may participate in voting only on matters affecting the Portfolios in which
your assets have been invested. We determine the number of Portfolio shares in
each Division that are attributable to your Contract by dividing the amount of
your Division Accumulation Value allocated to that Division by the net asset
value of one share of the corresponding Portfolio. The number of shares as to
which you may give instructions will be determined as of the record date set by
the Portfolio's Board for the Portfolio's shareholders meeting. We count
fractional shares. If you have a voting interest, we will send you proxy
material and a form for giving us voting instructions.
All Portfolio shares are entitled to one vote. The votes of all Portfolios are
cast together on an aggregate basis, except on matters where the interests of
the Portfolios differ. In such cases, voting is on a portfolio-by-portfolio
basis. In these cases, the approval of the shareholders in one Portfolio is not
needed in order to make a decision in another Portfolio. Examples of matters
that would require a portfolio-by-portfolio vote are changes in the fundamental
investment policy of a particular Portfolio or approval of an investment
advisory agreement. Shareholders in a Portfolio not affected by a particular
matter generally would not be entitled to vote on it.
The Boards of the Portfolios and First ING Life and any other insurance
companies participating in the Portfolios are required to monitor events to
identify any material conflicts that may arise from the use of the Portfolios
for variable life and variable annuity separate accounts. Conflict might arise
as a result of changes in state insurance law or Federal income tax law, changes
in investment management of any Portfolio, or differences in voting instructions
given by owners of variable life insurance policies and variable annuity
contracts. Shares of these Portfolios may also be sold to certain pension and
retirement plans qualifying under Section 401 of the
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Code and plans that include cash or deferred arrangements under Section 401(k)
of the Code. As a result, there is a possibility that a material conflict may
arise between the interests of owners generally, or certain classes of owners,
and such retirement plans or participants in such retirement plans. If there is
a material conflict, First ING Life will have an obligation to determine what
action should be taken, probably including the removal of the affected
Portfolios from eligibility for investment by the Variable Account. First ING
Life will consider taking other action to protect Owners. However, there could
be unavoidable delays or interruptions of operations of the Variable Account
that First ING Life may be unable to remedy.
In certain cases, when required by state insurance regulatory authorities, we
may disregard instructions relating to changes in the Portfolio's adviser or the
investment policies of the Portfolios. In the event we do disregard voting
instructions, we will include a summary of our actions and give our reasons in
the next semiannual report to Owners.
Under the 1940 Act, certain actions affecting the Variable Account (such as some
of those described under Changes Within The Variable Account, page 17) may
require Owner approval. In that case, you will be entitled to one vote for every
$100 of Division Accumulation Value you have in the Divisions of the Variable
Account. We will cast votes attributable to amounts in the Divisions of the
Variable Account not attributable to Contracts in the same proportion as votes
cast by Owners.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the State of New
York , which periodically examines our financial condition and operations. We
are also subject to the insurance laws and regulations of all jurisdictions in
which we do business. The Contract has been approved by the Insurance Department
of the State of New York and by the Insurance Departments of other
jurisdictions. We are required to submit annual statements of our operations,
including financial statements, to the Insurance Departments of the various
jurisdictions in which we do business to determine solvency and compliance with
state insurance laws and regulations.
LEGAL PROCEEDINGS
First ING Life, as an insurance company, is ordinarily involved in litigation.
We do not believe that any current litigation is material to First ING Life's
ability to meet its obligations under the Contract or to the Variable Account,
and we do not expect to incur significant losses from such actions. ING America
Equities, the principal underwriter and distributor of the Contact, is not
engaged in any litigation of any material nature.
LEGAL MATTERS
The legality of the Contract described in this prospectus has been passed upon
by Eugene L. Copeland, General Counsel and Secretary of First ING Life.
EXPERTS
The financial statements of First ING Life at December 31, 1995 and 1994, and
for each of the three years in the period ended December 31, 1995, appearing in
the Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The ultimate effect of Federal income taxes on the amounts paid for the
Contract, on the investment return on assets held under a Contract, on Annuity
Payouts and on the economic benefits to the Owner, Annuitant or Beneficiary
depends upon the terms of the Contract, upon First ING Life's tax status and
upon the tax status of the parties concerned.
The following discussion is general in nature and is not intended as tax advice.
Each party concerned should consult a competent tax adviser. The discussion
below is based upon First ING Life's understanding of the Federal income tax
laws as they are currently interpreted and does not include state or local tax
issues. No representation is made regarding the likelihood of continuation of
the Federal income tax laws, the Treasury Regulations, or the current
interpretations by the Internal Revenue Service. For a discussion of Federal
income taxes as they relate to the Portfolios, please see the accompanying
prospectuses for the Portfolios that you are considering.
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FIRST ING LIFE TAX STATUS
First ING Life is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Variable Account is not a separate entity from First ING
Life and its operations form a part of First ING Life, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of the Variable
Account are reinvested and taken into account in determining the Contract's
Accumulation Value. Under existing Federal income tax laws, the Variable
Account's investment income, including realized net capital gains, is not taxed
to First ING Life. First ING Life reserves the right to make a deduction for
taxes should they be imposed with respect to such items in the future.
TAXATION OF ANNUITIES
Section 72 of the Code governs taxation of annuities. In general, the Owner
(holder) of an annuity Contract will not be taxed on increases in value under
the Contract until some form of distribution occurs. (For purposes of this rule,
the amount of any indebtedness that is secured by a pledge or assignment of a
Contract is treated as a payout received on account of a partial withdrawal from
the Contract.) Under certain circumstances, however, the amount of any increase
in the value of a Contract may be subject to current Federal income tax. See
Contracts Owned by Non-Natural Persons, page 38, and Diversification
Standards, page 39.
1. WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
Section 72 of the Code provides, in effect, that the Proceeds from a surrender
of the Contract or a partial withdrawal from the Contract prior to the Annuity
Date will be treated as taxable income to the extent that the amount held under
the Contract immediately prior to the distribution exceeds the "investment in
the Contract." The "investment in the Contract" is defined in the Code as that
portion, if any, of Purchase Payments by or on behalf of a taxpayer under the
Contract which was not excluded from the taxpayer's gross income at the time of
such payout less any amounts previously received under the Contract which were
excluded from the taxpayer's gross income at the time of their receipt. For
these purposes, "investment in the Contract" is not affected by the Owner's or
Annuitant's death. That is, the investment in the Contract remains the amount of
any Purchase Payments made which were not excluded from gross income. The
taxable portion of any distribution received prior to the Annuity Date will be
subject to tax at ordinary income tax rates. For purposes of this rule, a pledge
or assignment of a Contract is treated as a payout received on account of a
partial withdrawal of a Contract.
2. ANNUITY PAYOUTS AFTER THE ANNUITY DATE.
Upon receipt of the Proceeds of a surrender of the Contract after the Annuity
Date, the recipient is taxed to the extent the Proceeds exceed the investment in
the Contract. Upon receipt of an Annuity Payout under the Contract, the
recipient will be taxed on a portion of each payout received if the value of the
Contract exceeds the investment in the Contract. The taxable portion of a payout
received after the Annuity Date will be subject to tax at ordinary income tax
rates.
For Fixed Annuity Payouts, the taxable portion of each payout is determined by
using a formula known as the "exclusion ratio," which establishes the ratio that
the investment in the Contract bears to the total expected amount of Annuity
Payouts for the term of the Contract. That ratio is then applied to each payout
to determine the non-taxable portion of the payout. The remaining portion of
each payout is taxed at ordinary income rates. For Variable Annuity Payouts, in
general, the taxable portion is determined by a formula which establishes a
specific dollar amount of each payout that is not taxed. The dollar amount is
determined by dividing the investment in the Contract by the total number of
expected periodic payouts. The remaining portion of each payout is taxed at
ordinary income rates. For Contracts with Annuity Dates after December 31, 1986,
once the excludable portion of Annuity Payouts to date equals the investment in
the Contract, the balance of the Annuity Payouts will be fully taxable.
Withholding of Federal income taxes on all distributions may be required unless
the recipient elects not to have any amounts withheld and properly notifies
First ING Life of that election.
3. PENALTY TAX ON CERTAIN WITHDRAWALS OR DISTRIBUTIONS.
With respect to amounts withdrawn or distributed before the taxpayer reaches Age
59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of amounts
withdrawn or distributed. However, the penalty tax will not apply to
withdrawals:
1) made on or after the death of the Owner or, where the Owner is not an
individual, the death of the "primary Annuitant." The primary Annuitant
is defined as the individual the events in whose life are of primary
importance in
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affecting the timing and amount of the payout under the Contract;
2) attributable to the taxpayer's becoming totally disabled within the
meaning of Code Section 72(m)(7);
3) which are part of a series of substantially equal periodic payouts made
at least annually for the life (or life expectancy) of the taxpayer, or
the joint lives (or joint life expectancies) of the taxpayer and his
Beneficiary;
4) from an IRA;
5) allocable to investment in the Contract prior to August 14, 1982;
6) under a qualified funding asset (as defined in Code Section 130(d));
7) under an immediate annuity Contract, or
8) which are purchased by an employer on termination of certain types of
qualified plans and which are held by the employer until the employee
separates from service.
Other tax penalties may apply to certain distributions as well as to certain
contributions and other transactions under a qualified plan.
If the penalty tax does not apply to a withdrawal as a result of the application
of item 3) above, and the series of payouts are subsequently modified (other
than by reason of death or disability), the tax for the year when the
modification occurs will be increased by an amount (as determined by the
regulations) equal to the tax that would have been imposed but for item 3)
above, plus interest for the deferral period, if the modification takes place
(a) before the close of the period which is five years from the date of the
first payout and after the taxpayer attains Age 59 1/2, or (b) before the
taxpayer reaches Age 59 1/2.
TAXATION OF INDIVIDUAL RETIREMENT ANNUITIES
Code Section 408 permits individuals or their employers to contribute to an
individual retirement program known as an IRA. In addition, distributions from
certain other types of qualified plans may be placed into an IRA on a tax
deferred basis. IRAs are subject to limitations on the amount which may be
contributed and the time when distributions may commence. Tax penalties may
apply to contributions in excess of specified limits, loans or assignments,
distributions in excess of a specified amount annually or that do not meet
specified requirements, and in certain other circumstances.
Under the Code, distributions from IRAs generally must begin no later than April
1st of the calendar year following the calendar year in which the Owner attains
Age 70 1/2. If the required minimum distribution is not withdrawn, there may be
a penalty tax in an amount equal to 50% of the difference between the amount
required to be withdrawn and the amount actually withdrawn. See the Statement of
Additional Information for a discussion of the various special rules concerning
the minimum distribution requirements.
Under amendments to the Code which became effective in 1993, distributions from
a qualified plan (other than non-taxable distributions representing a return of
capital, distributions meeting the minimum distribution requirement,
distributions for the life or life expectancy of the recipient(s) or
distributions that are made over a period of more than 10 years) are eligible
for tax-free rollover within 60 days of the date of distribution, but are also
subject to Federal income tax withholding at a 20% rate unless paid directly to
another qualified plan. If the recipient is unable to take full advantage of the
tax-free rollover provisions, there may be taxable income, and the imposition of
a 10% penalty tax if the recipient is under Age 59 1/2.
It is important that you consult your tax adviser before purchasing an IRA.
DISTRIBUTION-AT-DEATH RULES
The following required distribution rules shall apply if and to the extent
required under Section 72(s) of the Internal Revenue Code:
1) Subject to the alternative election or spouse beneficiary provisions in
subsection (2) or (3) below,
a) If any Owner dies on or after the annuity starting date and before
the entire interest in this Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the
date of such death;
b) If any Owner dies before the annuity starting date, the entire
interest in this Contract will be distributed within 5 years after
such death; and
c) If any Owner is not an individual, then for purposes of this
subsection (1), the primary
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Annuitant under this Contract shall be treated as the Owner (the
"Deemed Owner"), and any change in the primary Annuitant shall be
treated as the death of the Owner. The primary Annuitant is the
individual, the events in the life of whom are of primary importance
in affecting the timing or amount of the payout under the Contract.
2) If any portion of the interest of an Owner (or a Deemed Owner) in
subsection (1) is payable to or for the benefit of a designated
beneficiary, and such beneficiary elects within 60 days of receipt of
due proof of death to have such portion distributed in an Annuity Option
over a period that: A) does not extend beyond such beneficiary's life or
life expectancy and B) starts within 1 year after such death (a
"Qualifying Distribution Period"); then for purposes of satisfying the
requirements of subsection (1), such portion shall be treated as
distributed entirely on the date such periodic distributions begin. Such
beneficiary may elect any Payout Period Option for a Qualifying
Distribution Period, subject to any restrictions imposed by any
regulations under Section 72(s) of the Internal Revenue Code.
3) If any portion of the interest of an Owner (or a Deemed Owner) described
in subsection (1) is payable to or for the benefit of such Owner's
spouse, or is co-owned by such spouse, then such spouse shall be treated
as the Owner of such portion for purposes of the requirements of
subsection (1).
Our Contract complies with these rules. See the Required Distribution section of
your Contract.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non-qualified Contract because of the death of
the Owner. Generally, such amounts are includible in the income of the recipient
as follows: (a) if distributed in a lump sum, they are taxed in the same manner
as a full surrender of the Contract, as described above, or (b) if distributed
under an Annuity Option, they are taxed in the same manner as Annuity Payouts,
as described above.
CONTRACTS OWNED BY NON-NATURAL PERSONS
For contributions to Contracts where the Contract is held by a non-natural
person (for example, a corporation) the income on that Contract (generally the
increase in the Cash Surrender Value less the Purchase Payments) is includible
in taxable income each year. The rule does not apply where the non-natural
person is the nominal Owner of a Contract and the Beneficiary is a natural
person. The rule also does not apply where the Contract is acquired by the
estate of a decedent, where the Contract is an IRA Contract, where the Contract
is a qualified funding asset for structured settlements or where the Contract is
purchased on behalf of an employee upon termination of a qualified plan.
SECTION 1035 EXCHANGES
Section 1035 of the Code provides that no gain or loss shall be recognized on
the exchange of an annuity Contract for another. If the exchanged contract was
issued prior to August 14, 1982, the new Contract retains some of the exchanged
contract's tax attributes. The pre-August 14, 1982, cost recovery rules will
continue to apply to distributions characterized as amounts not received as an
annuity with respect to such distributions allocable to investments made before
August 14, 1982. Under the cost recovery rule, such amounts are received tax-
free until the taxpayer has received amounts equal to the pre-August 14, 1982
investments. Amounts allocable to post-August 13, 1982, investments are subject
to the interest first rule. In contrast, a new Contract issued in exchange for a
contract issued before January 18, 1985, does not retain the exchanged
contract's grandfathering 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 advisers.
ASSIGNMENTS
A transfer of Ownership, a collateral assignment or the designation of an
Annuitant or other Beneficiary who is not also the Owner may result in tax
consequences to the Owner, Annuitant or Beneficiary that are not discussed
herein. An Owner contemplating such a transfer or assignment of a Contract
should contact a competent tax adviser with respect to the potential tax effects
of such a transaction.
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MULTIPLE CONTRACTS RULE
The Technical and Miscellaneous Revenue Act of 1988 (the "1988 Act") provides
that, for Contracts entered into on or after October 21, 1988, for purposes of
determining the amount of any distribution under Section 72(e) (amounts not
received as annuities) that is includible in gross income, all non-qualified
deferred annuity contracts issued by the same (or an affiliated) insurer to the
same Owner during any calendar year are to be aggregated and treated as one
contract. Thus, any amount received under any such contract prior to the
contract's annuity starting date, such as a partial withdrawal, dividend, or
loan, will be taxable (and possibly subject to the 10% penalty tax) to the
extent of the combined income in all such contracts. The Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) income through the serial purchase of annuity contracts or otherwise. In
addition, there may be other situations in which the Treasury Department may
conclude that it would be appropriate to aggregate two or more contracts
purchased by the same Owner. Accordingly, an Owner should consult a competent
tax adviser before purchasing more than one annuity contract.
DIVERSIFICATION STANDARDS
To comply with the diversification regulations ("Regulations") issued under Code
Section 817(h), the Divisions will be required to diversify their investments.
The Regulations generally require that on the last day of each quarter of a
calendar year:
1) no more than 55% of the value of each Division is represented by any one
investment;
2) no more than 70% is represented by any two investments;
3) no more than 80% is represented by any three investments; and
4) no more than 90% is represented by any four investments.
With respect to each Division, a "look-through" rule applies which suggests that
each Division of the Variable Account will be tested for compliance with the
percentage limitations by looking through to the assets of the Portfolio in
which that Division invests. All securities of the same issuer are treated as
one investment. As a result of the 1988 Act, each government agency or
instrumentality will be treated as a separate issuer for the purposes of these
limitations.
In connection with the issuance of the temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which owners may direct their investments to
particular divisions of a separate account without being considered the owners
of the assets of the account. It is possible that regulations or revenue rulings
may be issued in this area at some time in the future. It is not clear at this
time what these regulations or rulings would provide. It is possible that if
such regulations or rulings are issued, the Contract may need to be modified in
order to remain in compliance. For these reasons, First ING Life reserves the
right to modify the Contract, as necessary, to prevent the Owner from being
considered the Owner of the assets of the Variable Account.
The Portfolios in which the Variable Account invests have provided certain
assurances that they will meet the applicable diversification standards.
However, in the case of a master feeder arrangement, we note that the Internal
Revenue Service had not previously ruled that the "look-through" rule referenced
above may be applied to both the feeder fund and the master fund in order to
meet the diversification requirements of Code Section 817(h). Thus, in
connection with the conversion of the Neuberger & Berman Advisers Management
Trust into a master feeder structure effective May 1, 1995 (see "Facts about
First ING Life and the Variable Account -- The Portfolios"), Neuberger & Berman
Management Incorporated advised First ING Life that it applied for a private
letter ruling from the Internal Revenue Service authorizing such a multiple
look-through. On June 29, 1995, the Internal Revenue Service issued a favorable
private letter ruling regarding the applicability of the "look-through"
provisions of Internal Revenue Code Section 817(h) to the master feeder
structure.
- --------------------------------------------------------------------------------
FING Exchequer
39
<PAGE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
FIRST ING LIFE 2
THE ADMINISTRATOR 2
PERFORMANCE INFORMATION 2
SEC Yield for the Division Investing in the Fidelity VIP Money
Market Portfolio 2
SEC Standard Average Annual Total Return for Non-Money Market
Divisions 3
Accumulation Unit Value 3
Determination of Annuity Payouts 4
IRA INCOME PROGRAM 6
OTHER INFORMATION 7
FINANCIAL STATEMENTS 7
</TABLE>
- --------------------------------------------------------------------------------
FING Exchequer
40
<PAGE>
APPENDIX A
EXAMPLE 1: HYPOTHETICAL ILLUSTRATION OF SYSTEMATIC INCOME PROGRAM WITHDRAWALS
The following example illustrates how Systematic Income Program partial
withdrawals would work if you elected a monthly withdrawal program with the
maximum monthly income payment percentage of 1.25% of Accumulation Value, based
on hypothetical Accumulation Values as shown:
<TABLE>
<CAPTION>
Accumulation Value Systematic Income
Month At Time of Withdrawal Program Withdrawal Amount
----- --------------------- -------------------------
<S> <C> <C>
1 $8,500.00 $106.25
2 $8,425.00 $105.31
3 $8,700.00 $108.75
4 $8,150.00 $101.87
5 $7,900.00 $ 98.75
</TABLE>
Because the fifth monthly Systematic Income Program withdrawal amount would be
less than $100 (and is based on the maximum monthly percentage of 1.25%), the
Systematic Income Program would be canceled after this withdrawal, and no
withdrawal would be made for the sixth and subsequent months.
For additional information about the Systematic Income Program, see Systematic
Income Program, page 24.
EXAMPLE 2: HYPOTHETICAL ILLUSTRATION OF A SERIES OF DEMAND WITHDRAWALS
The following example illustrates how we would determine the surrender charge
(and the amounts that could be withdrawn without a surrender charge) and the
partial withdrawal transaction charge for a hypothetical series of three demand
withdrawals made in the third Contract Year.
For example, assume that:
1) An Owner has made an initial Purchase Payment of $30,000 to a Contract;
2) The Owner has not subsequently made any additional Purchase Payments to
the Contract;
3) The Owner has not taken any partial withdrawals during the first two
Contract Years; and
4) The Accumulation Value of the Contract as of the second Contract
Anniversary is $34,000.
The surrender and partial withdrawal transaction charges associated with each of
the following three hypothetical demand withdrawals would therefore be as
follows:
- --------------------------------------------------------------------------------
FING Exchequer 41
<PAGE>
<TABLE>
<CAPTION>
First Gross Second Gross Third Gross
Demand Withdrawal Demand Withdrawal Demand Withdrawal
----------------- ----------------- -----------------
<S> <C> <C> <C>
1) Hypothetical Accumulation Value $34,200 $33,000/1/ $29,400/2/
Before Demand Withdrawal
2) 15% Of The Accumulation Value As Of $ 5,100 $ 3,100/3/ $ 0/4/
The Last Contract Anniversary (Less
Any Gross Partial Withdrawals Already
Made During The Contract Year That Are
Not Considered To Be Withdrawals Of
Purchase Payments)
3) Amount Of Accumulation Value $4,2005/5/ $ 3,000/6/ $ 400/7/
Attributable To Earnings
4) Gross Demand Withdrawal Requested8 $ 2,000 $ 4,000 $ 3,000
5) Amount Withdrawn Attributable To Any $ 2,000 $ 3,000 $ 400
Earnings In The Contract
6) Amount Withdrawn Attributable To $ 0 $ 0 $ 0
Purchase Payments Held For At Least
Five Full Contract Years Since The
Contract Anniversary At The End Of The
Contract Year In Which The Purchase
Payment Was Made
7) Amount Withdrawn Attributable To The $ 0 $ 100 $ 0
Amount By Which 2) Exceeds 3)
8) Amount Withdrawn Attributable To Any $ 0 $ 900 $ 0
Purchase Payments Remaining On A
First-In, First-Out Basis
9) Surrender Charge $ 0 $ 45 $ 130
[8) Multiplied By 5%, The
Applicable Surrender Charge
Percentage For Surrenders Of
Purchase Payments Made During The
Contract Year.]
10) Partial Withdrawal Transaction $ 0 $ 25 $ 25
Charge
11) Amount Of Net Demand Withdrawal [4) $ 2,000 $ 3,930 $ 2,845
Minus 9) Minus 10)]
</TABLE>
For more information, see Demand Withdrawal Option, page 24, and The Amount
You May Withdraw Without a Surrender Charge, page 25.
- -------------------------------
1 Accumulation Value after the first Net Demand Withdrawal ($32,200) plus any
Earnings since that time, assumed to be $800.
2 Accumulation Value after the second Net Demand Withdrawal ($29,000) plus any
Earnings since that time, assumed to be $400.
3 $5,100 minus $2,000, the amount of Gross Partial Withdrawals already made
during the Contract Year that are not considered to be withdrawals of Purchase
Payments.
4 $5,100 minus $2,000 minus $3,100, the amount of Gross Partial Withdrawals
already made during the Contract Year that are not considered to be
withdrawals of Purchase Payments.
5 Current Accumulation Value ($34,200) minus amount of initial Purchase Payment
($30,000).
6 Cumulative Earnings remaining after the first Demand Withdrawal ($2,200) plus
the Earnings since that time, assumed to be $800.
7 Cumulative Earnings remaining after the first and second Demand Withdrawals
($0) plus the Earnings since that time, assumed to be $400.
8 We would deem the Gross Demand Withdrawal to be made in the following order --
5), 6), 7) and 8) -- for purposes of determining the amount of any surrender
charge. Withdrawals deemed to be taken from 5), 6) or 7) are not subject to a
surrender charge.
- --------------------------------------------------------------------------------
FING Exchequer 42
<PAGE>
EXAMPLE 3: HYPOTHETICAL ILLUSTRATION OF A FULL SURRENDER
The following example illustrates how we impose the surrender charge and
administrative charge on full surrenders to arrive at the Cash Surrender Value.
For example, assuming that:
1) An Owner has made an initial Purchase Payment of $30,000 to a Contract; and
2) The Owner has not made any additional Purchase Payments to the Contract;
The Owner's Cash Surrender Value would be as follows, based on hypothetical
Accumulation Values, if the Contract were surrendered at the end of the
applicable time periods:
<TABLE>
<CAPTION>
If You
Surrender Your Hypothetical Purchase Surrender Cash
Contract in Accumulation Earnings Payment Charge Surrender Administrative Surrender
Contract Year Value Withdrawal Withdrawn Percentage Charge Charge Value
- ------------- ----- ---------- --------- ---------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
1 $31,000 $ 1,000 $30,000 7% $2,100 $30 $28,870
3 $40,000 $10,000 $30,000 6% $1,500 $30 $38,470
6 $60,000 $30,000 $30,000 2% $ 600 $30 $59,370
8 $70,000 $40,000 $30,000 0% $ 0 $30 $69,970
</TABLE>
For more information, see Surrender Charge, page 29, and Administrative
Charge, page 30.
- --------------------------------------------------------------------------------
FING Exchequer 43
<PAGE>
APPENDIX B
PERFORMANCE INFORMATION
We may advertise certain performance related information for the Divisions of
the Variable Account, including yields and average annual total return. Certain
Portfolios have been in existence prior to the commencement of the offering of
the Contract described in this prospectus. We may advertise the performance of
the Divisions that invest in these Portfolios for these prior periods. The
performance information of any period prior to the commencement of the offering
of the Contract is calculated as if the Contract had been offered during those
periods using current charges and expenses.
Performance information for a Division of the Variable Account may be compared,
in reports and promotional literature, to: (i) the Standard & Poor's 500 Index
("S & P 500"), the Dow Jones Industrial Average ("DJIA"), the Shearson/Lehman
Intermediate Government/Corporate Bond Index, the Shearson/Lehman Long-Term
Government/Corporate Bond Index; the Donoghue Money Fund Average, the U.S.
Treasury Note Index, or other indices measuring performance of a pertinent group
of securities so that investors may compare that Division's results with those
of a group of securities widely regarded by investors as representative of the
securities markets in general; (ii) other variable annuity separate accounts or
other investment products tracked by Lipper Analytical Services, Variable
Annuity Research Data Service ("VARDS') or Morningstar, Inc. -- three widely
used independent research firms which rank mutual funds and other investment
companies by overall performance, investment objectives, and assets -- or
tracked by other ratings services, companies, publications, or persons who rank
separate accounts or other investment products on overall performance or other
criteria; and (iii) the Consumer Price Index (as a measure for inflation) to
assess the real rate of return from an investment in the Contract. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper, VARDS, Morningstar, Donoghue, magazines such as Money, Forbes,
Kiplinger's Personal Finance Magazine, Financial World, Consumer Reports,
Business Week, Time, Newsweek, National Underwriter, U.S. News and World Report,
On Wall Street, Smart Money, Investment Advisor, Securities Industry Management,
Life Insurance Selling, Financial Planning; rating services such as LIMRA,
Value, Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports,
and other publications such as The Wall Street Journal, Barron's, Investor's
Daily, and Standard & Poor's Outlook.
Performance information for any Division of the Variable Account reflects only
the performance of a hypothetical Contract under which the Division Accumulation
Value is allocated to that Division during the particular time period on which
the calculations are based. The performance information is based on historical
results and is not intended to indicate past or future performance under an
actual Contract.
Below are tables of total return for each Division of the Variable Account for
the most recent one, five and ten years (or since inception of the underlying
Portfolio if less than ten years). Below also are the 7-day yield and effective
yield for the Division investing in the Fidelity VIP Money Market Portfolio.
The yield of the Division investing in the Fidelity VIP Money Market Portfolio
refers to the income generated by an investment in the Division over a 7-day
period (which period will be specified in the advertisement). This income is
then "annualized" by assuming that the income generated in the specific week is
generated over a 52-week period. This annualized yield is shown as a percentage
of the investment. The effective yield calculation is similar, but when
annualized, the income earned by an investment in the Division is assumed to be
reinvested. Thus the effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. The yield and
effective yield of this Division reflects the deduction of all charges, expenses
and fees applicable to that Division but not the surrender charge, partial
withdrawal transaction charge, excess transfer charge, or taxes on Purchase
Payments. Yield and effective yield are calculated as shown in the Statement of
Additional Information.
Quotations of the average annual total returns are based on the average
percentage change in value of a hypothetical investment in the specific Division
over a given period of one, five or ten years (or, if less, up to the life of
the Portfolio.) They reflect the deduction of the surrender charge that would
apply if an Owner terminated the Contract at the end of the period
- --------------------------------------------------------------------------------
FING Exchequer 44
<PAGE>
indicated, the administrative charge, the mortality and expense risk charge and
the asset-based administrative charge as well as fees and charges of the
respective Portfolio. In addition, average annual total return quotations may
also be accompanied by total return quotations, computed on the same basis as
described above, except deductions will not include the surrender charge.
Average annual total return is calculated as shown in the Statement of
Additional Information.
The performance results shown in the following tables are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Owner.
Performance information should be considered in light of the investment
objectives, characteristics and quality of the Portfolios in which that Division
invests, and the market conditions during the given time period, and should not
be considered as a representation of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Divisions of the Variable Account, see the Statement of Additional Information.
Reports and promotional literature may also contain other information, including
the ranking of any Division derived from rankings of variable annuity separate
accounts or other investment products tracked by Lipper Analytical Services,
Morningstar, Inc., or by ratings services, companies, publications, or other
persons who rank separate accounts or other investment products on overall
performance or other criteria.
The Variable Account may also report other information, including the effect of
tax-deferred compounding on a Division's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Division investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the Division
investment experience exceeds 1.40% on an annual basis over many years.
First ING Life is also ranked and rated by independent financial rating
services, among which may include A. M. Best, Duff & Phelps, Moody's, Standard &
Poor's and Weiss Research, Inc. The purpose of these ratings is to reflect the
financial strength or claims-paying ability of First ING Life. The ratings are
not intended to reflect the investment experience or financial strength of the
Variable Account.
- --------------------------------------------------------------------------------
FING Exchequer 45
<PAGE>
PERFORMANCE CHART
The information below shows how the actual charges of a hypothetical contract
held for specified time periods ending June 30, 1996, would affect the
investment experience of the various Divisions available under the Contract. The
rates of return assume a $1,000 single purchase payment allocated to each
individual Division and no taxes deducted from the Purchase Payment. The returns
for a Contract that is not surrendered and for the 7-day yield for the Division
investing in the Fidelity VIP Money Market Portfolio include all deductions for
contract charges except the surrender charge. The returns for a Contract that is
surrendered reflect all Contract costs -- including the surrender charge -- that
would apply if the Contract were terminated at the end of the period indicated.
(The maximum sales surrender charge on each payment is 7% the first year,
decreasing 1% each year thereafter and equaling 0% after six years.) The maximum
$30 annual administrative charge is reflected using a formula which allows this
charge to be expressed as a percentage of the anticipated average Contract size.
Because the anticipated average Contact account size is greater than $1,000, the
expense effect of the annual administrative charge is reduced accordingly.
<TABLE>
<CAPTION>
Total Average Annual Returns Total Average Annual Returns
Assuming Contract Not Surrendered Assuming Contract Surrendered
- ------------------------------------------------------------------------------------------------------------------------------------
Shorter of Shorter of 10
Portfolio 10 Years or Years or
Division Inception 1 Year 5 Years Inception 1 Year 5 Years Inception
--------- ------ ------- --------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Neuberger & Berman Advisers Management Trust
Limited Maturity Bond Portfolio 09-10-84 3.09% 4.46% 5.10% -3.91% 3.95% 5.10%
Government Income Portfolio 03-22-94 0.76% 2.83% -6.24% 0.68%
Growth Portfolio 09-10-94 12.71% 10.42% 8.85% 5.71% 10.02% 8.85%
Partners Portfolio 03-22-94 24.78% 17.68% 17.78% 15.88%
The Alger American Fund
Alger American Small
Capitalization Portfolio 09-21-88 16.23% 16.57% 20.44% 9.23% 16.25% 20.44%
Alger American MidCap Growth Portfolio 05-03-93 21.36% 25.35% 14.36% 24.57%
Alger American Growth Portfolio 01-09-89 14.33% 18.25% 17.38% 7.33% 17.95% 17.38%
Alger American Leveraged
AllCap Portfolio 01-25-95 32.70% 56.68% 25.70% 53.20%
Fidelity Variable Insurance Products Fund
VIP Growth Portfolio 10-09-86 19.33% 18.19% 13.58% 12.33% 17.88% 13.56%
VIP Overseas Portfolio 01-28-87 11.50% 8.49% 6.15% 4.50% 8.06% 6.15%
VIP Money Market Portfolio* 04-01-82 4.00% 3.00% 4.44% -3.00% 2.46% 4.44%
Fidelity Variable Insurance Products Fund II
VIP II Asset Manager Portfolio 09-06-89 14.88% 9.68% 9.67% 7.88% 9.27% 9.67%
VIP II Index 500 Portfolio 08-27-92 24.05% 14.52% 17.05% 13.80%
INVESCO Variable Investment Funds, Inc.
INVESCO VIF - Total Return Portfolio 06-02-94 13.57% 12.28% 6.57% 10.13%
INVESCO VIF - Industrial Income Portfolio 08-10-94 24.70% 20.13% 17.70% 17.41%
INVESCO VIF - High Yield Portfolio 05-27-94 11.76% 9.79% 4.76% 8.04%
INVESCO VIF - Utilities Portfolio 01-01-95 15.15% 10.07% 8.15% 6.21%
Van Eck Worldwide Insurance Trust
Worldwide Balanced Fund 12-23-94 2.00% 0.69% -5.00% -3.30%
Gold and Natural Resources Fund 09-01-89 16.82% 10.33% 6.11% 9.82% 9.92% 6.11%
</TABLE>
*THE YIELD AND EFFECTIVE YIELD FOR THE DIVISION INVESTING IN THE FIDELITY VIP
MONEY MARKET PORTFOLIO WAS 3.53% AND 3.59%, RESPECTIVELY, AS OF JUNE 30, 1996.
The above performance figures reflect past performance only. They neither
guarantee nor predict future investment results under a Contract. Actual rates
of return and values will fluctuate, and you may have a gain or loss when money
is withdrawn from the Contract. The Accumulation Values of the Contract will
depend upon a number of factors, including what investment allocations you
choose and the experience of the Divisions in which you invest.
- --------------------------------------------------------------------------------
FING Exchequer 46
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE EXCHEQUER VARIABLE ANNUITY
A FLEXIBLE PREMIUM DEFERRED COMBINATION
FIXED AND VARIABLE ANNUITY CONTRACT
ISSUED BY
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
AND
FIRST ING LIFE SEPARATE ACCOUNT A1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE FIRST
ING LIFE INSURANCE COMPANY OF NEW YORK EXCHEQUER DEFERRED COMBINATION FIXED AND
VARIABLE ANNUITY CONTRACT WHICH IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW
BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN REQUEST TO FIRST
ING LIFE INSURANCE COMPANY OF NEW YORK, CUSTOMER SERVICE CENTER, OR TELEPHONE 1-
800-933-5858.
TABLE OF CONTENTS
<TABLE>
<S> <C>
FIRST ING LIFE 2
THE ADMINISTRATOR 2
PERFORMANCE INFORMATION 2
SEC YIELD FOR THE DIVISION INVESTING IN THE FIDELITY VIP MONEY MARKET PORTFOLIO 2
SEC STANDARD AVERAGE ANNUAL TOTAL RETURN FOR NON-MONEY MARKET DIVISIONS 3
ACCUMULATION UNIT VALUE 3
DETERMINATION OF ANNUITY PAYOUTS 4
IRA INCOME PROGRAM 6
OTHER INFORMATION 7
FINANCIAL STATEMENTS 7
</TABLE>
DATE OF PROSPECTUS: __________ ____, 1996
DATE OF STATEMENT OF ADDITIONAL INFORMATION: __________ ____, 1996
1
<PAGE>
FIRST ING LIFE
First ING Life's parents include ING America Insurance Holdings, Inc., a
Delaware corporation whose principal business is to act as the holding company
for ING Groep, N.V.'s U.S. insurance companies.
First ING Life's indirect intermediate parents, ING Insurance International B.V.
and ING Verzekeringen N.V., are Dutch insurance and financial corporations.
First ING Life's ultimate parent, ING Groep, N.V., is a Dutch insurance and
financial corporation primarily engaged in banking and insurance services which
include life and non-life insurance, life reinsurance, funds transfer services,
savings plans, investments in securities and other capital market instruments,
lending, mortgages, leasing, investment banking, debtor finance, debt conversion
and international project management, property development, finance and
management.
First ING Life acts as its own custodian for the Variable Account, and its
affiliate, ING America Equities, Inc., is the principal underwriter and
distributor of the Contracts in a continuous offering.
THE ADMINISTRATOR
Financial Administrative Services Corporation and its affiliate, Great-West Life
& Annuity Insurance Company, have an Administrative Services Agreement with
First ING Life. Financial Administrative Services Corporation or its affiliate,
Great-West Life & Annuity Insurance Company, provide administrative services for
all of First ING Life's variable annuity Contracts, such as Contract
underwriting and issue, Owner service and the administration of the Variable
Account.
PERFORMANCE INFORMATION
Performance information for the Divisions of the Variable Account, including the
total return of the Divisions, may appear in reports or promotional literature
to current or prospective Owners. Negative values are denoted by parentheses.
Performance information for measures other than total return do not reflect
surrender charges, which can have a maximum level of 7% of Purchase Payments,
and any applicable tax on Purchase Payments, currently ranging from 0% to 3.5%
(5% in the Virgin Islands).
See Appendix B, Performance Information, in the Prospectus for a discussion of
the types of performance information that may be published for the Divisions.
SEC YIELD FOR THE DIVISION INVESTING IN THE FIDELITY VIP MONEY MARKET PORTFOLIO
The yield and effective yield figures are calculated by standardized methods
prescribed by rules of the Securities and Exchange Commission. Under those
methods, the yield quotation is computed by determining the net change
(exclusive of capital changes) in the value of a hypothetical pre-existing
account having a balance of one Accumulation Unit of the Division at the
beginning of the period, subtracting a charge reflecting deductions from the
account, and dividing the difference by the value of the account at the
beginning of the same period to obtain the base period return, and then
multiplying the return for a seven-day period by (365/7), with the resulting
yield carried to the nearest hundredth of one percent. Effective yield is
computed by compounding the unannualized base period return by using the
formula:
Effective Yield = [base period return + 1 (365/7)] - 1
SEC STANDARD AVERAGE ANNUAL TOTAL RETURN FOR NON-MONEY MARKET DIVISIONS
Quotations of average annual total return for the Divisions of the Variable
Account are expressed in terms of the average annual compounded rate of return
of a hypothetical investment in a Contract over a period of 1, 5 and 10 years
(or, if less, up to the life of the Division), calculated pursuant to the
following formula:
P(1 + T)n = ERV
2
<PAGE>
Where:
[P] equals a hypothetical initial Purchase Payment of $1,000
[T] equals the average annual total return
[n] equals the number of years
[ERV] equals the ending redeemable value of a hypothetical $1,000 Purchase
Payment made at the beginning of the period (or fractional portion
thereof).
Fees that vary with the size of the account are included assuming an account
size equal to the Division's mean (or median) account size. The SEC requires
that an assumption be made that the Owner surrenders the entire Contract at the
end of the 1, 5 and 10 year periods (or, if less, up to the life of the
Division) for which performance is required to be calculated. This assumption
may not be consistent with the typical Owner's intentions in purchasing a
Contract and may adversely affect advertised or quoted returns.
ACCUMULATION UNIT VALUE
The calculation of the Accumulation Unit Value ("AUV") is discussed in the
Prospectus under Division Accumulation Value of each Division of the Variable
Account. The following illustrations show a calculation of a new AUV and the
purchase of Accumulation Units (using hypothetical examples):
<TABLE>
<CAPTION>
ILLUSTRATION OF CALCULATION OF ACCUMULATION UNIT VALUE
<C> <S> <C>
1) AUV for the Division at the end of the preceding Valuation Period $5.00000000
2) Net asset value per share of the Portfolio at the end of preceding Valuation Period $ 25.00
3) Net asset value per share of the Portfolio at the end of current Valuation Period $ 25.50
4) Dividends and capital gains declared and reinvested in the Portfolio
during the current Valuation Period $ 0.55
5) Charge for taxes per share in the Portfolio during the current Valuation Period $ 0.05
6) Gross investment return factor = [3) plus 4) minus 5)] divided by 2) 1.04000000
7) Less daily mortality and expense risk charge 0.00003425
8) Less daily asset based administrative charge 0.00000411
9) Accumulation Experience Factor for the current Valuation
Period = 6) minus 7) minus 8) 1.03996164
10) AUV for the Division at the end of the current Valuation Period = [1) times 9)] $5.19980822
11) Net Rate of Return for the Division during the current Valuation
Period = [9) minus 1) times 100] 3.996164%
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE TAX ON PURCHASE PAYMENTS)
1) Purchase Payment $ 100.00
2) AUV for the Division on the effective date of purchase (see above example) $5.00000000
3) Number of Accumulation Units purchased = [1) divided by 2)] 20.000000
4) AUV for the Division on the Valuation Date following purchase (see above example) $5.19980822
5) Value of the Accumulation Units in the Division for the Valuation Date
following purchase = [3) times 4)] $ 104.00
------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
DETERMINATION OF ANNUITY PAYOUTS
For Variable Annuity Payouts, you have the option of electing either a 3% or 5%
Benchmark Total Return. The rate is elected at the same time the Variable
Annuity Payout is elected and may not be changed after the Annuity Date.
Compared to a 3% Benchmark Total Return, electing the 5% Benchmark Total Return
would mean a higher initial payment but more slowly rising or more rapidly
falling subsequent payments if actual investment experience varied from 5%. If
the actual investment rate is at the annual rate of 3% or 5%, the Annuity
Payouts will be level if you elected either 3% or 5%, respectively.
As of the Annuity Date, any Division Accumulation Value invested in the
Guaranteed Interest Division will be allocated among the Divisions of the
Variable Account in the same proportion that the Division Accumulation Value of
each Division of the Variable Account bears to the total Division Accumulation
Value of all the Divisions of the Variable Account.
The first Variable Annuity Payout for each Division of the Variable Account will
be the amount that the Proceeds will provide as of the close of business on the
Valuation Date immediately preceding the Supplementary Contract Effective Date
at the Benchmark Total Return chosen. If you have elected to receive payouts
less frequently than monthly, the payout amount is then adjusted according to
the factors in the Payouts Other Than Monthly section in the prospectus.
The initial number of Annuity Units for a Division of the Variable Account is
calculated by dividing the payout amount of that Division by the Annuity Unit
Value of that Division as of the Supplementary Contract Effective Date. The
number of Annuity Units for a Division of the Variable Account does not change
throughout the Annuity Period unless a transfer is made between Divisions of the
Variable Account or, if a Combination Annuity Payout is selected, an increase in
allocation from the Variable Annuity Payout to the Fixed Annuity Payout is made.
The total Variable Annuity Payment is the sum of the Variable Annuity Payouts
from all Divisions of the Variable Account.
Variable Annuity Payouts, after the first payout, vary in amount with the
investment experience of the Divisions of the Variable Account. The dollar
amount of each Variable Annuity Payout after the first payout is calculated by
adding the amount due for each Division of the Variable Account. The amount due
for each Division equals:
1) The number of Annuity Units for that Division; multiplied by,
2) The Annuity Unit Value for that Division for the Valuation Period for which
each payout is due.
The dollar amount of each Annuity Payout after the first payout will not be
affected by variations in our expenses or mortality experience.
The Annuitant or Beneficiary may transfer all or a portion of the Annuity Units
in a Division of the Variable Account to another Division of the Variable
Account. After the transfer, the number of Annuity Units in the Division of the
Variable Account from which you are transferring will be reduced by the number
of Annuity Units transferred. The number of Annuity Units in the Division of the
Variable Account to which the transfer is made will be increased by the number
of Annuity Units transferred multiplied by:
1) The value of an Annuity Unit in the Division of the Variable Account from
which the transfer is made; divided by
2) The value of an Annuity Unit in the Division of the Variable Account to
which the transfer is made.
ANNUITY UNIT VALUE
We use an Annuity Unit Value to calculate the Variable Annuity Payouts. The
Annuity Unit Value for any later Valuation Period is:
1) The Annuity Unit Value for each Division as of the last prior Valuation
Period multiplied by the Annuity Experience Factor for that Division for
the Valuation Period for which the Annuity Unit Value is being calculated;
divided by
2) An interest factor based on the Benchmark Total Return selected. (This is
done to neutralize the Benchmark Total Return.)
- --------------------------------------------------------------------------------
4
<PAGE>
ANNUITY EXPERIENCE FACTOR
For each Division of the Variable Account, the Annuity Experience Factor
reflects the investment experience of the Portfolio in which that Division
invests and the charges assessed against that Division for a Valuation Period.
The Annuity Experience Factor is calculated as follows:
1) The net asset value of the Portfolio in which that Division invests as of
the end of the current Valuation Period; plus
2) The amount of any dividend or capital gains distribution declared and
reinvested in that Portfolio during the current Valuation Period; minus
3) A charge for taxes, if any.
4) The result of 1), 2) and 3), divided by the net asset value of that
Portfolio as of the end of the preceding Valuation Period; minus
5) The daily equivalent of the Variable Account Annual Expenses shown in the
Contract Schedule for each day in the current Valuation Period.
HYPOTHETICAL EXAMPLES
The following illustrations show, byuseof hypothetical examples,
the method of determining the Annuity Unit Value and the amount of several
variable Annuity Payments based on one Division.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
<TABLE>
<S> <C> <C>
1) Annuity Unit Value for the Division at the end of the
preceding Valuation Period $ 10.00000000
2) Net asset value per share of the Portfolio at the end
of preceding Valuation Period $25.00
3) Net asset value per share of the Portfolio at the end
of current Valuation Period $25.50
4) Dividends and capital gains declared and reinvested in
the Portfolio during the current Valuation Period $0.55
5) Charge for taxes per share in the Portfolio during the
current Valuation Period $0.05
6) Gross investment return factor = [3) plus 4) minus 5)]
divided 2) 1.04000000
7) Less daily mortality and expense risk charge 0.00003425
8) Less daily asset based administrative charge 0.00000411
9) Annuity Experience Factor for the current Valuation
Period = [6) minus 7) minus 8)] 1.03996164
10) Daily factor to compensate for Benchmark Total Return
of 3% 1.00008099
11) Adjusted Annuity Experience Factor for the current
Valuation Period = [9) divided by 10)] 1.03987743
12) Annuity Unit Value at the end of the current
Valuation period = [1) times 11)] 10.39877428
</TABLE>
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
(ASSUMING NO PREMIUM TAX IS APPLICABLE)
<TABLE>
<S> <C> <C>
1) Number of Accumulation Units at Annuity Date 1,000.00
2) Accumulation Unit Value 12.55548000
3) Adjusted Contract value = [1) times 2)] $12,555.48
4) First monthly annuity payment per $1,000 of adjusted
Contract Value $9.63
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
<TABLE>
<S> <C> <C>
5) First monthly annuity payment = [3) times 4) divided by
1,000] $120.91
6) Annuity Unit Value 10.39877428
7) Number of Annuity Units = [5) divided by 6)] 11.62726194
8) Assume Annuity Unit Value for second month payment
equals 10.50000000
9) Second monthly annuity payment = [7) times 8)] $122.09
10) Assume Annuity Unit Value for third month payment
equals 10.60000000
11) Third monthly annuity payment = [7) times 10)] $123.25
</TABLE>
IRA INCOME PROGRAM
If the Owner has an IRA Contract, we will provide payout of amounts required to
be distributed by the Internal Revenue Serviceunless the minimum distributions
are otherwise satisfied.
We will determine the amount that is required to be distributed from your
Contract each year based on the information you give us and various choices you
make. The minimum dollar amount of each distribution is $100. For purposes of
calculating the minimum distribution amount, all demand withdrawals, Systematic
Income Program partial withdrawals, and Annuity Payouts must be summed between
IRA required distribution payout dates to determine if the minimum distribution
amount has been met through these other distributions. If there have been
sufficient distributions made from the Contract during the calendar year, no
further distributions will be made for that year. If there have not been
sufficient distributions made from the Contract during the calendar year, the
remaining minimum distribution amount will be paid to the Owner. At any time
while minimum distributions are being made, if your Cash Surrender Value falls
below $2,000, we will cancel the Contract and send you the amount of the Cash
Surrender Value.
First ING Life notifies the Owner of the current IRA regulations in the IRA
Disclosure Statement which you will receive during the application process. The
Owner specifies whether the withdrawal amount will be based on a life expectancy
calculated on a single life basis (Owner's life only) or, if the Owner is
married, on a joint life basis (Owner's and spouse's life combined).
First ING Life calculates a required distribution amount each year based on the
Code's minimum distribution rules. We do this by dividing the Accumulation Value
as of December 31 of the prior year by the life expectancy. The life expectancy
is recalculated each year. Special minimum distribution rules govern payouts if
the Beneficiary is other than the Owner's spouse and the Beneficiary is more
than ten years younger than the Owner.
OTHER INFORMATION
Registration statements have been filed with the Securities and Exchange
Commission, with respect to the Contracts discussed in this Statement of
Additional Information. Not all of the information set forth in the registration
statements, 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 Securities
and Exchange Commission.
FINANCIAL STATEMENTS
Ernst & Young LLP, independent auditors, 370 17th Street, Suite 4300, Denver, CO
80202, will perform annual audits of the financial statements of First ING Life
and the financial statements of the First ING of New York Separate Account A1.
The financial statements of First ING Life, which are included in this Statement
of Additional Information, should be considered only as bearing on the ability
of First ING Life to meet its obligations under the Contract.
- --------------------------------------------------------------------------------
6
<PAGE>
FINANCIAL STATEMENTS
FIRST ING LIFE INSURANCE
COMPANY OF NEW YORK
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
WITH REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
7
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
REPORT OF INDEPENDENT AUDITORS...............................9
AUDITED FINANCIAL STATEMENTS
BALANCE SHEETS..............................................10
STATEMENTS OF OPERATIONS....................................12
STATEMENTS OF STOCKHOLDER'S EQUITY..........................13
STATEMENTS OF CASH FLOWS....................................14
NOTES TO FINANCIAL STATEMENTS...............................15
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholder
First ING Life Insurance Company of New York
We have audited the accompanying balance sheets of First ING Life Insurance
Company of New York (a wholly-owned subsidiary of Security Life of Denver
Insurance Company) as of December 31, 1995 and 1994, and the related statements
of operations, stockholder's equity, and cash flows for each of the three years
in the period ended December 31, 1995. 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 amount 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First ING Life Insurance
Company of New York at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company made certain
accounting changes in 1994 and 1993.
/s/ Ernst & Young LLP
-----------------------------------------
ERNST & YOUNG LLP
Denver, Colorado
April 5, 1996
9
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
----------------
<S> <C> <C>
ASSETS
Fixed maturity investments (Note 3) $19,002 $8,741
Cash 1,010 2,762
Accrued investment income 324 95
Reinsurance recoverable (Note 4):
Paid benefits 2,569 80
Unpaid benefits 1,584 1,912
Prepaid reinsurance premiums (Note 4 and 5) 8,838 9,025
Deferred federal income taxes (Note 6) - 421
Federal income taxes recoverable (Note 6) 9 61
----------------
Total assets $33,336 $23,097
================
</TABLE>
- -------------------------------------------------------------------------------
10
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits (Note 4):
Life and annuity reserves $ 8,921 $ 9,105
Unpaid claims 1,583 1,912
-----------------
Total future policy benefits 10,504 11,017
Accounts payable and accrued expenses 895 118
Indebtedness to related parties 156 298
Amounts due to reinsurers (Note 4) 10 757
Deferred federal income taxes (Note 6) 421 -
-----------------
Total liabilities 11,986 12,190
Commitments and contingent liabilities
(Notes 4 and 8)
Stockholder's equity (Note 7):
Common stock, $110 par value:
Authorized - 10,000 shares
Issued and outstanding - 10,000 shares 1,100 1,100
Additional paid-in capital 23,330 14,330
Net unrealized gain (loss) on investments 198 (491)
Retained earnings deficit (3,278) (4,032)
-----------------
Total stockholder's equity 21,350 10,907
-----------------
Total liabilities and stockholder's equity $33,336 $23,097
=================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
11
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Revenues:
Reinsurance assumed premiums $ 7,426 $ 7,696 $ 7,497
Reinsurance ceded premiums (7,426) (7,616) (6,159)
---------------------------
0 80 1,338
Net investment income 789 567 294
Net realized (gains) losses on investments 83 (412) (48)
---------------------------
Total revenues 872 235 1,584
Benefits and expenses:
Death benefits 6,765 7,917 6,657
Other benefits 206 163 72
Increase in policy reserves and other funds 3 80 87
Reinsurance recoveries (6,970) (8,080) (5,146)
---------------------------
4 80 1,670
Expenses:
Commissions (344) (402) (327)
Insurance operating expenses 714 753 634
Miscellaneous expense (2) 2 11
---------------------------
Total benefits and expenses 372 433 1,988
Income (loss) before federal income taxes 500 (198) (404)
Federal income tax benefit (expense) (Note 6) 254 46 (82)
---------------------------
Net income (loss) before cumulative effect
of accounting change 754 (152) (486)
Cumulative effect of accounting change
for income tax (Note 1) - - (40)
---------------------------
Net income (loss) $ 754 $ (152) $ (526)
===========================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
12
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year $ 1,100 $ 1,100 $ 1,100
-----------------------------
Additional paid-in capital:
Balance at beginning of year $14,330 $14,330 $12,330
Capital contribution 9,000 - 2,000
-----------------------------
Balance at end of year $23,330 $14,330 $14,330
=============================
Net unrealized gain (loss) on investments:
Balance at beginning of year $ (491) $ - $ -
Adjustment to beginning balance for change
in accounting method used for investments
net of $10 tax benefit (Note 1) - 18 -
Net change in unrealized gain (loss) on
investments, net of tax 689 (509) -
-----------------------------
Balance at end of year $ 198 $ (491) $ -
=============================
Retained earnings (deficit):
Balance at beginning of year $(4,032) $(3,880) $(3,354)
Net income (loss) 754 (152) (526)
-----------------------------
Balance at end of year $(3,278) $(4,032) $(3,880)
=============================
Total stockholder's equity $21,350 $10,907 $11,550
=============================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
13
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF CASH FLOW
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 754 $ (152) $ (526)
Adjustment to reconcile net income (loss) to net cash
provided (used) by operating activities
Increase (decrease) in future policy benefits (513) 423 (2,568)
Net (decrease) increase in federal income taxes 524 (107) 226
Increase in accounts payable, accrued expenses,
and amounts due to reinsurers 29 392 48
Decrease (increase) in accrued investment income (229) 103 (150)
Increase in reinsurance recoverable (2,160) (316) (985)
Decrease (increase) in prepaid reinsurance
premiums 188 47 (5,193)
Net realized (gain) loss on sale of investments (83) 412 43
Other, net 57 97 (140)
-----------------------------
Net cash provided (used) by operating activities (1,433) 899 (9,245)
INVESTING ACTIVITIES
Sales of fixed maturity investments, available for sale 1,075 9,698 -
Maturities of fixed maturity investments, available
for sale 750 - -
Purchase of fixed maturity investments, available
for sale (11,002) (8,277) -
Sale, maturity or repayment of fixed maturity
investments - - 69,562
Purchase of fixed maturity investments - - (62,858)
------------------------------
Net cash provided (used) by investing activities (9,177) 1,421 6,704
FINANCING ACTIVITIES
Increase (decrease) in indebtedness to related parties (142) 256 42
Capital contribution 9,000 - 2,000
-----------------------------
Net cash provided by financing activities 8,858 256 2,042
-----------------------------
Net increase (decrease) in cash (1,752) $ 2,576 (499)
Cash at beginning of year 2,762 186 685
-----------------------------
Cash at end of year $1,010 $ 2,762 $ 186
=============================
</TABLE>
See accompanying notes
- --------------------------------------------------------------------------------
14
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SIGNIFICANT AND ACCOUNTING POLICIES
NATURE OF OPERATIONS
First ING Life Insurance Company of New York (the Company, formerly known as the
Urbaine Life Reinsurance Company) is a wholly-owned subsidiary of Security Life
of Denver Insurance Company and is ultimately a part of the ING Groep, N.V.
organization based in the Netherlands. Currently, the Company's operations are
primarily limited to assuming existing closed blocks of business from various
insurance companies and retroceding the business to certain other reinsurers.
The Company receives compensation for administering these reinsurance contracts.
The reinsurance contracts are comprised of traditional life and accident and
health products. The Company intends to enter the direct variable insurance
market in the state of New York in the near future.
The significant accounting policies followed by the Company that materially
affect the financial statements are summarized below:
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which differ
from statutory accounting practices prescribed or permitted by state insurance
regulatory authorities.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
ACCOUNTING CHANGES
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities. The Company adopted the provisions of the new
standard for investments held as of or acquired after January 1, 1994. In
accordance with the statement, prior period financial statements have not been
restated to reflect the change in accounting principle. The cumulative effect
as of January 1, 1994 of adopting FASB Statement 115 had no impact on income.
The opening balance of stockholder's equity was increased by $18,000 (net of
$10,000 in deferred income taxes) to reflect the net unrealized holding gains on
securities classified as available-for-sale previously carried at amortized
cost.
- --------------------------------------------------------------------------------
15
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CHANGES (CONTINUED)
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, Accounting for Income Taxes (see Note 1, "Accounting
Policies"). The cumulative effect of adopting FASB Statement No. 109 as of
January 1, 1993 was to decrease net income by $40,000.
INVESTMENTS
Investments are presented on the following bases:
The carrying value of fixed maturities depends on the classification of the
security: securities held-to-maturity, securities available-for-sale, and
trading securities. Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Debt securities are classified as held-to-maturity
when the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity or trading are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
the unrealized gain or loss, net of tax, reported in a separate component of
stockholder's equity.
The Company does not hold trading securities or securities held-to-maturity.
The amortized cost of debt securities is adjusted for amortization of premiums
and accretion of discounts to maturity, or in the case of mortgage-backed
securities, over the estimated life of the security. Such amortization is
included in interest income from investments. Interest is included in net
investment income as earned.
Realized gains and losses, and declines in value judged to be other-than-
temporary are recognized in net income. The cost of securities sold is based
on the specific identification method.
- --------------------------------------------------------------------------------
16
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECOGNITION OF PREMIUM REVENUES
Premiums for traditional life insurance products, which include those products
with fixed and guaranteed premiums and benefits and consist principally of whole
life insurance policies, are recognized as revenue over the premium-paying
period.
FUTURE POLICY BENEFITS
The liabilities for life and accident and health benefits and expenses are
developed by actuarial methods and are determined based on published tables
using statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash value or the amounts required by law. Interest
rates range from 3% to 6% at both December 31, 1995 and 1994. The liabilities
calculated using this method are not materially different than liabilities
calculated using generally accepted accounting principles.
UNPAID CLAIMS
The liabilities for unpaid claims include estimates of amounts due on reported
claims and claims that have been incurred but were not reported as December 31.
Such estimates are based on actuarial projections applied to historical claim
payment data. Such liabilities are reasonable and adequate to discharge the
Company's obligations for claims incurred but unpaid as of December 31.
FEDERAL INCOME TAXES
Deferred federal income taxes have been provided or credited to reflect
significant temporary differences between income reported for tax and financial
reporting purposes.
CASH FLOW INFORMATION
Cash includes cash on hand and demand deposits. Included as a component of
operating activities is interest paid of $0 in 1995, $0 in 1994 and $182,000 in
1993.
- --------------------------------------------------------------------------------
17
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
In cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases could not be realized in immediate settlement of the instrument.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company.
Life insurance liabilities that contain mortality risk and all nonfinancial
instruments are excluded from the disclosure requirements. However, the fair
value of liabilities under all insurance contracts are taken into consideration
in the Company's overall management of interest rate risk, such that the
Company's exposure to changing interest rates is minimized through the matching
of investment maturities with amounts due under insurance contracts.
The following methods and assumptions were used by the Company in estimating the
"fair value" disclosures for financial instruments:
FIXED MATURITIES: The fair values for fixed maturities are based on quoted
market prices, where available. For fixed maturities not actively traded,
fair values are estimated using values obtained from independent pricing
services or, in the case of collateralized mortgage obligations, are
estimated by discounting expected future cash flows using a current market
rate applicable to the yield, credit quality, and maturity of the
investments.
LETTERS OF CREDIT: The Company is the beneficiary of two separate renewable
letters of credit totaling $11,615,000. These letters of credit have a
market value to the Company of $0 (see Note 9).
The carrying value of all other assets and liabilities approximate their
fair values.
- --------------------------------------------------------------------------------
18
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
The amortized cost and fair value of investments in fixed maturities are as
follows at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1995 Available for Sale:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $12,105 $252 $ 1 $12,356
Corporate securities 3,300 23 6 3,317
Mortgage-backed securities 3,293 36 - 3,329
-----------------------------------------
$18,698 $311 $ 7 $19,002
=========================================
1994 Available for Sale:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 2,865 $ 12 $ 75 $ 2,802
Corporate securities 3,335 - 330 3,005
Mortgage-backed securities 3,298 - 364 2,934
-----------------------------------------
$ 9,498 $ 12 $769 $ 8,741
=========================================
</TABLE>
The amortized cost and fair value of investments in fixed maturities at December
31, 1995, by contractual maturity, are shown in the following table. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
- --------------------------------------------------------------------------------
19
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
-------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Available for Sale:
Due in one year or less $ $
- -
Due after one year through five years 15,395 15,663
Due after five years through ten years 10 10
Mortgage-backed securities 3,293 3,329
-----------------------
$18,698 $19,002
=======================
</TABLE>
Changes in unrealized gains (losses) on investments in fixed maturities for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Gross unrealized gains $ 311 $ 12 $ 26
Gross unrealized losses (7) (769) (58)
-----------------------------
Net unrealized gains (losses) 304 (757) (32)
Deferred income tax (expense) benefit (106) 266 11
-----------------------------
Net unrealized gains (losses) after taxes 198 (491) (21)
Less:
Balance at beginning of year (491) - 57
Adjustment for change in accounting method - 18 -
-----------------------------
Change in net unrealized gains (losses)
on fixed maturities $ 689 $(509) $(78)
=============================
</TABLE>
Major categories of investment income for the years ended December 31, are
summarized as follows.
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities $797 $578 $484
Other investments - - 11
----------------------------
797 578 495
Investment expenses (8) (11) (201)
----------------------------
Net investment income $789 $567 $294
============================
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
Included as a component of investment expenses is interest expense of $0 in
1995, $0 in 1994 and $182,000 in 1993.
At December 31, 1995, 1994 and 1993 net realized gains (losses) on investments
of $83,000, ($412,000), and ($48,000) respectively were recognized on the sale
of fixed maturities.
Debt and marketable equity securities available-for-sale with fair value at the
date of sale of $1,075,000 and $9,698,000 were sold during 1995 and 1994
respectively. Gross gains of $83,000 and $0 and gross losses of $0 and $412,000
were realized on those sales during 1995 and 1994, respectively.
Proceeds from the sale of investments in fixed maturities during 1993 were
$69,562,000. Gross gains of $0 and gross losses of $48,000 were realized on
sales of investments in fixed maturities during 1993.
As part of its overall investment management strategy, the Company had not
entered into any agreements to purchase or sell securities as of December 31,
1995 and 1994.
At December 31, 1995 and 1994, bonds with an amortized cost of $1,679,000 and
$1,697,000, respectively, were on deposit with various state insurance
departments to meet regulatory requirements.
4. REINSURANCE
The Company is involved in both ceded and assumed reinsurance with other
companies for the purpose of diversifying risk and limiting exposure on larger
risks. As of December 31, 1995, the Company's retention limit for acceptance of
risk on life insurance policies had been set at various levels up to $150,000.
Reinsurance premiums, commissions, expense reimbursements, and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts.
To the extent that the assuming companies become unable to meet their
obligations under these treaties, the Company remains contingently liable to its
policyholders for the portion reinsured. Consequently, allowances are
established for amounts deemed uncollectible. To minimize its exposure to
significant losses from reinsurer insolvencies, the Company evaluates the
financial condition of its reinsurers.
- --------------------------------------------------------------------------------
21
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. REINSURANCE (CONTINUED)
A summary of the reinsured premiums is as follows:
<TABLE>
<CAPTION>
CEDED TO ASSUMED PERCENTAGE
GROSS OTHER FROM OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
As of December 31, 1995:
Life insurance in force $ - $ 797,106 $ 797,204 $ 98 N/A
==============================================
Premiums:
Life insurance $ - $ 7,426 $ 7,426 $ 0 N/A
Accident & health insurance - - - - N/A
----------------------------------------------
Total premiums $ - $ 7,426 $ 7,426 $ 0 N/A
==============================================
As of December 31, 1994:
Life insurance in force $ - $ 942,722 $ 942,819 $ 97 N/A
==============================================
Premiums:
Life insurance $ - $ 7,618 $ 7,698 $ 80 9,623%
Accident & health insurance - (2) (2) - N/A
----------------------------------------------
Total premiums $ - $ 7,616 $ 7,696 $ 80 9,620%
==============================================
As of December 31, 1993:
Life insurance in force $ - $1,130,621 $ 1,130,621 $ - N/A
==============================================
Premiums:
Life insurance $ - $ 6,130 $ 7,500 $1,370 548%
Accident & health insurance - 29 (3) (32) 10%
----------------------------------------------
Total premiums $ - $ 6,159 $ 7,497 $1,338 561%
==============================================
</TABLE>
5. CONCENTRATIONS OF CREDIT RISK:
At both December 31, 1995 and 1994, the Company held no less-than investment-
grade bonds in its portfolio.
At December 31, 1995 and 1994, $8,600,000 and $8,700,000, respectively, of the
Company's prepaid reinsurance premiums were retroceded to one reinsurer. The
amounts represent 97% of the total prepaid reinsurance premiums at both December
31, 1995 and 1994.
- --------------------------------------------------------------------------------
22
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31, are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Cession adjustment $(1,250) $ -
Other (102) (246)
---------------------
Total deferred tax liabilities (1,352) (246)
---------------------
Deferred tax assets:
Tax-basis deferred acquisition costs 581 683
Net operating loss carryforward 350 422
---------------------
Total deferred tax assets 931 1,105
Valuation allowance - (438)
---------------------
Net deferred tax assets 931 667
---------------------
Net deferred tax (liabilities) assets $ (421) $ 421
=====================
</TABLE>
Prior to 1995, a valuation allowance had been established by the Company to
account for the fact that the full benefit of the deferred tax asset for tax-
basis deferred acquisition costs more than likely would not be fully realized.
In 1995, a change in judgement about the realization of the deferred tax asset
occurred and the valuation allowance was removed.
The Policyholder's Surplus Account is an accumulation of certain special
deductions for income tax purposes and a portion of the "gains from operations"
which were not subject to current taxation under the Life Insurance Tax Act of
1959. At December 31, 1995, the balance in this account for tax return purposes
was approximately $188,000. The Tax Reform Act of 1984 provides that no further
accumulations will be made in this account. If amounts accumulated in the
Policyholder's Surplus Account exceed certain limits or if distributions to the
shareholders exceed amounts in the Shareholder's Surplus Account, to the extent
of such excess amount or excess distributions as determined for income tax
purposes, amounts in the Policyholder's Surplus Account would become subject to
income tax at rates in effect at that time. Should this occur, the maximum tax
which would be paid at the current tax rate is $65,800. The Company does not
anticipate any such action or foresee any events which would result in such tax.
- --------------------------------------------------------------------------------
23
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
For financial reporting purposes, federal income tax benefit (expense) consists
of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current $ 726 $ 44 $ (43)
Deferred (910) 2 184
Current year change in
valuation allowance 438 - (223)
-----------------------------
Federal income tax (benefit) expense $ 254 $ 46 $ (82)
=============================
</TABLE>
In 1995 and 1993, the Company's effective income tax rate varies from the
statutory federal income tax rate due to changes in the valuation allowance. In
1994, the Company's effective income tax rate does not vary significantly from
the statutory federal income tax rate.
As of December 31, 1995, the Company had a net operating loss (NOL) carryforward
for tax purposes of $1,001,000 which is available to offset future taxable
income until it expires in the year 2008.
The Company had net income tax payments of ($778,000), $61,000 and $303,000
during 1995, 1994 and 1993, respectively, for current income tax payments and
settlements of prior year returns.
7. STATUTORY ACCOUNTING INFORMATION AND PRACTICES
The Company prepares its statutory-basis financial statements in accordance with
accounting practices prescribed or permitted by its state of domicile.
"Prescribed" statutory accounting practices include state laws, regulations and
general administrative rules, as well as a variety of publications of the
National Association of Insurance Commissioners (NAIC). "Permitted" statutory
accounting practices encompass all accounting practices that are not prescribed;
such practices may differ from state to state, from company to company within
the state, and may change in the future. The NAIC is currently in the process
of codifying statutory accounting practices, the result of which is expected to
constitute the only source of "prescribed" statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1996 will
- --------------------------------------------------------------------------------
24
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STATUTORY ACCOUNTING INFORMATION AND PRACTICES (CONTINUED)
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that insurance companies use
to prepare their statutory-basis financial statements.
Effective in 1994, the Company is required to identify those significant
accounting practices that are permitted and obtain written approval of the
practice from the Insurance Department of the State of New York. As of December
31, 1995 and 1994, the Company had no significant permitted accounting
practices.
The NAIC prescribes Risk-Based Capital (RBC) requirements for life/health
insurance companies. At December 31, 1995 the Company met RBC requirements.
Stockholder's equity, determined in accordance with statutory accounting
practices (SAP), was $21,441,000 and $11,197,000 at December 31, 1995 and 1994,
respectively. Net income (loss), determined in accordance with SAP was
$1,154,000, $126,000 and ($617,000) for the years ended December 31, 1995, 1994
and 1993, respectively.
The Company is required to maintain statutory paid-in capital of at least
$1,000,000 and paid-in surplus of at least 50% of the paid-in capital in its
state of domicile. The Company exceeded its minimum statutory capital and
surplus requirements at December 31, 1995. Additionally, the amount of
dividends which can be paid by the Company to its stockholder is subject to
prior approval by the Insurance Department of the State of New York based on its
review of the Company's financial condition.
8. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is not currently a party to any pending or threatened lawsuits and
is not aware of any material contingent liabilities.
9. FINANCING ARRANGEMENT
The Company is the beneficiary of two separate renewable letters of credit
totaling $11,615,000, that were established in accordance with the terms of
certain reinsurance agreements. These letters of credit expired on December 31,
1995 and were renewed in 1996. The letters of credit were unused during both
1995 and 1994.
- --------------------------------------------------------------------------------
25
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS
Beginning in 1993, the Company obtained administrative, investment and other
operating services from its parent. Amounts expensed for these services were
$41,000, $362,000 and $66,000 during 1995, and 1994 and 1993, respectively.
In 1994 the Company entered into a reinsurance contract with its parent to
assume the reserves on a block of whole life insurance policies. The initial
premium to be received and reserves assumed were $80,000. The net reinsurance
receivable at December 31, 1995 and 1994 was $0 and $80,000 respectively.
- --------------------------------------------------------------------------------
26
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements included in Part B:
First ING Life Insurance Company of New York:
Report of Independent Auditors.
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for Years Ended December 31, 1995, 1994
and 1993
Statements of Stockholder's Equity for Years Ended
December 31,1995, 1994 and 1993
Statements of Cash Flows for Years Ended December 31,1995, 1994
and 1993
Notes to Financial Statements
(b) Exhibits:
The following exhibits are filed herewith:
1. Resolutions of the Executive Committee of the Board of Directors
of First ING Life Insurance Company of New York ("First ING
Life") authorizing the establishment of the Registrant. 1/
2. Not applicable.
3. (a) First ING Life Insurance Company of New York
Distribution Agreement.3/
(b) Specimen Broker-Dealer Supervisory and Selling Agreement for
Variable Contracts.1/
4. (a) Form of Variable Annuity Contract.2/
5. (a) Form of Variable Annuity Contract Application.2/
6. (a) Articles of Incorporation of First ING Life Insurance
Company of New York. 3/
(b) By-Laws of First ING Life Insurance Company of New York.3/
7. Not Applicable.
8. Participation, Service and Administrative Agreements.
(a) The Alger American Fund
(b) Fidelity Variable Insurance Products Fund
(c) Fidelity Variable Insurance Products Fund II
- --------------------------------------------------------------------------------
C-1
<PAGE>
(d) INVESCO Variable Investment Funds, Inc.
(e) Van Eck Worldwide Insurance Trust
(f) Administration Services Agreement
between First ING Life Insurance Company of
New York and Financial Administrative Services
Corporation 3/
--
9. Opinion and Consent of Eugene L. Copeland as to the legality of
the securities being registered.2/
--
10. Consent of Independent Auditors.
11. None.
12. None.
13. Schedule for Computation of Performance Quotations.
14. Financial Data Schedules.
15. (a) Powers of Attorney.2/
--
(b) Power of Attorney for Michael W. Cunningham. 3/
--
1/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form N-4 Registration Statement of First ING Life Insurance Company of New
York and its First ING Life Separate Account A1, filed with the Securities
and Exchange Commission on July 31, 1995 (File Nos. 33-88794 and 811-8700).
2/ Incorporated herein by reference to the Form N-4 Registration Statement of
First ING Life and its First ING Life Separate Account A1, filed with the
Securities and Exchange Commission on August 16, 1994 (File Nos. 33-82890
and 811-8700).
3/ Incorporated herein by reference to Post-Effective Amendment No. 1 to the
Form N-4 Registration Statement of First ING Life Insurance Company of New
York and its First ING Life Separate Account A1, filed with the Securities
and Exchange Commission on April 23, 1996 (File Nos. 33-88794 and 811-8700).
C-2
<PAGE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Set forth below is information regarding the directors and officers of
First ING Life Insurance Company of New York. First ING's address, and the
business address of each person named, except as otherwise noted, is Security
Life Center, 1290 Broadway, Denver, Colorado 80203-5699.
Name and Principal Business Address Position and Offices with First ING
- ----------------------------------- -----------------------------------
R. Glenn Hilliard Chairman of the Board, Chief Executive
ING Officer
North America Insurance Corporation
5780 Powers Ferry Road
Atlanta, GA 30327-4390
Robert J. St. Jacques Director
ING
North America Insurance Corporation
5780 Powers Ferry Road
Atlanta, GA 30327-4390
Stephen M. Christopher Director, President and Chief Operating
Officer
Kevin W. Ahern Director, Vice President and Senior
Portfolio Manager
Evelyn A. Bentz Director
Wayne D. Bidelman Director
Thomas F. Conroy Director, President - Reinsurance
and Institutional Markets
Eugene L. Copeland Director, Senior Vice President
General Counsel and Corporate Secretary
Fred A. Deering Director
Weaver H. Gaines Director
528 Bayberry
Ocean City, NY 11770
C-3
<PAGE>
Name and Principal Business Address Position and Offices with First ING
- ----------------------------------- -----------------------------------
William S. Lutter Director, Vice President - Administration
First ING Life Insurance Company of
New York
225 Broadway, Suite 1901
New York, NY 10007
Roger D. Roenfeldt Director
100 So. Middle Neck Rd.
Great Neck, NY 11021
Stephen K. West Director
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Ben Currier Executive Vice President - Operations
Jeffrey W. Seel Vice President, Chief Investment Officer
ING
North America Insurance Corporation
5780 Powers Ferry Road
Atlanta, GA 30327-4390
Jess A. Skriletz Senior Vice President - Institutional
Markets
Lyndon E. Oliver Treasurer
ING
North America Insurance Corporation
5780 Powers Ferry Road
Atlanta, GA 30327-4390
C-4
<PAGE>
Name and Principal Business Address Position and Offices with First ING
- ----------------------------------- -----------------------------------
John G. Grant Vice President - Sr. Portfolio Manager
Amy L. Winsor Finance and Tax Officer
Irene M. Colorosa Assistant Secretary
Leonard Heim Appointed Actuary
Shirley Knarr Actuary Officer
Item 26. Persons Controlled by or Under Common Control with First ING Life
Insurance Company of New York or Registrant
First ING Life Insurance Company of New York, the depositor of First
ING of New York Separate Account A1, is an indirect wholly owned subsidiary of
ING Groep, N.W. ("ING"). ING is a holding company made up of two sub-holding
companies, ING Verzekeringen N.V. ("ING Insurance") and ING Bank N.V. ("ING
Bank") The ING address is:
Post Office Box 810
1000 AV Amsterdam
The Netherlands
The voting shares of ING are registered in the name of a Trustee,
which under a trust agreement with ING has issued against these shares not-
voting bearer depository receipts which are listed on the stock exchanges of
Amsterdam, Antwerp, Basel, Brussels, Frankfurt, Geneva, Paris and Zurich. This
kind of trust arrangement is not uncommon among public companies in the
Netherlands and the ING Trustee's principal business is the administration of
such trust arrangements with respect to the shares of ING and the shares of
other Dutch corporations. The bearer depository receipts can be exchanged for
voting shares on an extremely limited basis under which no one share holder may
never hold more than 1% of any class of voting shares.
Although trustees formally have and exercise voting rights, these
rights are limited. For example, trustees do not have the right to elect
directors. Also, it is the general policy of the Netherlands that these trustees
follow the recommendations of the Boards of Directors and the management of
corporations and will not exercise voting rights to influence the operations of
these corporations in the normal course of events.
ING Insurance is one of the largest insurance operations in the world.
More than half of its total consolidated premium income is derived from life
insurance underwriting. ING Insurance also participates in underwriting fire,
marine and aviation, motor vehicle, accident and sickness insurance, and
professional reinsurance. ING Insurance subsidiaries are engaged in the
insurance underwriting business in Europe, North America, Latin America,
Australia, the Caribbean and Asia.
Although First ING Life Insurance Company of New York's ultimate
parent company is ING, one hundred percent of the issued and outstanding stock
is owned directly by Security Life of Denver Insurance Company ("SLD"), an
insurance company incorporated in the state of
C-5
<PAGE>
Colorado. Security Life of Denver Insurance Company is wholly owned by ING
America Insurance Holdings, Inc. ("ING America Holdings"), a holding company
incorporated in the state of Delaware. ING America Holdings is wholly owned by
ING Insurance International B.V., which is in turn wholly owned by ING
Insurance. SLD's subsidiary organizations are composed of the following:
1) Wilderness Associates, a Colorado partnership in which SLD is a
49% partner.
2) First Secured Mortgage Deposit Corp., a wholly owned Colorado
subsidiary corporation.
3) Midwestern United Life Insurance Company, a wholly owned Indiana
subsidiary corporation.
4) ING America Equities, Inc., a wholly owned Colorado subsidiary
corporation
5) First ING Life Insurance Company of New York
The list showing the U.S. holdings of ING America Holdings and the
world-wide holdings of ING as of December, 1995 is hereby incorporated by
reference to Post-Effective Amendment No. 3 to the Form N-4 Registration
Statement filed by Security Life of Denver and its Security Life Separate
Account A1 on April 23, 1996 (File Nos. 33-78444 and 811-8196).
Items 27. Number of Contract Owners
Not Applicable -- Registration not yet effective.
Item 28. Indemnification
Incorporated herein by reference to the Form N-4 Registration
Statement of First ING Life Insurance Company of New York and Its First ING Life
Separate Account A1, filed with the Securities and Exchange Commission on August
14, 1994 (File Nos. 33-82890 and 811-8700).
Item 29. Principal Underwriters
----------------------
a) None
b) The following table sets forth certain information regarding the
officers and directors of ING America Equities, Inc. The business
address of each person named below is Security Life of Denver,
Security Life Center, 1290 Broadway, Attn: Variable, Denver, Colorado
80203-5699
Name and Principal Position and Offices
Business and Address with Underwriter
- -------------------- ---------------------
Edward K. Campbell Director and President
Eugene L. Copeland Senior Vice President and Secretary
C-6
<PAGE>
Shari A. Enger Treasurer
Frank T. Wright Director and Vice President
Irene M. Colorosa Assistant Secretary
Melodie A. Maxwell-Jones Director and Chief Compliance Officer
Jerrianne Smith Chief Operating Officer
Debbie Bell Chief Financial Officer
Kurt W. Bernlohr Director, Vice President and Chief Legal
Officer
Daniel Lazaras Director
c) None
Item 30. Location of Accounts and Records
--------------------------------
The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 and 31a-3 thereunder are maintained by First
ING Life Insurance Company of New York at Security Life Center, 1290 Broadway,
Denver, Colorado 80203-5699, and at Financial Administrative Services
Corporation, 8515 East Orchard Road, Englewood, Colorado 80111.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
Incorporated herein by reference to the Form N-4 Registration
Statement of First ING Life Insurance Company of New York and Its First ING Life
Separate Account A1, filed with the Securities and Exchange Commission on August
14, 1994 (File Nos. 33-82890 and 811-8700).
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, First ING Life Insurance Company of New York and has duly
caused this Pre-Effective Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, and its seal
to be hereunto fixed and attested, all in the City and County of Denver and the
State of Colorado on the 13 day of August, 1996.
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
(Depositor)
By: /s/: Stephen M. Christopher*
-----------------------------
Stephen M. Christopher
President and Chief Operating Officer
FIRST ING LIFE SEPARATE ACCOUNT A1
(Registrant)
By: FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
(Depositor)
By: /s/: Stephen M. Christopher*
-----------------------------
Stephen M. Christopher
President and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities with First ING Life Insurance Company of New
York and on the date indicated.
PRINCIPAL EXECUTIVE OFFICERS:
/s/: Robert J. St. Jacques*
- ----------------------------
Robert J. St. Jacques
Chief Executive Officer
C-8
<PAGE>
/s/: Stephen M. Christopher*
- --------------------------------------------
Stephen M. Christopher
President and Chief Operating Officer
PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER:
/s/: Michael E. Cunningham*
- --------------------------------------------
Michael E. Cunningham
Acting Chief Financial Officer and Acting Principal Accounting Officer
DIRECTORS:
/s/: R. Glenn Hilliard (Chairman)*
- --------------------------------------------
R. Glenn Hilliard
/s/: Robert J. St. Jacques (Vice Chairman)*
- --------------------------------------------
Robert J. St. Jacques
/s/: Kevin W. Ahern*
- --------------------------------------------
Kevin W. Ahern
/s/: Evelyn A. Bentz*
- --------------------------------------------
Evelyn A. Bentz
/s/: Wayne D. Bidelman*
- --------------------------------------------
Wayne D. Bidelman
/s/: Stephen M. Christopher*
- --------------------------------------------
Stephen M. Christopher
/s/: Thomas F. Conroy*
- --------------------------------------------
Thomas F. Conroy
/s/: Eugene L. Copeland*
- --------------------------------------------
Eugene L. Copeland
/s/: Fred A. Deering*
- --------------------------------------------
Fred A. Deering
- --------------------------------------------------------------------------------
C-9
<PAGE>
/s/: Weaver H. Gaines*
- --------------------------------------------
Weaver H. Gaines
/s/: William S. Lutter*
- --------------------------------------------
William S. Lutter
/s/: Roger D. Roenfeldt*
- --------------------------------------------
Roger D. Roenfeldt
/s/: Stephen K. West*
- --------------------------------------------
Stephen K. West
* By: /s/: Edward K. Campbell
------------------------------------
Edward K. Campbell
Attorney-in-fact
August 13, 1996
- --------------------------------------------------------------------------------
C-10
<PAGE>
SALES AGREEMENT
THIS AGREEMENT is made by and between The Alger American Fund ("FUND"), a
Massachusetts business trust, FRED ALGER MANAGEMENT, INC., a New York
corporation ("ADVISER"), and FIRST ING LIFE INSURANCE COMPANY OF NEW YORK ("LIFE
COMPANY"), a life insurance company organized under the laws of the State of New
York.
WHEREAS, FUND is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 (" '40 Act") as an open-end
diversified management investment company; and
WHEREAS, FUND is organized as a series fund, comprised of several
Portfolios which are listed on Appendix A hereto; and
WHEREAS, FUND was initially organized to act as the funding vehicle for
certain variable life insurance and/or variable annuity contracts ("Variable
Contracts") offered by life insurance companies through separate accounts of
such life insurance companies; and
WHEREAS, ADVISER is registered with the SEC as an investment adviser under
the Investment Advisers Act of 1940 and as a broker-dealer under the Securities
Exchange Act of 1934, as amended; and
WHEREAS, ADVISER is the investment adviser to FUND and the distributor of
the shares of FUND; and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having FUND as one of the underlying funding vehicles for such
Variable Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of FUND to fund the
aforementioned Variable Contracts and FUND is authorized to sell such shares to
LIFE COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
FUND and ADVISER agree as follows:
1. FUND will make available to the designated Separate Accounts of LIFE
COMPANY shares of the selected Portfolios for investment of purchase payments of
Variable Contracts allocated to the designated Separate Accounts as provided in
FUND's Prospectus.
2. FUND represents and warrants that all shares of the Portfolios of
FUND will be sold only to other insurance companies which have agreed to
participate in FUND to fund their Separate Accounts, all in accordance with the
requirements of Section 817(h)
<PAGE>
of the Internal Revenue Code of 1986, as amended ("Code") and Treasury
Regulation 1.817-5. Shares of the Portfolios of FUND will not be sold directly
to the general public.
3. (a) FUND agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of FUND which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by FUND or its designee
of the order for the shares of FUND. For purposes of this Section 3(a), LIFE
COMPANY shall be the designee of FUND for receipt of such orders and receipt by
such designee shall constitute receipt by FUND; provided that FUND receives
notice of such order by 9:30 a.m. New York time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which FUND calculates its net asset value pursuant to
the rules of the SEC.
(b) FUND agrees to redeem for cash, on LIFE COMPANY's request, any
full or fractional shares of FUND held by LIFE COMPANY, executing such requests
on a daily basis at the net asset value next computed after receipt by FUND or
its designee of the request for redemption. For purposes of this Section 3(b),
LIFE COMPANY shall be the designee of FUND for receipt of requests for
redemption and receipt by such designee shall constitute receipt by FUND;
provided that FUND receives notice of such request for redemption by 9:30 a.m.
New York time on the next following Business Day.
(c) FUND shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practical after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:15 p.m. New York time.
If FUND provides LIFE COMPANY with the incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any error in
the calculation of net asset value, dividend and capital gain information
greater than or equal to $.01 per share of FUND, shall be reported immediately
upon discovery to LIFE COMPANY. Any error of a lesser amount shall be corrected
in the next Business Day's net asset value per share for FUND.
(d) At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 3(c) to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of FUND shares which shall be purchased or redeemed at that
-2-
<PAGE>
day's closing net asset value per share. The net purchase or redemption orders
so determined shall be transmitted to FUND by LIFE COMPANY by 9:30 a.m. New York
time on the Business Day next following LIFE COMPANY's receipt of such requests
and premiums in accordance with the terms of Sections 3(a) and 3(b) hereof.
(e) If LIFE COMPANY's order requests the purchase of FUND shares,
LIFE COMPANY shall pay for such purchase by wiring federal funds to FUND or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, FUND shall wire the redemption
proceeds to LIFE COMPANY by the next Business Day, unless doing so would require
FUND to dispose of portfolio securities or otherwise incur additional costs, but
in such event, proceeds shall be wired to LIFE COMPANY within seven days and
FUND shall notify the person designated in writing by LIFE COMPANY as the
recipient for such notice of such delay by 3:00 p.m. New York time the same
Business Day that LIFE COMPANY transmits the redemption order to FUND. If LIFE
COMPANY's order requests the application of redemption proceeds from the
redemption of shares to the purchase of shares of another portfolio managed or
distributed by ADVISER, FUND shall so apply such proceeds the same Business Day
that LIFE COMPANY transmits such order to FUND.
4. (a) FUND will bear the printing costs (or duplicating costs with
respect to the statement of additional information) and mailing costs associated
with the delivery of the following FUND (or individual portfolio) documents, and
any supplements thereto, to existing Variable Contract owners of LIFE COMPANY
whose Variable Contract values are invested in the Fund:
(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
LIFE COMPANY will submit any bills for printing, duplicating and/or mailing
costs, relating to the FUND documents described above, to FUND for reimbursement
by FUND. LIFE COMPANY shall monitor such costs and shall use its best efforts
to control these costs. LIFE COMPANY will provide FUND on a semi-annual basis,
or more frequently as reasonably requested by FUND, with a current tabulation of
the number of existing Variable Contract owners of LIFE COMPANY whose Variable
Contract values are invested in FUND. This tabulation will be sent to FUND in
the form of a letter signed by a duly authorized officer of LIFE COMPANY
attesting to the accuracy of the information contained in the letter.
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(b) ADVISER will provide, at its expense, LIFE COMPANY with the
following FUND (or individual Portfolio) documents, and any supplements thereto,
with respect to prospective Variable Contract owners of LIFE COMPANY:
(i) camera ready copy of the current prospectus for printing
by the LIFE COMPANY;
(ii) a copy of the statement of additional information
suitable for duplication;
(iii) camera ready copy of proxy material suitable for printing;
and
(iv) camera ready copy of the annual and semi-annual reports
for printing by the LIFE COMPANY.
(c) FUND shall provide LIFE COMPANY with as many copies of the
current prospectus of FUND as LIFE COMPANY may reasonably request. Where FUND is
not obligated to bear the costs of such prospectuses under Sections 4(a) and
(b), LIFE COMPANY will reimburse FUND for the cost of providing the requested
prospectuses. If requested by LIFE COMPANY, FUND shall provide such
documentation (including a final copy of FUND's prospectus as set in type or in
camera-ready copy) and other assistance as is reasonably necessary in order for
LIFE COMPANY to print together in one document the current prospectus for the
Variable Contracts issued by LIFE COMPANY and the current prospectus for FUND.
5. (a) LIFE COMPANY will furnish, or will cause to be furnished, to FUND
and ADVISER, each piece of sales literature or other promotional material in
which FUND or ADVISER is named at least fifteen Business Days prior to its
intended use. No such material will be used if FUND or ADVISER objects to its
use in writing within ten Business Days after receipt of such material. LIFE
COMPANY will be responsible for making submissions to the NASD or other
regulatory authorities of such sales literature or other promotional materials.
(b) FUND and ADVISER will furnish, or will cause to be furnished, to
LIFE COMPANY, each piece of sales literature or other promotional material in
which LIFE COMPANY is named, at least fifteen Business Days prior to its
intended use. No such material will be used if LIFE COMPANY objects to its use
in writing within ten Business Days after receipt of such material. FUND or
ADVISOR will be responsible for making submissions to the NASD or other
regulatory authorities of such sales literature or other promotional materials.
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(c) FUND and its affiliates and agents shall not give any information
or make any representations on behalf of LIFE COMPANY or concerning LIFE
COMPANY, the Separate Accounts, or the Variable Contracts issued by LIFE
COMPANY, other than the information or representations contained in a
registration statement or prospectus for such Variable Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports for the Separate Accounts or prepared for distribution to
owners of such Variable Contracts, or in sales literature or other promotional
material approved by LIFE COMPANY or its designee, except with the permission of
LIFE COMPANY.
(d) LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of FUND or concerning FUND or
ADVISER other than the information or representations contained in a
registration statement or prospectus for FUND, as such registration statement
and prospectus may be amended or supplemented from time to time, or in
published reports for FUND which are in the public domain or approved by FUND or
ADVISER for distribution, or in sales literature or other promotional material
approved by FUND or its designee, except with the permission of FUND.
(e) For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for use, in
a newspaper, magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures or other
public media), sales literature (such as any written communication distributed
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts, or
reprints or excerpts or any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, registration
statements, prospectuses, statements of additional information, shareholder
reports and proxy materials, and any other material constituting sales
literature or advertising under National Association of Securities Dealers, Inc.
rules, the '40 Act or the Securities Act of 1933 (" '33 Act").
6. Each Portfolio of FUND will comply with Section 817(h) of the Code
and Treasury Regulation 1.817-5, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any amendments
or other modifications to such Section or Regulation. In the event FUND becomes
aware that any Portfolio of FUND has failed to comply, it will take all
reasonable steps (a) to notify LIFE COMPANY of such failure, and
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(b) to adequately diversify the Portfolio so as to achieve compliance.
7. (a) Except as limited by and in accordance with the provisions of
Sections 7(b) and 7(c) hereof, LIFE COMPANY agrees to indemnify and hold
harmless FUND and ADVISER, each of the officers and members of the Board of
Trustees of FUND, each of the directors and officers of ADVISER, and each
person, if any, who controls FUND or ADVISER within the meaning of Section 15 of
the '33 Act (collectively, the "Indemnified Parties" for purposes of this
Section 7) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of LIFE COMPANY) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of FUND's shares or the Variable Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus for the
Variable Contracts or contained in the Variable Contracts
or sales literature therefore (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission of a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with information furnished to LIFE
COMPANY by or on behalf of FUND for use in the
registration statement or prospectus for the Variable
Contract or in the Variable Contracts or sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contracts or
FUND shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of FUND not supplied by LIFE COMPANY, or
persons under its contract) or
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wrongful conduct of LIFE COMPANY or persons under its
control, with respect to the sale or distribution of the
Variable Contracts or FUND shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of FUND or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with information furnished to FUND
or ADVISER by or on behalf of LIFE COMPANY; or
(iv) arise as a result of any failure by LIFE COMPANY to
substantially provide the services and furnish the
materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in
this Agreement or arise out of or result from any other
material breach of this Agreement by LIFE COMPANY.
(b) LIFE COMPANY shall not be liable under this indemnification provision
for any losses, claims, damages, or liabilities incurred or assessed against an
Indemnified Party arising from such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to FUND, whichever is applicable.
(c) LIFE COMPANY shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY of any
such claim shall not relieve LIFE COMPANY from any liability which it may have
to the Indemnified Party against whom
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such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against an Indemnified Party, LIFE
COMPANY shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from LIFE COMPANY to
such party of LIFE COMPANY's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and LIFE COMPANY will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8. (a) Except as limited by and in accordance with the provisions of
Sections 8(b) and 8(c) hereof, ADVISER agrees to indemnify and hold harmless
LIFE COMPANY and each of its directors and officers and each person, if any, who
controls LIFE COMPANY within the meaning of Section 15 of the '33 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8) against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of ADVISER) or litigation (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of FUND's shares or the
Variable Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales
literature of FUND (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to ADVISER or
FUND by or on behalf of LIFE COMPANY for use in the
registration statement or prospectus for FUND or in sales
literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Variable
Contracts or FUND shares; or
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<PAGE>
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature for the Variable Contracts not supplied
by ADVISER or persons under its control) or wrongful
conduct of FUND, ADVISER or persons under their control,
with respect to the sale or distribution of the Variable
Contracts or FUND shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Variable Contracts, or any amendment thereof or supplement
thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to LIFE COMPANY by or on behalf of
FUND; or
(iv) arise as a result of (a) a failure by FUND to
substantially provide the services and furnish the
materials under the terms of this Agreement; (b) a failure
by FUND to comply with the diversification requirements of
Section 817(h) of the Code; (c) a failure by FUND to
qualify as a Regulated Investment Company under Subchapter
M of the Code; or (d) a failure by FUND to register its
shares for sale as required by the laws of the various
states.
(v) arise out of or result from any material breach of any
representation and/or warranty made by ADVISER in this
Agreement or arise out of or result from any other
material breach of this Agreement by ADVISER.
(b) ADVISER shall not be liable under this indemnification provision for
any losses, claims, damages, or liabilities incurred or assessed against an
Indemnified Party arising from the Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless
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<PAGE>
disregard of obligations and duties under this Agreement or to LIFE COMPANY.
(c) ADVISER shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified ADVISER in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify ADVISER of any such claim shall not
relieve ADVISER from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, ADVISER shall be entitled to participate at its own expense
in the defense thereof. ADVISER also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from ADVISER to such party of ADVISER's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and ADVISER will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
9. FUND represents and warrants that FUND Shares sold pursuant to this
Agreement shall be registered under the '33 Act and duly authorized for
issuance, and shall be issued, in compliance in all material respects with
applicable law, and that FUND is and shall remain registered under the '40 Act
for so long as required thereunder. FUND further represents and warrants that
FUND currently qualifies and will make every effort to continue to qualify as a
Regulated Investment Company under Subchapter M of the Code, and to maintain
such qualification (under Subchapter M or any successor or similar provisions),
and that FUND will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future. FUND will register and qualify its shares for sale in
accordance with the laws of the various states as may be required by law.
10. FUND will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. LIFE
COMPANY will provide FUND with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and
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<PAGE>
all amendments or supplements to any of the above that relate to a Separate
Account promptly after the filing of each such document with the SEC or other
regulatory authority.
11. FUND will disclose in its prospectus that (1) shares of FUND are
offered to affiliated or unaffiliated insurance company separate accounts which
fund both annuity and life insurance contracts, (2) due to differences in tax
treatment or other considerations, the interests of various Variable Contract
owners participating in FUND might at some time be in conflict, and (3) the
Board of Trustees of FUND will monitor for any material conflicts and determine
what action, if any, should be taken. FUND hereby notifies LIFE COMPANY that
prospectus disclosure may be appropriate regarding potential risks of offering
shares of FUND to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding variable
contracts of unaffiliated life insurance companies.
12. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13. LIFE COMPANY agrees to inform the Board of Trustees of FUND of the
existence of or any potential for any material irreconcilable conflict of
interest between the interest of the contract owners of the Separate Accounts of
LIFE COMPANY investing in FUND and/or any other separate account of any other
insurance company investing in FUND upon LIFE COMPANY having knowledge of same.
FUND agrees to inform LIFE COMPANY of the existence of or any potential for any
material irreconcilable conflict of interest between the interests of the
contract owners of the Separate Accounts of LIFE COMPANY investing in FUND
and/or any other separate account of any other insurance company investing in
FUND (upon FUND having knowledge of same).
A material irreconcilable conflict may arise for any one of a variety of
reasons, including:
(a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretive letter, or any similar
action by insurance, tax or securities regulatory authorities;
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<PAGE>
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Portfolio are being
managed;
(e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or by
contract owners of different life insurance companies utilizing
FUND; or
(f) a decision by a participating life insurance company to disregard
the voting instructions of contract owners.
The Board of Trustees of FUND shall promptly inform LIFE COMPANY if it
determines that an irreconcilable material conflict exists and the implications
thereof.
LIFE COMPANY will be responsible for assisting the Board of Trustees of
FUND in carrying out its responsibilities by providing the Board with all
information reasonably necessary for the Board to consider any issue raised
including information as to a decision by LIFE COMPANY to disregard voting
instructions of contract owners.
It is agreed that if it is determined by a majority of the members of the
Board of Trustees of FUND or a majority of its disinterested Trustees that a
material irreconcilable conflict exists affecting LIFE COMPANY, LIFE COMPANY
shall, at its own expense, to the extent reasonably practicable, take whatever
steps are necessary to remedy or eliminate the material irreconcilable conflict,
which steps may include, but are not limited to,
(a) withdrawing the assets allocable to some or all of the Separate
Accounts from FUND or any Portfolio and reinvesting such assets
in a different investment medium, including another Portfolio of
FUND or submitting the questions of whether such segregation
should be implemented to a vote of all affected contract owners
and, as appropriate, segregating the assets of any particular
group (i.e., annuity contract owners or life insurance contract
owners) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change;
(b) establishing a new registered management investment company or
managed separate account.
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<PAGE>
If a material irreconcilable conflict arises because of LIFE COMPANY's
decision to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the LIFE
COMPANY may be required, at FUND's election, to withdraw its Separate Account's
investment in FUND. No charge or penalty will be imposed against a Separate
Account of LIFE COMPANY as a result of such withdrawal. LIFE COMPANY agrees that
any remedial action taken by it in resolving any material conflicts of interest
will be carried out in the interests of contract owners.
For purposes hereof, a majority of the disinterested members of the Board
of Trustees of FUND shall determine whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no event will FUND
be required to establish a new funding medium for any Variable Contracts. LIFE
COMPANY shall not be required by the terms hereof to establish a new funding
medium for any Variable Contracts if an offer to do so has been declined by vote
of a majority of affected contract owners.
14. LIFE COMPANY shall provide pass-through voting privileges, as provided
in this paragraph, to all Variable Contract owners so long as the SEC or its
staff continues to interpret the '40 Act to require such pass-through voting
privileges for Variable Contract owners. LIFE COMPANY will vote shares for which
it has not received voting instructions as well as shares attributable to it in
the same proportion as it votes shares for which it has received instructions.
LIFE COMPANY shall be responsible for assuring that each of its Separate
Accounts participating in FUND calculates voting privileges in a manner
consistent with other life companies utilizing FUND provided that each
participating life insurance company enters into an agreement containing a
provision or provisions, which do not vary in any material respect, from the
terms of Section 13 hereof.
15. (a) This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
(b) This Agreement shall terminate automatically in the event of its
assignment unless such assignment is made with the written consent of LIFE
COMPANY and FUND.
(c) This Agreement shall terminate without penalty at the option of
the terminating party in accordance with the following provisions:
(i) At the option of LIFE COMPANY or FUND at any time from the
date hereof upon 180 days' advance written notice, unless
a shorter time is agreed to in writing by the parties;
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(ii) At the option of LIFE COMPANY if FUND shares are not
reasonably available to meet the requirements of the
Variable Contracts as determined by LIFE COMPANY. Notice
of election to terminate shall be furnished by LIFE
COMPANY and termination shall be effective ten days after
FUND's receipt of said notice unless FUND makes available
a sufficient number of shares, to the satisfaction of LIFE
COMPANY, to meet the requirements of the Variable
Contracts within said ten-day period;
(iii) At the option of LIFE COMPANY, upon the institution of
formal proceedings against FUND by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in LIFE COMPANY'S
reasonable judgment, materially impair FUND'S ability to
meet and perform FUND'S obligations and duties hereunder.
Prompt notice of election to terminate under this
paragraph shall be furnished by LIFE COMPANY with said
termination to be effective upon receipt of notice;
(iv) At the option of LIFE COMPANY, upon its good faith
determination, or at the option of FUND upon a
determination by a majority of the Board, or a majority of
disinterested Board members, that an irreconcilable
material conflict exists among the interests of (i) owners
of Variable Contracts issued by participating life
insurance companies; or (ii) the interest of participating
life insurance companies;
(v) At the option of FUND, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling,
judgement or outcome which would, in FUND'S reasonable
judgment, materially impair LIFE COMPANY'S ability to meet
and perform its obligations and duties hereunder. Prompt
notice of election to terminate under this paragraph shall
be
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<PAGE>
furnished by FUND with said termination to be effective
upon receipt of notice;
(vi) At the option of FUND, if (1) FUND shall determine in its
sole judgement reasonably exercised in good faith, that
LIFE COMPANY has suffered a material adverse change in its
business or financial condition or is the subject of
material adverse publicity and such material adverse
change or material adverse publicity is likely to have a
material adverse impact upon the business and operation of
FUND and ADVISER, (2) FUND shall have notified LIFE
COMPANY in writing of such determination and its intent to
terminate this Agreement, and, (3) after consideration of
the actions taken by LIFE COMPANY and any other changes in
circumstances since the giving of such notice, the
determination of FUND shall continue to apply on the
sixtieth (60th) day since giving of such notice, then such
sixtieth day shall be the effective date of termination;
(vii) At the option of LIFE COMPANY after having been notified
by FUND of a termination or proposed termination of the
Investment Advisory Agreement between FUND and ADVISER or
its successors, which notice FUND shall provide promptly
to LIFE COMPANY, the effective date of termination of the
Agreement to be as determined by LIFE COMPANY;
(viii) In the event FUND's shares are not registered, issued or
sold in accordance with applicable federal law, or such
law precludes the use of such shares as the underlying
investment medium of Variable Contracts issued or to be
issued by LIFE COMPANY. Termination shall be effective
immediately upon such occurrence without notice;
(ix) At the option of FUND upon a reasonable determination by
the Board in good faith that it is no longer advisable and
in the best interests of shareholders for FUND to continue
to operate pursuant to this Agreement;
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(x) At the option of FUND if the Variable Contracts cease to
qualify as annuity contracts or life insurance contracts,
as applicable, under the Code, or if FUND reasonably
believes that the Variable Contracts may fail to so
qualify;
(xi) At the option of LIFE COMPANY, upon FUND'S breach of any
material provision of this Agreement, which breach has not
been cured to the satisfaction of LIFE COMPANY within ten
days after written notice of such breach is delivered to
FUND;
(xii) At the option of FUND, upon LIFE COMPANY's breach of any
material provision of this Agreement, which breach has not
been cured to the satisfaction of FUND within ten days
after written notice of such breach is delivered to LIFE
COMPANY;
(xiii) At the option of FUND, if the Variable Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law. Termination shall be effective
immediately upon such occurrence without notice;
(xiv) At the option of LIFE COMPANY, if LIFE COMPANY shall
determine, in its sole judgment reasonably exercised in
good faith, that FUND is the subject of material adverse
publicity and such material adverse publicity is likely to
have a material adverse impact on the sale of the Variable
Contracts and/or the operations or business reputation of
LIFE COMPANY, the LIFE COMPANY shall have notified FUND
in writing of such determination and its intent to
terminate this Agreement, and, after consideration of the
actions taken by FUND and any other changes in
circumstances since the giving of such notice, the
determination of the LIFE COMPANY shall continue to apply
on the sixtieth (60th) day since giving of such notice,
which sixtieth day shall be the effective date of
termination; or
(xv) Upon requisite vote of the Variable Contract owners having
an interest in the Separate Accounts to substitute the
shares of another
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investment company for the corresponding shares of FUND in
accordance with the terms of the Variable Contracts for
which those shares had been selected to serve as the
underlying investment media.
(d) Notwithstanding any termination of this Agreement pursuant to
Section 15(c) hereof, at the election of LIFE COMPANY, FUND shall continue to
make available additional FUND shares, as provided below, pursuant to the terms
and conditions of this Agreement, for all Variable Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, at the election of LIFE
COMPANY, the owners of the Existing Contracts or LIFE COMPANY, whichever shall
have legal authority to do so, shall be permitted to reallocate investments in
FUND, redeem investments in FUND and/or invest in FUND upon the payment of
additional premiums under the Existing Contracts. In the event of a
termination of this Agreement pursuant to Section 15(c) hereof, LIFE COMPANY, as
promptly as is practicable under the circumstances, shall notify FUND whether
LIFE COMPANY shall elect to continue to have FUND make shares available after
such termination. If FUND shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either FUND or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 15(d), upon prior written notice to the other
party such notice to be for a period that is reasonable under the circumstances
but, if given by FUND, need not be for more than six months. In determining
whether to elect to continue to make available additional FUND shares, LIFE
COMPANY shall act in good faith, giving due consideration to the interests of
existing shareholders, including holders of Existing Contracts.
16. This Agreement shall be subject to the provisions of the '40 Act and
the rules and regulations thereunder, including any exemptive relief therefrom
and the orders of the SEC setting forth such relief.
17. Each party hereto agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the insurance operations of LIFE COMPANY are being conducted
in a manner consistent with the California Insurance Regulations and any other
applicable law or regulations. FUND agrees that LIFE COMPANY shall have the
right to inspect, audit and copy all records pertaining to the performance of
services under this Agreement pursuant to the requirements of the California
Insurance Department. However, FUND and ADVISER shall own and control all
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the pertinent records pertaining to their performance of services under this
Agreement.
18. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
19. It is understood by the parties that this Agreement is not an
exclusive arrangement.
20. FUND represents that a copy of its Agreement and Declaration of Trust,
dated April 6, 1988, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts. This Agreement has
been executed on behalf of FUND by the undersigned officer of FUND in his
capacity as an officer of FUND. The obligations of this Agreement shall be
binding on the assets and property of FUND only and shall not be binding on any
Trustee, officer, or shareholder of FUND individually.
Executed this 8th day of September, 1994.
THE ALGER AMERICAN FUND
ATTEST: /s/ ??? Staple BY: /s/ Gregory ???
--------------------------- ------------------------------------
FIRST ING LIFE INSURANCE
COMPANY OF NEW YORK
ATTEST: /s/ ???? BY: /s/ ???
--------------------------- -------------------------------------
FRED ALGER MANAGEMENT, INC.
ATTEST: /s/ ?? Staple BY: /s/ Gregory ????
--------------------------- -------------------------------------
-18-
<PAGE>
APPENDIX A
Alger American Small Capitalization Portfolio
Alger American MidCap Growth Portfolio
Alger American Growth Portfolio
Alger American Leveraged Allcap Portfolio
<PAGE>
FIRST AMENDMENT TO SALES AGREEMENT
This AGREEMENT is made by and between The Alger American Fund ("FUND"), a
Massachusetts business trust, FRED ALGER MANAGEMENT, INC., a New York
corporation ("ADVISER"), and FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
("LIFE COMPANY"), a life insurance company organized under the laws of the State
of New York (collectively, the "PARTIES").
WHEREAS, the PARTIES executed a sales agreement dated September 8, 1994
(the "Sales Agreement"), governing how shares of FUND's portfolios are to be
made available to certain variable life insurance and/or variable annuity
contracts offered by LIFE COMPANY through certain separate accounts (the
"Separate Accounts").
WHEREAS, the FUND portfolios available to the Separate Accounts are listed
in Appendix A of the Sales Agreement;
WHEREAS, the PARTIES have agreed that it is in their interests to make two
additional FUND portfolios available to the separate accounts;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
FUND and ADVISER agree as follows:
1. The Sales Agreement is hereby amended by substituting for the original
Appendix A an amended Appendix A in the form attached hereto which adds the
Alger American Growth Portfolio and Alger American Leveraged Allcap Portfolio to
the list of portfolios made available to the Separate Accounts.
Executed this 28th day of February, 1995.
The Alger American Fund
ATTEST: /s/ ??? Staple BY: /s/ Gregory ???
--------------------- ---------------------
First ING Life Insurance Company
of New York
ATTEST: /s/ ??? BY: /s/ ????
--------------------- ---------------------
Fred Alger Management, Inc.
ATTEST: /s/ ??? Staple BY: /s/ Gregory ????
--------------------- ---------------------
<PAGE>
APPENDIX A
Alger American Small Capitalization Portfolio
Alger American MidCap Growth Portfolio
<PAGE>
ADDENDUM TO THE SALES AGREEMENT DATED SEPTEMBER 8, 1995
BY AND BETWEEN
THE ALGER AMERICAN FUND, FRED ALGER MANAGEMENT, INC. AND
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
Section 2 of the Sales Agreement is hereby amended to read as follows:
2. FUND represents and warrants that all shares of the Portfolios of FUND will
be sold only to other insurance companies which have agreed to participate
in FUND to fund their Separate Accounts and to such other entities as may be
permitted by Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code"), which may include FUND's Distributor or its affiliates. Shares of
the Portfolios of FUND will not be sold directly to the: general public.
Date: June , 1995
THE ALGER AMERICAN FUND.
By: /s/ Gregory ???
----------------------
FIRST ING LIFE INSURANCE
COMPANY OF NEW YORK
By:
---------------------
FRED ALGER MANAGEMENT, INC.
By: /s/ Gregory ???
----------------------
<PAGE>
SERVICE AGREEMENT
This Agreement is made as of the 1st day of June, 1995 by and between First
ING Life Insurance Company of New York ("First ING") and Fred Alger Management,
Inc., a New York corporation ("Adviser"} (collectively, the "Parties").
WITNESSETH:
-----------
WHEREAS, the Adviser serves as the investment adviser of The Alger American
Fund, a Massachusetts business trust (the "Fund"), which currently consists of
six separate series (each, a "Portfolio"); and
WHEREAS, First ING has entered into an agreement, dated September 8, 1994,
and amended February 28, 1995, with the Fund and Adviser (the "Sales Agreement")
pursuant to which the Fund will make shares of each Portfolio listed from time
to time on Schedule A thereto available to certain variable life insurance
and/or variable annuity contracts offered by First ING through certain separate
accounts (the "Separate Accounts") at net asset value and with no sales charges,
subject to the terms of the Sales Agreement; and
WHEREAS, the Sales Agreement provides that the Fund will bear the costs of
preparing, filing with the Securities and Exchange Commission, printing or
duplicating and mailing the Fund's prospectus, statement of additional
information and any amendments or supplements thereto, periodic reports to
shareholders, Fund proxy material and other shareholder communications
(collectively, the "Fund Materials") required by law to be sent to owners of
Contracts ("Contract owners") who have allocated any Contract value to a
Portfolio; and
WHEREAS, the Sales Agreement provides that the Adviser, at its expense,
will provide First ING with camera ready copies or copies suitable for
duplication of all Fund Materials with respect to prospective Variable Contract
owners of First ING; and
WHEREAS, the Sales Agreement makes no provision for which party shall
incur various administrative expenses in connection with the servicing of
Contract owners who have allocated Contract value to a portfolio, including, but
not limited to, responding to various Contract owner inquiries regarding a
Portfolio; and
WHEREAS, the Parties hereto wish to allocate the expenses in a manner that
is fair and equitable, and consistent with the best interests of Contract
owners; and
WHEREAS, the Parties hereto wish to establish a means for allocating the
expenses that does not entail the expense and inconvenience of separately
identifying and accounting for each item of Fund expense;
1
<PAGE>
NOW THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
I. SERVICES PROVIDED:
-----------------
Security life agrees to provide services to the Adviser including the
following:
a) responding to inquiries from First ING Contract owners using one or
more of the Portfolios as an investment vehicle regarding the services performed
by Security life as they relate to the Fund or its Portfolios;
b) providing information to the Adviser and to Contract owners with
respect to shares attributable to Contract owner accounts;
c) printing and mailing of shareholder communications from the Fund as
may be required pursuant to Paragraph 4 of the Sales Agreement;
d) communication directly with Contract owners concerning the Fund's
operations;
e) providing such similar services as Adviser may reasonably request to
the extent permitted or required under applicable statutes, rules and
regulations.
II. EXPENSE ALLOCATIONS:
-------------------
Subject to Section III hereof, First ING or its affiliates shall initially
bear the costs of the following:
a) printing and distributing all Fund Materials to be distributed to
prospective Contract owners;
b) printing and distributing all sales literature or promotional material
developed by First ING or its affiliates and relating to the Contracts;
c) servicing Contract owners who have allocated Contract value to a
Portfolio, which servicing shall include, but is not limited to, the items
listed in Paragraph I of this Agreement.
2
<PAGE>
III. PAYMENT OF EXPENSES:
--------------------
a) The Adviser shall pay to First ING a quarterly fee equal to a
percentage of the average daily net assets of the Portfolio attributable to
Contracts, at the annual rate of .10% (hereinafter, the "Quarterly Fee"), in
connection with the expenses incurred by First ING under Section II hereof. The
payment of the Quarterly Fee shall commence at the end of the first calendar
quarter in which Contract value has been allocated to a Portfolio.
b) From time to time, the Parties hereto shall review the Quarterly Fee
to determine whether it reasonably approximates the incurred and anticipated
costs, over time, of First ING in connection with its duties hereunder. The
Parties agree to negotiate in good faith any change to the Quarterly Fee
proposed by a Party in good faith.
c) This Agreement shall not modify any of the provisions of Paragraph 4
of the Sales Agreement, but shall supplement those provisions.
IV. TERM OF AGREEMENT:
------------------
Any Party may terminate this Agreement, without penalty, on 60 days'
written notice to the other Parties. Unless so terminated, this Agreement shall
continue in effect for so long as the Adviser or its successor(s) in interest,
or any affiliate thereof, continues to perform in a similar capacity for the
Fund, and for so long as any Contract value or any monies attributable to
Security life is allocated to a Portfolio.
V. INDEMNIFICATION:
----------------
a) First ING agrees to indemnify and hold harmless the Adviser and its
officers and directors, from any and all loss, liability and expense resulting
from the gross negligence or willful wrongful act of First ING under this
Agreement, except to the extent such loss, liability or expense is the result of
the willful misfeasance, bad faith or gross negligence of the Adviser in the
performance of its duties, or by reason of the reckless disregard of its
obligations and duties under this Agreement.
b) Adviser agrees to indemnify and hold harmless First ING and its officers
and directors from any and all loss, liability and expense resulting from the
gross negligence or willful wrongful act of Adviser under this Agreement, except
to the extent such loss, liability or expense is the result of the willful
misfeasance, bad faith or gross negligence of First ING in the performance of
its duties, or by reason of the reckless disregard of its obligations and duties
under this Agreement.
3
<PAGE>
VI. NOTICES:
--------
Notices and communications required or permitted hereby will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Fred Alger Management, Inc.
75 Maiden Lane
New York, N.Y. 10038
Attn: Gregory S. Duch
FAX: (201) 434-1459
First ING Life Insurance Company of New York
1290 Broadway
Denver, Colorado 80203-5699
Attn: Stephen Moses
FAX: (303) 860-2283
VII. APPLICABLE LAW:
--------------
Except insofar as the Investment Company Act of 1940 or other federal laws
and regulations may be controlling, this Agreement will be construed and the
provisions hereof interpreted under and in accordance with New York law, without
regard for that state's principles of conflict of laws.
VIII. EXECUTION IN COUNTERPARTS:
--------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
IX. SEVERABILITY:
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
X. RIGHTS CUMULATIVE:
------------------
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
4
<PAGE>
XI. HEADINGS:
---------
The headings used in this Agreement are for purposes of reference only and
shall not limit or define the meaning of the provisions of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
FRED ALGER MANAGEMENT, INC. FIRST ING LIFE INSURANCE
COMPANY OF NEW YORK
By: By: /s/ Eugene L. Copeland
-------------------------- ----------------------------
Name: Name: Eugene L. Copeland
----------------------- -------------------------
Title: Title: Senior Vice President
----------------------- ------------------------
5
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND,
---------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
THIS AGREEMENT, made and entered into as of the 29th day of September,
1994 by and among FIRST ING LIFE INSURANCE COMPANY OF NEW YORK, (hereinafter the
"Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts (hereinafter
the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets (a list of the
Portfolios of the Fund to which this Agreement applies is included in Schedule D
hereto, as may be amended from time to time); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 9:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
2
<PAGE>
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day. Proceeds of any net
redemption are normally wired to the Company on the Business Day immediately
following receipt of the redemption order.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement (a list
of
3
<PAGE>
such funds appearing on Schedule C to this Agreement); or (d) the Fund or
Underwriter consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 4240 of the New York Insurance Laws and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New York and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend
4
<PAGE>
the Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated
as life insurance or annuity contracts, under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it will
notify the Fund and the Underwriter immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they might
not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-l, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of New York to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New York and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of the persons
affiliated with it who are described in Rule 17g-(1) under the 1940 Act are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, in an amount not less $5 million. The aforesaid includes coverage for
larceny and embezzlement is issued by a reputable bonding company. The Company
agrees to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the Fund
and the Underwriter in the event that such coverage no longer applies.
2.12. The Fund and the Underwriter represent that they will own and
control all the pertinent records pertaining to their performance of services
under this Agreement.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is available
from the Fund), and the Underwriter (or the Fund), at its expense, shall print
and provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
6
<PAGE>
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business
7
<PAGE>
Days prior to its use. No such material shall be used if the Company or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable
8
<PAGE>
to the Underwriter, past profits of the Underwriter or other resources available
to the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall
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<PAGE>
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
10
<PAGE>
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained
in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material
11
<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund not
supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.l(b) and 8.l(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to
12
<PAGE>
notify the Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense
thereof, the Indemnified Party, shall bear the fees and expenses of
any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Registration Statement or
prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or
the alleged omission to state therein a material
fact required to be stated therein or necessary to
make the statements therein not misleading,
provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission
was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by
or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund
or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement,
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<PAGE>
prospectus or sales literature for the Contracts
not supplied by the Underwriter or persons under
its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their
control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials
under the terms of this Agreement (including a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or
to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Underwriter in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Underwriter of any
such claim shall not relieve the Underwriter from any liability which
it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties,
the Underwriter will be entitled to participate, at its own expense,
in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Underwriter will not be liable to such
party under this Agreement for any legal or other expenses
14
<PAGE>
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party, as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the
15
<PAGE>
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
16
<PAGE>
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.6(b) hereof and at the
time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(h)
shall be effective forty five (45) days after the notice
specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request, the
Company will promptly furnish to the Fund and the
17
<PAGE>
Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
First ING Life Insurance Company of New York
1290 Broadway
Denver, CO 80203-5699
Attention: Stephen B. Moses
If to the Underwriter:
82 Devonshire Street
Boston. Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
<PAGE>
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations. The Fund
agrees that the Company shall have the right to inspect, audit and copy all
records pertaining to the performance of services under this Agreement to the
requirements of the California Insurance Department.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP")), as soon
as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as
soon as practical and in any event within 45 days after the
end of each quarterly period:
<PAGE>
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon
as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
By its authorized officer,
By: /s/ James E. Walden III
--------------------------
Name: James E. Walden III
------------------------
Title: President & CEO
-----------------------
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
By: /s/ J. Gary Burkhead
--------------------------
Name: J. Gary Burkhead
------------------------
Title: Senior Vice President
-----------------------
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/ Kure A. Grace
--------------------------
Name: Kure A. Grace
------------------------
Title: President
-----------------------
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
First ING Life Separate Account A1 The Exchequer Variable Annuity
(June 23, 1994) (Flexible Premium Deferred
Combination Fixed and Variable
Annuity Contract)
First ING Life Separate Account L1 First Line (Flexible Premium
(June 23, 1994) Variable Life Insurance Policy)
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
22
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter -- optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but not including) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
23
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares. Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
24
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
INVESCO VIF High Yield Portfolio
INVESCO VIF Industrial Income Portfolio
INVESCO VIF Total Return Portfolio
INVESCO VIF Utilities Portfolio
Neuberger and Berman Government Income Portfolio
Neuberger and Berman Growth Portfolio
Neuberger and Berman Limited Maturity Bond Portfolio
Neuberger and Berman Partners Portfolio
Van Eck Gold and Natural Resources Portfolio
Van Eck Worldwide Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund II
Asset Manager Portfolio
Index 500 Portfolio
25
<PAGE>
SCHEDULE D
Portfolios of the Fund available as funding vehicles under the Contracts:
Growth Portfolio
Money Market Portfolio
Overseas Portfolio
26
<PAGE>
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and among First ING Life Insurance Company of New
York, a life insurance company organized under the laws of the State of New York
("Insurance Company"), Variable Insurance Products Fund, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(the "Fund"), and Fidelity Distributors Corporation, a Massachusetts corporation
(the "Underwriter") (collectively, the "Parties").
WHEREAS, the Parties executed a participation agreement dated September 29,
1994 (the "Participation Agreement"), governing how shares of Fund's portfolios
axe to be made available to certain variable life insurance and/or variable
annuity contracts (the "Contracts") offered by Insurance Company through certain
separate accounts (the "Separate Accounts").
WHEREAS, the various Contracts for which shares are purchased are listed in
Schedule A of the Participation Agreement and the various portfolios made
available to the Separate Accounts are listed in Schedule C;
WHEREAS, the Parties have agreed that it is in their interests to add an
additional Contract funded by the Separate Accounts and two additional
portfolios made available to the Separate Accounts;
NOW, THEREFORE, in consideration of their mutual promises, Insurance
Company, Fund, and Underwriter agree as follows:
1. The Participation Agreement is hereby amended by substituting for the
original Schedule A an amended Schedule A in the form attached hereto which adds
the Strategic Advantage Variable Universal Life policy to the list of Contracts
funded by the Separate Accounts.
2. The Participation Agreement is hereby amended by substituting for the
original Schedule C an Amended Schedule C in the form attached hereto which adds
the Alger American Growth Portfolio and Alger American Leveraged Allcap
Portfolio to the list of portfolios made available to the Separate Accounts.
<PAGE>
Executed this____ day of February, 1995.
Variable Insurance Products Fund
ATTEST: BY: /s/J. Gary Burkhead
----------------------- -----------------------------------------
First ING Life Insurance Company of New York
ATTEST: BY: /s/Steve Largent
------------------------ -----------------------------------------
Fidelity Distributors Corporation
ATTEST: BY: /s/Kurt A. Lange
------------------------ -----------------------------------------
-2-
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- --------------------
Security Life Separate Account A1 The Exchequer Variable Annuity
(November 3, 1993) (Flexible Premium Deferred
Combination Fixed and Variable
Annuity Contract)
Security Life Separate Account L1 First Line (Flexible Premium
(November 3 1993) Variable Life Insurance Policy)
Strategic Advantage Variable
Universal Life (Flexible Premium
Variable Universal Life Insurance
Policy)
-3-
<PAGE>
Schedule C
----------
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
Alger American Growth Portfolio
Alger American Leveraged Allcap Portfolio
INVESCO VIF High Yield Portfolio
INVESCO VIF Industrial Income Portfolio
INVESCO VIF Total Return Portfolio
INVESCO VIF Utilities Portfolio
Neuberger and Berman Government Income Portfolio
Neuberger and Berman Growth Portfolio
Neuberger and Berman Limited Maturity Bond Portfolio
Neuberger and Berman Partners Portfolio
Van Eck Gold and Natural Resources Portfolio
Van Eck Worldwide Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund II
Asset Manager Portfolio
Index 500 Portfolio
-4-
<PAGE>
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT AMONG
-
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY DISTRIBUTORS CORPORATION
and
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
WHEREAS, FIRST ING LIFE INSURANCE COMPANY OF NEW YORK (the "Company"),
VARIABLE INSURANCE PRODUCTS FUND (the "Fund") and FIDELITY DISTRIBUTORS
CORPORATION have previously entered into a Participation Agreement (the
"Agreement") containing certain arrangements concerning prospectus costs; and
WHEREAS, the Trustees of the Fund have approved certain changes to the
expense structure of the Fund; and
NOW, THEREFORE, the parties do hereby agree to amend the Agreement by
substituting the following arrangement in place of any inconsistent language in
the Participation Agreement, wherever found:
1. The Fund will provide to the Company each year, at the Fund's cost,
such number of prospectuses and Statements of Additional Information as are
actually distributed to the Company's then-existing variable life and/or
variable annuity contract owners.
2. If the Company takes camera-ready film or computer diskettes
containing the Fund's prospectus and/or Statement of Additional Information in
lieu of receiving hard copies of these documents, the Fund will reimburse the
Company in an amount computed as follows. The number of prospectuses and
Statements of Additional Information actually distributed to existing contract
owners by the Company will be multiplied by the Fund's actual per-unit cost of
printing the documents.
3. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund in order to verify that
the prospectuses and Statements of Additional Information provided to the
Company, or the reimbursement made to the Company, are or have been used only
for the purposes set forth hereinabove.
IN WITNESS WHEREOF we have set our hand as of the 15th day of December,
1994.
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
By: /s/Steve Largent
--------------------
Name: Steve Largent
------------------
Title: Vice President
VARIABLE INSURANCE PRODUCTS FUND FIDELITY DISTRIBUTORS CORPORATION
By:/s/J. Gary Burkhead By:/s/Kurt A. Lange
-------------------- -----------------------
Name: J. Gary Burkhead Name: Kurt A. Lange
------------------- -----------------------
Title: Senior Vice President Title: President
----------------- -----------------------
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND II,
------------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
THIS AGREEMENT, made and entered into as of the 29th day of September,
1994 by and among FIRST LNG LIFE INSURANCE COMPANY OF NEW YORK, (hereinafter the
"Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets (a list of the
Portfolios of the Fund to which this Agreement applies is included in Schedule D
hereto, as may be amended from time to time); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 9:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
2
<PAGE>
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day. Proceeds of any net
redemption are normally wired to the Company on the Business Day immediately
following receipt of the redemption order.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to
in writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
in, forms the Fund and Underwriter prior to their signing this Agreement (a list
of
3
<PAGE>
such funds appearing on Schedule C to this Agreement); or (d) the Fund or
Underwriter consents to the use of such other investment company.
1.7 The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 4240 of the New York Insurance Laws and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New York and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend
4
<PAGE>
the Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated
as life insurance or annuity contracts, under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it will
notify the Fund and the Underwriter immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they might
not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-l, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of New York to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New York and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of the persons
affiliated with it who are described in Rule 17g-(1) under the 1940 Act are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, in an amount not less $5 million. The aforesaid includes coverage for
larceny and embezzlement is issued by a reputable bonding company. The Company
agrees to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the Fund
and the Underwriter in the event that such coverage no longer applies.
2.12. The Fund and the Underwriter represent that they will own and
control all the pertinent records pertaining to their performance of services
under this Agreement.
ARTICLE III. Prospectuses and Proxy Statements Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary.
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is available
from the Fund), and the Underwriter (or the Fund), at its expense, shall print
and provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
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3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3 5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business
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<PAGE>
Days prior to its use. No such material shall be used if the Company or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable
8
<PAGE>
to the Underwriter, past profits of the Underwriter or other resources available
to the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall
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<PAGE>
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and {2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
10
<PAGE>
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7 4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
11
<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure
to
12
<PAGE>
notify the Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Registration Statement or prospectus or sales
literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for use
in the Registration Statement or prospectus for the Fund
or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement,
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<PAGE>
prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its control)
or wrongful conduct of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or
on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Idemnified Party (or after such indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses
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<PAGE>
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the
diversification requirements specified in Article VI of
this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party, against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the
15
<PAGE>
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
16
<PAGE>
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.6(b) hereof and at the
time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(h)
shall be effective forty five (45) days after the notice
specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request, the
Company will promptly furnish to the Fund and the
17
<PAGE>
Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
First ING Life Insurance Company of New York
1290 Broadway
Denver, CO 80203-5699
Attention: Stephen B. Moses
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
18
<PAGE>
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations. The Fund
agrees that the Company shall have the right to inspect, audit and copy all
records pertaining to the performance of services under this Agreement to the
requirements of the California Insurance Department.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP")), as
soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP),
as soon as practical and in any event within 45 days
after the end of each quarterly period;
19
<PAGE>
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders,
as soon as practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities
and Exchange Commission or any state insurance regulator,
as soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
By its authorized officer,
By: /s/ ????????????????????????
----------------------------------
Name: James E. ???????? III
----------------------------------
Title: President & CEO
----------------------------------
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
By: /s/ J. Gary Burkhead
----------------------------------
Name: J. Gary Burkhead
----------------------------------
Title: Senior V.P.
----------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/ ???????????
----------------------------------
Name: Kurt A. Lange'
----------------------------------
Title: President
----------------------------------
20
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
First ING Life Separate Account A1 The Exchequer Variable Annuity
(June 23, 1994) (Flexible Premium Deferred
Combination Fixed and Variable
Annuity Contract
First ING Life Separate Account L1 First Line (Flexible Premium
(June 23, 1994) Variable Life Insurance Policy)
21
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include, the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
22
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but not including) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
23
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an
internal audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
24
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
INVESCO VIF High Yield Portfolio
INVESCO VIF Industrial Income Portfolio
INVESCO VIF Total Return Portfolio
INVESCO VIF Utilities Portfolio
Neuberger and Berman Government Income Portfolio
Neuberger and Berman Growth Portfolio
Neuberger and Berman Limited Maturity Bond Portfolio
Neuberger and Berman Partners Portfolio
Van Eck Gold and Natural Resources Portfolio
Van Eck Worldwide Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund
Growth Portfolio
Money Market Portfolio
Overseas Portfolio
25
<PAGE>
SCHEDULE D
Portfolios of the Fund available as funding vehicles under the Contracts:
Asset Manager Portfolio
Index 500 Portfolio
26
<PAGE>
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and among First ING Life Insurance Company of New
York, a life insurance company organized under the laws of the State of New York
("Insurance Company"), Variable Insurance Products Fund II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(the "Fund"), and Fidelity Distributors Corporation, a Massachusetts corporation
(the "Underwriter") (collectively, the "Parties").
WHEREAS, the Parties executed a participation agreement dated September 29,
1994 (the "Participation Agreement"), governing how shares of Fund's portfolios
are to be made available to certain variable life insurance and/or variable
annuity contracts (the "Contracts") offered by Insurance Company through certain
separate accounts (the "Separate Accounts").
WHEREAS, the various Contracts for which shares are purchased are listed in
Schedule A of the Participation Agreement and the various portfolios made
available to the Separate Accounts are listed in Schedule C;
WHEREAS, the Parties have agreed that it is in their interests to add an
additional Contract funded by the Separate Accounts and two additional
portfolios made available to the Separate Accounts;
NOW, THEREFORE, in consideration of their mutual promises, Insurance
Company, Fund, and Underwriter agree as follows:
1. The Participation Agreement is hereby amended by substituting for the
original Schedule A an amended Schedule A in the form attached hereto which adds
the Strategic Advantage Variable Universal Life policy to the list of Contracts
funded by the Separate Accounts.
2. The Participation Agreement is hereby amended by substituting for the
original Schedule C an amended Schedule C in the form attached hereto which adds
the Alger American Growth Portfolio and Alger American Leveraged Allcap
Portfolio to the list of portfolios made available to the Separate Accounts.
27
<PAGE>
Executed this ____ day of February, 1995.
Variable Insurance Products Fund II
ATTEST: BY: /s/ T. Gary Burkhead
--------------------- ----------------------------------------
First ING Life Insurance Company of New York
ATTEST: ??????? BY: /s/ Steve Largent
--------------------- ----------------------------------------
Fidelity Distributors Corporation
ATTEST: BY: /s/ ?????????????????
--------------------- ----------------------------------------
-2-
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Security Life Separate Account A1 The Exchequer Variable Annuity
(November 3, 1993) (Flexible Premium Deferred
Combination Fixed and Variable
Annuity Contract)
Security Life Separate Account L1 First Line (Flexible Premium
(November 3, 1993) Variable Life Insurance Policy)
Strategic Advantage Variable
Universal Life (Flexible Premium
Variable Universal Life Insurance
Policy)
-3-
<PAGE>
Schedule C
----------
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Alger American MidCap Growth Portfolio
Alger American Small
Capitalization Portfolio
Alger American Growth Portfolio
Alger American Leveraged Allcap Portfolio
INVESCO VIF High Yield Portfolio
INVESCO VIF Industrial Income Portfolio
INVESCO VIF Total Return Portfolio
INVESCO VIF Utilities Portfolio
Neuberger and Berman Government Income Portfolio
Neuberger and Berman Growth Portfolio
Neuberger and Berman Limited Maturity Bond Portfolio
Neuberger and Berman Partners Portfolio
Van Eck Gold and Natural Resources Portfolio
Van Eck Worldwide Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund
Growth Portfolio
Money Market Portfolio
Overseas Portfolio
-4-
<PAGE>
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT AMONG
VARIABLE INSURANCE PRODUCTS FUND II
FIDELITY DISTRIBUTORS CORPORATION
and
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
WHEREAS, FIRST ING LIFE INSURANCE COMPANY OF NEW YORK (the "Company"),
VARIABLE INSURANCE PRODUCTS FUND II (the "Fund") and FIDELITY DISTRIBUTORS
CORPORATION have previously entered into a Participation Agreement (the
"Agreement") containing certain arrangements concerning prospectus costs; and
WHEREAS, the Trustees of the Fund have approved certain changes to the
expense structure of the Fund; and
NOW, THEREFORE, the parties do hereby agree to amend the Agreement by
substituting the following arrangement in place of any inconsistent language in
the Participation Agreement, wherever found:
1. The Fund will provide to the Company each year, at the Fund's cost, such
number of prospectuses and Statements of Additional Information as are actually
distributed to the Company's then-existing variable life and/or variable annuity
contract owners.
2. If the Company takes camera-ready film or computer diskettes containing
the Fund's prospectus and/or Statement of Additional Information in lieu of
receiving hard copies of these documents, the Fund will reimburse the Company in
an amount computed as follows. The number of prospectuses and Statements of
Additional Information actually distributed to existing contract owners by the
Company will be multiplied by the Fund's actual per-unit cost of printing the
documents.
3. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund in order to verify that
the prospectuses and Statements of Additional Information provided to the
Company, or the reimbursement made to the Company, are or have been used only
for the purposes set forth hereinabove.
IN WITNESS WHEREOF we have set our hand as of the 15th day of December,
1994.
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Steve Largent
------------------------------------
Name: Steve Largent
------------------------------------
Title: Vice President
------------------------------------
VARIABLE INSURANCE PRODUCTS FUND II FIDELITY DISTRIBUTORS CORPORATION
By: /s/ J. Gary Burkhead By: /s/ ??????????????????
---------------------------- -------------------------
Name: J. Gary Burkhead Name: Kurt A. Lange
---------------------------- -------------------------
Title: Senior Vice President Title: President
---------------------------- -------------------------
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
---------------------------------------
INVESCO FUNDS GROUP, INC.
-------------------------
and
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
THIS AGREEMENT, made and entered into this 19th day of September, 1994 by
and among FIRST ING LIFE INSURANCE COMPANY OF NEW YORK, (hereinafter the
"Insurance Company"), a New York corporation, on its own behalf and on behalf of
each segregated asset account of the Insurance Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), INVESCO VARIABLE INVESTMENT FUNDS, INC., a
Maryland corporation (the "Company") and INVESCO FUNDS GROUP, INC. ("INVESCO"),
a Delaware corporation.
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable annuity and life insurance contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and Exchange
Commission (the "Commission"), dated December 29, 1993 (File No. 812-8590),
granting Participating Insurance Companies and their separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares
of the Company to be sold to and held by variable annuity and variable life
insurance separate accounts of life insurance companies that may or may not be
affiliated with one another (the "Mixed and Shared Funding Exemptive Order");
and
WHEREAS, the Company is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer under the Securities Exchange Act of 1934, as amended, (the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
1
<PAGE>
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity and variable life
insurance contracts identified by the form number(s) listed on Schedule B to
this Agreement, as amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds on
behalf of the Accounts to fund the Contracts and INVESCO is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. Sale of Company Shares
----------------------
1.1. INVESCO agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Company or its designee of
the order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided, that the Company receives notice of such order by 8:00
a.m., Mountain Time, on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Company calculates its net asset value pursuant to the rules of the
Commission.
1.2. The Company agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Company calculates its Funds' net asset values
pursuant to rules of the Commission and the Company shall use reasonable
efforts to calculate its Funds' net asset values on each day on which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
board of directors of the Company (hereinafter the "Board") may refuse to sell
shares of any Fund to any person, or suspend or terminate the offering of shares
of any Fund if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of that Fund.
1.3. The Company and INVESCO agree that shares of the Company will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Fund will be sold to the general public.
2
<PAGE>
1.4. The Company and INVESCO will not sell Company shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Company held by the Insurance Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 8:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of each
Fund offered by the then-current prospectus of the Company in accordance with
the provisions of that prospectus. The Insurance Company agrees that all net
amounts available under the Contracts shall be invested in the Company, in such
other Funds advised by INVESCO as may be mutually agreed to in writing by the
parties hereto, or in the Insurance Company's general account, provided that
such amounts may also be invested in an investment company other than the
Company if (a) the other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Funds of the Company; or (b) the Insurance
Company gives the Company and INVESCO 45 days written notice of its intention to
make the other investment company available as a funding vehicle for the
Contracts; or (c) the other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Insurance
Company so informs the Company and INVESCO prior to their signing this
Agreement; or (d) the Company or INVESCO consents to the use of the other
investment company.
1.7. The Insurance Company shall pay for Company shares by 9:00 a.m.,
Mountain Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the purpose of Sections 2.10
and 2.11, upon receipt by the Company of the federal funds so wired, such funds
shall cease to be the responsibility of the Insurance Company and shall become
the responsibility of the Company. Payment of net redemption proceeds (aggregate
redemptions of a Fund's shares by an Account minus aggregate purchases of that
Fund's shares by that Account) of less than $1 million for a given Business Day
will be made by wiring federal funds to the Insurance Company on the next
Business Day after receipt of the redemption request. Payment of net redemption
proceeds of $1 million or more will be by wiring federal funds within seven days
after receipt of the redemption request. Notwithstanding the foregoing, in the
event that one or more Funds has insufficient cash on hand to pay net
redemptions on the next Business Day, and if such Fund has determined to settle
redemption transactions for all of its shareholders on a delayed basis (more
than one Business Day, but in no event more than seven calendar days, after the
date on which the redemption order is received, unless otherwise permitted by an
order of the Commission under Section 22(e) of the 1940 Act), the Company shall
be permitted to delay sending redemption proceeds to the Insurance Company by
the
3
<PAGE>
same number of days that the Company is delaying sending redemption proceeds to
the other shareholders of the Fund. Redemptions of up to the lesser of $250,000
or 1% of the net asset value of the Fund whose shares are to be redeemed in any
90-day period will be made in cash. Redemptions in excess of that amount in any
90-day period may, in the sole discretion of the Company, be in-kind
redemptions, with the securities to be delivered in payment of redemptions
selected by the Company and valued at the value assigned to them in computing
the Fund's net asset value per share.
1.8. Issuance and transfer of the Company's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 6:00 p.m.,
Mountain Time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Insurance Company represents and warrants that the Contracts are,
or will be, registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with applicable state insurance suitability requirements. The Insurance
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under Colorado Revised Statutes Section 10-7-402 and
has registered, or prior to any issuance or sale of the Contracts will register,
the Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Company represents and warrants that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company shall amend the registration
statement for its shares under the i933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The
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Company shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Company or INVESCO.
2.3. The Company represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain that
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4. The Insurance Company represents and warrants that the Contracts are
currently treated as annuity or life insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Company and INVESCO immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5. The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Company makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. INVESCO represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the Commission. INVESCO
further represents that it will sell and distribute the Company shares in
accordance with the laws of the State of Maryland and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.9. INVESCO represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it shall perform its obligations for the Company in
compliance in all material respects with the laws of the State of Colorado and
any applicable state and federal securities laws.
2.10. The Company and INVESCO represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities described in Rule 17g-1 under the 1940 Act are, and
shall continue to be at all times, covered by a blanket fidelity bond or similar
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coverage for the benefit of the Company in an amount not less than the minimum
coverage required currently by Rule 17g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. That fidelity bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
described in Rule 17g-l under the 1940 Act are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Company, in an amount not less than the minimum coverage required currently
for entities subject to the requirements of Rule 17g-1 under the 1940 Act or
related provisions or may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
2.13. The Insurance Company represents and warrants that the allocation of
expenses between the Insurance Company and the Company and/or INVESCO in this
Agreement is substantially similar to the allocation provisions in the majority
of the Insurance Company's current participation agreements with other funds.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Company will bear the printing costs (or duplicating costs with
respect to the statement of additional information) and mailing costs associated
with the delivery of the following Company (or individual Fund) documents, and
any supplements thereto, to existing Contract owners of the Insurance Company
whose Contract values are invested in the Company:
(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
3.2. The Insurance Company will submit any bills for printing, duplicating
and/or mailing costs, relating to the Company documents described above, to
Company for reimbursement by the Company. The Insurance Company shall monitor
such costs and shall use its best efforts to control these costs. The Insurance
Company will provide the Company (or INVESCO) on a semi-annual basis, or more
frequently as reasonably requested by the Company (or INVESCO), with a current
tabulation of the number of existing Contract owners of the Insurance Company
whose Contract values are invested in the Company. This tabulation will be sent
to the Company (or INVESCO) in the form of a letter signed by a duly authorized
officer of the Insurance Company attesting to the accuracy of the information
contained in the letter. If requested by the Insurance Company, the Company
shall provide such documentation (including a final copy of the Company's
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prospectus as set in type or in camera-ready copy) and other assistance as is
reasonably necessary in order for the Insurance Company to print together in one
document the current prospectus for the Company, the current prospectus for the
Contracts issued by the Insurance Company and/or the prospectuses of other
investment companies available for purchase by the Accounts. In the event that
such prospectuses are printed together in one document, the costs of printing
and mailing copies of the document shall be allocated based on the Company's
share of the total costs determined according to the number of pages of the
parties' and other investment companies' respective portions of the document.
3.3. The Company will provide, at its expense, the Insurance Company with
the following Company (or individual Fund) documents, and any supplements
thereto, with respect to prospective Contract owners of the Insurance Company,
and Insurance Company shall bear the expense of printing and mailing such
documents
(i) camera ready copy of the current prospectus for printing by the
Insurance Company;
(ii) a copy of the statement of additional information suitable for
duplication; and
(iii) camera ready copy of the annual and semi-annual reports for
printing by the Insurance Company.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions received
from Contract owners; and
(iii) vote Company shares for which no instructions have been received
in the same proportion as Company shares of such Fund for which
instructions have been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligations under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Company currently intends,
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<PAGE>
comply with Section 16(c) of the 1940 Act (although the Company is not one of
the trusts described in Section 16(c) of that Act) as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the Commission's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and with whatever rules
the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Insurance Company shall furnish, or shall cause to be furnished,
to the Company or its designee, each piece of sales literature or other
promotional material in which the Company, a sub-adviser of one of the Funds, or
INVESCO is named, at least fifteen calendar days prior to its use. No such
material shall be used if the Company or its designee objects to such use within
ten calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or statement
of additional information for the Company's shares, as such registration
statement, prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports or proxy statements for the
Company, or in sales literature or other promotional material approved by the
Company or its designee or by INVESCO, except with the permission of the Company
or INVESCO.
4.3. The Company, INVESCO, or its designee shall furnish, or shall cause to
be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least fifteen calendar days prior to its
use. No such material shall be used if the Insurance Company or its designee
objects to such use within ten calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for the Account which
are in the public domain or approved by the Insurance Company for distribution
to Contract owners, or in sales literature or other promotional material
approved by the Insurance Company or its designee, except with the permission
of the Insurance Company.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or its
shares,
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<PAGE>
contemporaneously with the filing of the document with the Commission, the NASD,
or other regulatory authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested. Company agrees that
Insurance Company shall have the right to inspect, audit and copy all records
pertaining to the performance of services under this Agreement pursuant to the
requirements of the California Insurance Department. However, Company and
INVESCO shall own and control all of their respective records pertaining to
their performance of the services under this Agreement.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Company and INVESCO shall pay no fee or other compensation to the
Insurance Company under this agreement, except that if the Company or any Fund
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then INVESCO may make payments to the Insurance Company if and in
amounts agreed to by INVESCO in writing, subject to review by the board of
directors of the Company. No such payments shall be made directly by the
Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Company or
INVESCO, in accordance with applicable state laws prior to their sale. The
Company shall bear the expenses for the cost of registration and qualification
of the Company's shares, preparation and filing of the Company's prospectus and
registration
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<PAGE>
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Company's shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and, except as
provided in Section 3.1, of distributing to Contract owners the Company's
prospectus, proxy materials and reports.
ARTICLE VI. Diversification
---------------
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any sub-
adviser to any of the Funds (the "Independent Directors"), that a material
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irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question whether such segregation should
be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. Any such
withdrawal and termination must take place within six (6) months after the
Company gives written notice that this provision is being implemented, and until
the end of that six month period INVESCO and the Company shall continue to
accept and implement orders by the Insurance Company for the purchase (and
redemption) of shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the Board informs the Insurance Company in writing that it has determined that
the state insurance regulator's decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Independent Directors. Until the end of the
foregoing six month period, INVESCO and the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the Independent Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts. The
Insurance Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed
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action does not adequately remedy any irreconcilable material conflict, then the
Insurance Company will withdraw the Account's investment in the Company and
terminate this Agreement within six (6) months after the Board informs the
Insurance Company in writing of the foregoing determination, provided, however,
that the withdrawal and termination shall be limited to the extent required by
the material irreconcilable conflict, as determined by a majority of the
Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Insurance Company
----------------------------------------
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each director of the Board and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Insurance Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to the
Insurance Company by or on behalf of the Company for use in the
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registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
shares of the Company;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the Company
not supplied by the Insurance Company, or persons under its control)
or wrongful conduct of the Insurance Company or persons under its
control, with respect to the sale or distribution of the Contracts or
Company Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or
sales literature of the Company or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished in writing to the Company
by or on behalf of the Insurance Company; or
(iv) arise as a result of any failure by the Insurance Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Insurance Company in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
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<PAGE>
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
the Insurance Company to the Indemnified Party of the Insurance Company's
election to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Insurance Company will not be liable
to that party under this Agreement for any legal or other expenses subsequently
incurred by the party independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Company's shares or the Contracts or
the operation of the Company.
8.2. Indemnification by INVESCO
8.2(a). INVESCO agrees to indemnify and hold harmless the Insurance
Company and each of its directors and officers and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of INVESCO) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Company's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Company (or any
amendment or
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supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if the statement or
omission or alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to INVESCO or
the Company by or on behalf of the Insurance Company for use in the
registration statement or prospectus for the Company or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Company shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by INVESCO or persons under its control) or
wrongful conduct of the Company, INVESCO or persons under their
control, with respect to the sale or distribution of the Contracts or
shares of the Company; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
in writing to the Insurance Company by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by INVESCO in this Agreement or
arise out of or result from any other material breach of this
Agreement by INVESCO; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
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8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
8.2(c) INVESCO shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified INVESCO in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve INVESCO of its
obligations hereunder except to the extent that INVESCO has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify INVESCO of any such claim shall not relieve INVESCO from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, INVESCO will be entitled to
participate, at its own expense, in the defense thereof. INVESCO also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action; provided, however, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to INVESCO, INVESCO shall not
have the right to assume said defense, but shall pay the costs and expenses
thereof (except that in no event shall INVESCO be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
INVESCO to the Indemnified Party of INVESCO's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and INVESCO will not be liable to that party under this
Agreement for any legal or other expenses subsequently incurred by that party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Company
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each of its directors and officers and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
16
<PAGE>
in settlement with the written consent of the Company) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Company and:
(i) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company;
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company, the Company, INVESCO or the Account, whichever is
applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Company of its obligations hereunder except to the extent that the Company has
been prejudiced by such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Company of any such claim shall not relieve the
Company from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company will be entitled to participate, at its own expense, in the defense
thereof. The Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action; provided, however, that
if the Indemnified Party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the Company, the Company shall not have the right to assume said
defense, but shall pay the costs and expenses thereof (except that in no event
shall the Company be liable for the fees and expenses of more than one counsel
for Indemnified Parties in connection
17
<PAGE>
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances).
After notice from the Company to the Indemnified Party of the Company's election
to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable to that
party under this Agreement for any legal or other expenses subsequently incurred
by that party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Insurance Company and INVESCO agree promptly to notify the
Company of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Company.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Colorado.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 acts, and the rules and regulations and rulings thereunder,
including any exemptions from those statutes, rules and regulations the
Commission may grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and construed
in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written
notice to the other parties; provided, however such notice shall
not be given earlier than one year following the date of this
Agreement; or
(b) at the option of the Insurance Company to the extent that
shares of Funds are not reasonably available to meet the
requirements of the Contracts as determined by the Insurance
Company, provided however, that such a termination shall apply only
to the Fund(s) not reasonably available. Prompt written notice of
the election to terminate for such cause shall be furnished by the
Insurance Company; or
(c) at the option of the Company in the event that formal
administrative proceedings are instituted against the Insurance
Company by the NASD, the Commission, an insurance commissioner or
any other regulatory body regarding the Insurance Company's duties
under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Company's shares,
provided, however, that the Company determines in its sole judgment
18
<PAGE>
exercised in good faith, that any such administrative proceedings will have
a material adverse effect upon the ability of the Insurance Company to
perform its obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or INVESCO by
the NASD, the Commission, or any state securities or insurance department
or any other regulatory body, provided, however, that the Insurance Company
determines in its sole judgement exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the
ability of the Company or INVESCO to perform its obligations under this
Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract owners
having an interest in that Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Fund shares in
accordance with the terms of the Contracts for which those Fund shares had
been selected to serve as the underlying investment media. The Insurance
Company will give at least 30 days' prior written notice to the Company of
the date of any proposed vote to replace the Company's shares; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such law
precludes the use of those shares as the underlying investment media of
the Contracts issued or to be issued by the Insurance Company; or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the Code or
under any successor or similar provision, or if the Insurance Company
reasonably believes that the Company may fail to so qualify; or
(h) at the option of the Insurance Company, if the Company fails to meet
the diversification requirements specified in Article VI hereof; or
(i) at the option of either the Company or INVESCO, if (1) the Company or
INVESCO, respectively, shall determine, in their sole judgment reasonably
exercised in good faith, that the Insurance ,Company has suffered a
material adverse change in its business or financial condition or is the
subject of material adverse publicity and that material adverse change or
material adverse publicity will have a material adverse impact upon the
business and operations of either the Company or INVESCO, (2) the Company
or INVESCO shall notify the Insurance Company in writing of that
determination and its intent to terminate this Agreement, and (3) after
considering the actions taken by the Insurance Company and any other
changes in circumstances since the giving of such a notice, the
determination
19
<PAGE>
of the Company or INVESCO shall continue to apply on the sixtieth (60th)
day following the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance Company
shall determine, in its sole judgment reasonably exercised in good faith,
that either the Company or INVESCO has suffered a material adverse change
in its business or financial condition or is the subject of material
adverse publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of the Insurance Company, (2) the Insurance Company shall notify
the Company and INVESCO in writing of the determination and its intent to
terminate the Agreement, and (3) after considering the actions taken by the
Company and/or INVESCO and any other changes in circumstances since the
giving of such a notice, the determination shall continue to apply on the
sixtieth (60th) day following the giving of the notice, which sixtieth day
shall be the effective date of termination; or
(k) at the option of either the Company or INVESCO, if the Insurance
Company gives the Company and INVESCO the written notice specified in
Section 1.6(b) hereof and at the time that notice was given there was
no notice of termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section 10.I(k)
shall be effective forty five (45) days after the notice specified in
Section 1.6(b) was given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the provisions of
Article VII, or the provisions of Section 10.1(a), 10.1(i), 10.1(j),
or 10.1(k) of this Agreement, the prior written notice shall be given
in advance of the effective date of termination as required by those
provisions; and
(b) in the event that any termination is based upon the provisions of
Section l0.l(c) or l0.1(d) of this Agreement, the prior written
notice shall be given at least ninety (90) days before the effective
date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Company and INVESCO shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically,
20
<PAGE>
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Company, redeem investments in the Company and/or
invest in the Company upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 shall not apply to
any terminations under Article VII and the effect of Article VII terminations
shall be governed by Article VII of this Agreement.
10.5. The Insurance Company shall not redeem Company shares attributable
to the Contracts (as opposed to Company shares attributable to the Insurance
Company's assets held in the Account) except (i} as necessary to implement
Contract-owner-initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Insurance
Company will promptly furnish to the Company and INVESCO the opinion of counsel
for the Insurance Company (which counsel shall be reasonably satisfactory to the
Company and INVESCO) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption.
ARTICLE XI. Notices.
--------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
1290 Broadway
Denver, Colorado 80203-5699
Attention: Bonnie Dailey
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
ARTICLE XII. Miscellaneous
-------------
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party unless and until that information may come into the public
domain.
21
<PAGE>
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. No party may assign this Agreement without the prior written consent
of the others.
22
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
Insurance Company:
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
By its authorized officer,
By: /s/ ????????????????
-----------------------------
Title: President & CEO
Date: 9/19/94
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
-----------------------------
Title: Treasurer
Date: September 19, 1994
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
-----------------------------
Title: Senior Vice President
Date: September 19, 1994
23
<PAGE>
Schedule A Accounts
-------------------
Date Established
----------------
Separate Account A1 June 23, 1994
Separate Account L1 June 23, 1994
24
<PAGE>
Schedule B
----------
Contracts
---------
1. The Exchequer Variable Annuity (Flexible Premium Deferred Combination
Fixed and Variable Annuity Contract)
2. First Line (Flexible Premium Variable Life
Insurance Policy)
25
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Company by INVESCO, the Company and the
Insurance Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Insurance Company" shall also
include the department or third party assigned by the Insurance Company to
perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by INVESCO
as early as possible before the date set by the Company for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time INVESCO will inform the Insurance Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Insurance Company will perform a "tape
run", or other activity, which will generate the names, addresses and
number of units which are attributed to each contractowner/policyholder
(the "Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status of
the Customers' accounts of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best
efforts to call in the number of Customers to INVESCO, as soon as
possible, but no later than one week after the Record Date.
3. The Company's Annual Report must be sent to each Customer by the Insurance
Company either before or together with the Customers' receipt of a proxy
statement. INVESCO will provide at least one copy of the last Annual Report
to the Insurance Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Insurance Company by the Company. The Insurance
Company, at its expense, shall produce and personalize the Voting
Instruction cards. The Legal Department of INVESCO ("INVESCO Legal") must
approve the Card before it is printed. Allow approximately 2-4 business
days for printing information on the Cards. Information commonly found on
the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Company).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.
26
<PAGE>
5. During this time, INVESCO Legal will develop, produce, and the Company will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Insurance Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to customers
by Insurance Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance Company) addressed
to the Insurance Company or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Company.)
e. Cover letter - optional, supplied by Insurance Company and
reviewed and approved in advance by INVESCO Legal.
6. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date. Individual in charge at
Insurance Company reviews and approves the contents of the mailing package
to ensure correctness and completeness. Copy of this approval sent to
INVESCO Legal.
7. Package mailed by the Insurance Company.
* The Company must allow at least a 15-day solicitation
time to the Insurance Company as the shareowner. (A 5-week period
is recommended.) Solicitation time is calculated as calendar days
from (but not including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure.
9. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Such mutilated or illegible Cards are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions on those
Cards are usually remedied individually.
10. There are various control procedures used to ensure proper tabulation of
votes and accuracy of the tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
27
<PAGE>
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
11. The actual tabulation of votes is done in units which are then converted to
shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of shares.) INVESCO Legal
must review and approve tabulation format.
12. Final tabulation in shares is verbally given by the Insurance Company to
INVESCO Legal on the morning of the meeting not later than 10:00 a.m.
Denver time. INVESCO Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
13. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original copy of the final vote.
INVESCO Legal will provide a standard form for each Certification.
14. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes, INVESCO
Legal will be permitted reasonable access to such Cards.
15. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
28
<PAGE>
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and among First ING Life Insurance Company of New
York, a life insurance company organized under the laws of the State of New York
("Insurance Company"), Invesco Variable Investment Funds, Inc., a Maryland
corporation (the "Company"), and Invesco Funds Group, Inc., a Delaware
corporation ("Invesco") (collectively, the "Parties").
WHEREAS, the Parties executed a participation agreement dated September 19,
1994 (the "Participation Agreement"), governing how shares of Company's
portfolios are to be made available to certain variable life insurance and/or
variable annuity contracts (the "Contracts") offered by Insurance Company
through certain separate accounts (the "Separate Accounts").
WHEREAS, the various Contracts for which shares are purchased are listed in
Schedule B of the Participation Agreement;
WHEREAS, the Parties have agreed that it is in their interests to add an
additional Contract funded by the Separate Accounts;
NOW, THEREFORE, in consideration of their mutual promises, Insurance
Company, Company, and Invesco agree as follows:
1. The Participation Agreement is hereby amended by substituting for the
original Schedule B an amended Schedule B in the form attached hereto which adds
the Strategic Advantage Variable Universal Life policy to the list of Contracts
funded by the Separate Accounts.
Executed this 22nd day of February, 1995.
Invesco Variable Investment Funds, Inc.
ATTEST: Glen A. Payne BY: ????????????????????
-------------------------- -------------------------------
First ING Life Insurance Company
of New York
ATTEST: ?????????????? BY: Steven Largent
-------------------------- -------------------------------
Invesco Funds Group, Inc.
ATTEST: Glen A. Payne BY: ????????????????
-------------------------- -------------------------------
29
<PAGE>
Schedule B
----------
Contracts
---------
1. The Exchequer Variable Annuity (Flexible Premium Deferred Combination Fixed
and Variable Annuity Contract)
2. First Line (Flexible Premium Variable Life
Insurance Policy)
3. Strategic Advantage Variable (Flexible Premium Variable
Universal Life Universal Life Insurance Policy)
-2-
<PAGE>
FUND PARTICIPATION AGREEMENT
----------------------------
First ING Life Insurance Company of New York ("Insurance Company"), Van Eck
Investment Trust ("Trust") and the Trust's investment adviser, Van Eck
Associates Corporation ("Adviser") hereby agree that shares of the series of the
Trust as listed on Exhibit A, as it may, from time to time, be amended
("Portfolios"), shall be made available to serve as an underlying investment
medium for Individual Deferred Variable Life Contracts and Variable Annuity
Contracts ("Contracts") to be offered by Insurance Company subject to the
following provisions:
1. Insurance Company represents that it has established separate Accounts A1
and L1 (each such account hereinafter, a "Variable Account"), a separate
account under Colorado law, and has registered it as a unit investment
trust under the Investment Company Act of 1940 ("1940 Act") to serve as an
investment vehicle for the Contracts. The Contracts provide for the
allocation of net amounts received by Insurance Company to separate series
of the Variable Account for investment in the shares of specified
investment companies selected among those companies available through the
Variable Account to act as underlying investment media. Selection of a
particular investment company is made by the Contract owner who may change
such selection from time to time in accordance with the terms of the
applicable Contract.
2. Insurance Company agrees to make every reasonable effort to market its
Contracts. It will use its best efforts to give equal emphasis and
promotion to shares of the Trust as is given to other underlying
investments of the Variable Account. In marketing its Contracts, Insurance
Company will comply with all applicable state or Federal laws.
3. The Trust or the Adviser will provide closing net asset value, dividend and
capital gain information to Insurance Company each business day by 6:15
p.m. New York time. Insurance Company will use this data to calculate unit
values, which will in turn be used to process that same business day's
Variable Account unit value. The Variable Account processing will be done
the same evening, and orders will be placed by 9:30 a.m. New York time on
the morning of the following business day. Orders will be sent by the
Insurance Company directly to the Trust or its specified agent, and payment
for purchases will be wired to a custodial account designated by the Trust
or the Adviser on the same day that the purchase order is executed by the
Trust. The Trust will execute the orders at the net asset value as
determined as of the close of trading on the prior day. Dividends and
capital gains distributions shall be reinvested in additional shares at the
ex-date net asset value.
4. If Insurance Company's order requests a net redemption resulting in a
payment of redemption proceeds to Insurance Company, Trust shall wire the
redemption proceeds to Insurance Company by the next business day, unless
doing so would require Trust to dispose of portfolio securities or
otherwise incur additional costs, but in such event, proceeds shall be
wired to Insurance Company within seven days and Trust shall notify the
person designated in writing by Insurance Company as the recipient for such
notice of such delay by 3:00 p.m. New York time the same business day that
Insurance Company transmits the redemption order to Trust. If Insurance
Company's order requests the application of redemption proceeds from the
redemption of shares to the purchase of shares of another fund managed or
distributed by Adviser, Trust shall so apply such proceeds the following
business day that Insurance Company transmits such order to Trust.
5. Trust will bear the printing costs (or duplicating costs with respect to
the statement of additional information) and incremental mailing costs
associated with the delivery of the
<PAGE>
following Trust (or individual portfolio) documents, and any supplements
thereto, to existing variable contract owners of Insurance Company.
(a) prospectuses and statements of additional information;
(b) annual and semi-annual reports; and
(c) proxy materials.
For purposes of this Section, incremental mailing costs shall mean (1) all costs
attributable to any mailing that includes only the document or documents listed
in the preceding sentence and (ii) where the document or documents listed in the
preceding sentence are mailed with other materials, any cost in excess of what
Insurance Company would have otherwise paid to mail periodic confirmation
statements or similar documents.
Insurance Company will submit any bills for printing, duplicating and/or mailing
costs, relating to the Trust documents described above, to Trust for
reimbursement by Trust, which reimbursement shall not exceed the Trust's cost of
production of such materials. Insurance Company shall monitor such costs and
shall use its best efforts to control these costs. Insurance Company will
provide Trust on a semi-annual basis, or more frequently as reasonably requested
by Trust, with a current tabulation of the number of existing variable contract
owners of Insurance Company whose variable contract values are invested in
Trust. This tabulation will be sent to Trust in the form of a letter signed by a
duly authorized officer of Insurance Company attesting to the accuracy of the
information contained in the letter. If requested by Insurance Company, the
Trust shall provide such documentation (including a final copy of the Trust
prospectus as set in type or in camera-ready copy) and other assistance as is
reasonably necessary in order for Insurance Company to print together in one
document the current prospectus for the variable contracts issued by Insurance
Company and the current prospectus for the Trust.
Trust will provide, at its expense, Insurance Company with the following Trust
(or individual Portfolio) documents, and any supplements thereto, with respect
to prospective variable contract owners of Insurance Company.
(d) camera ready copy of the current prospectus for printing by the
Insurance Company;
(e) a copy of the statement of additional information suitable for
duplication;
(f) camera ready copy of proxy material suitable for printing; and
(g) camera ready copy of the annual and semi-annual reports for printing by
the Insurance Company.
6. Insurance Company and its agents shall make no representations concerning
the Trust or Trust shares except those contained in the then current
prospectuses of the Trust and in current printed sales literature of the
Trust.
2
<PAGE>
7. Administrative services to Contract owners shall be the responsibility of
Insurance Company, and shall not be the responsibility of the Trust or the
Adviser. The Trust and Adviser recognize that Insurance Company will be the
sole shareholder of Trust shares issued pursuant to the Contracts. Such
arrangement will result in multiple share orders.
8. The Trust shall comply with Sections 817(h) and 851 of the Internal Revenue
Code of 1986, if applicable, and the regulations thereunder, and the
applicable provisions of the 1940 Act relating to the diversification
requirements for variable annuity, endowment, and life insurance contracts.
Upon request, the Trust shall provide Insurance Company with a letter from
the appropriate Trust officer certifying the Trust's compliance with the
diversification requirements and qualification as a regulated investment
company.
9. Insurance Company agrees to inform the Board of Trustees of the Trust of
the existence of, or any potential for, any material irreconcilable
conflict of interest between the interests of the Contract owners of the
Variable Account investing in the Trust and/or any other separate account
of any other insurance company investing in the Trust.
A material irreconcilable conflict may arise for a variety of reasons,
including:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, or any
similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Portfolio are being
managed;
(e) a difference in voting instructions given by Contract owners and
variable annuity insurance contract owners or by variable annuity or
life insurance contract owners of different life insurance companies
utilizing the Trust; or
(f) a decision by Insurance Company to disregard the voting instructions
of contract owners.
Insurance Company will be responsible for assisting the Board of Trustees
of the Trust in carrying out its responsibilities by providing the Board
with all information reasonably necessary for the Board to consider any
issue raised, including information as to a decision by Insurance Company
to disregard voting instructions of Contract owners.
It is agreed that if it is determined by a majority of the members of the
Board of Trustees of the Trust or a majority of its disinterested Trustees
that a material irreconcilable conflict exists affecting Insurance Company,
Insurance Company shall, at its own expense, take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict,
which steps may include, but are not limited to,
(a) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Portfolio and reinvesting such assets
in a different investment medium, including
3
<PAGE>
another Portfolio of the Trust or submitting the questions of whether
such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any
particular group (i.e., annuity Contract owners, life insurance
Contract owners or qualified Contract owners) that votes in favor of
such segregation, or offering to the affected Contract owners the
option of making such a change;
(b) establishing a new registered management investment company or managed
separate account.
If a material irreconcilable conflict arises because of Insurance Company's
decision to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Insurance
Company may be required, at the Trust's election, to withdraw the Variable
Account's investment in the Trust. No charge or penalty will be imposed
against the Variable Account as a result of such withdrawal. Insurance
Company agrees that any remedial action taken by it in resolving any
material conflicts of interest will be carried out with a view only to the
interests of Contract owners.
For purposes hereof, a majority of the disinterested members of the Board
of Trustees of the Trust shall determine whether any proposed action
adequately remedies any material irreconcilable conflict. In no event will
the Trust be required to establish a new funding medium for any Contracts.
Insurance Company shall not be required by the terms hereof to establish a
new funding medium for any Contracts if an offer to do so has been declined
by vote of a majority of affected Contract owners.
The Trust will undertake to promptly make known to Insurance Company the
Board of Trustees' determination of the existence of a material
irreconcilable conflict and its implications.
10. This Agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of Insurance Company, the Adviser or the Trust upon six
months' advance written notice to the other parties;
(b) at the option of Insurance Company, if Trust shares are not available for
any reason to meet the requirements of Contracts as determined by
Insurance Company, Reasonable advance notice of election to terminate
shall be furnished by Insurance Company;
(c) at the option of Insurance Company, the Adviser or the Trust, upon
institution of formal proceedings against the Broker-Dealer or Broker-
Dealers marketing the Contracts, the Variable Account, Insurance Company
or the Trust by the National Association of Securities Dealers ("NASD"),
the SEC or any other regulatory body;
(d) upon a decision by Insurance Company, in accordance with regulations of
the SEC, to substitute such Trust shares with the shares of another
investment company for Contracts for which the Trust shares have been
selected to serve as the underlying investment medium. Insurance Company
will give 60 days' written notice to the Trust and the Adviser of any
proposed vote to replace Trust shares;
4
<PAGE>
(e) upon assignment of this Agreement unless made with the written consent of
each other party;
(f) in the event Trust shares are not registered, issued or sold in
conformance with Federal or State law or such law precludes the use of
Trust shares as an underlying investment medium of Contracts issued or to
be issued by Insurance Company. Prompt notice shall be given by either
party to the other in the event the conditions of this provision occur.
11. Notwithstanding any termination of this Agreement pursuant to this
Agreement, at the election of Insurance Company, Trust shall continue to
make available additional Trust shares, as provided below, pursuant to the
terms and conditions of this Agreement, for all variable contracts in
effect on the effective date of termination of this agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts or Insurance Company, whichever shall have
legal authority to do so, shall be permitted to reallocate investments in
Trust, redeem investments in Trust and/or invest in Trust upon the payment
of additional premiums under the Existing Contracts unless proscribed by
Federal or State law.
12. Each notice required by this Agreement shall be given by wire and
confirmed in writing to:
First ING Life Insurance Company of New York
C/O Security Life of Denver
1290 Broadway
Denver, Colorado 80203
Attn: Bonnie Dailey, Esq.
Van Eck Investment Trust
122 East 42nd Street
New York, New York 10168
Attn: President, with a copy to the Secretary
Van Eck Associates Corporation
122 East 42nd Street
New York, New York 10168
Attn: President, with a copy to the General Counsel
13. Advertising and sales literature with respect to the Trust prepared by
Insurance Company or its agents for use in marketing its Contracts will be
submitted to the Trust for review before; such material is submitted to the
SEC or NASD for review.
14 Insurance Company will distribute all proxy material furnished by the Trust
and will vote Trust shares in accordance with instructions received from
the Contract owners of such Trust shares. Insurance Company shall vote the
Trust shares for which no instructions have been received in the same
proportion as Trust shares for which said instructions have been received
from Contract owners. Insurance Company and its agents will in no way
recommend action in connection with or oppose or interfere with the
solicitation of proxies for the Trust shares held for such Contract owners.
5
<PAGE>
15. (a) Insurance Company agrees to indemnify and hold harmless the Trust, the
Adviser, and each of its trustees, directors, officers, employees,
agents and each person, if any, who controls the Trust within the
meaning of the Securities Act of 1933 (the "Act") (the Trust and such
persons collectively, "Trust Indemnified Person") against any losses,
claims, damages or liabilities to which a Trust Indemnified Person may
become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in information furnished by
Insurance Company for use in the Registration Statement or prospectus
of the Trust or in the Registration Statement or prospectus for the
Variable Account, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or arise out of or as a result of conduct, statements or
representations (other than statements or representations contained in
the prospectus and Trust-prepared sales literature of the Trust) of
Insurance Company or its agents with respect to the sale and
distribution of contracts for which Trust shares are an underlying
investment or arise out of a material breach of this Agreement by
Insurance Company or its agents; and Insurance Company will reimburse
any legal or other expenses reasonably incurred by a Trust Indemnified
Person in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be
in addition to any liability which Insurance Company may otherwise
have.
(b) The Trust agrees to indemnify and hold harmless Insurance Company and
each of its directors, officers, employees, agents and each person, if
any, who controls Insurance Company within the meaning of the Act
(Insurance Company and such persons collectively, "Insurance Company
Indemnified Person") against any losses, claims, damages or
liabilities to which an Insurance Company Indemnified Person may
become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement
or prospectus or Trust-prepared sales literature of the Trust, or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise out
of or are based upon the Trust's failure to comply with the
diversification requirements of the Investment Company Act of 1940
and of Section 817(h) of the Internal Revenue Code of 1986, as
amended (the "Code"), and to maintain the Fund as a Regulated
Investment Company under the Code, or arise out of a material breach
of this Agreement by the Trust or its agents and the Trust will
reimburse any legal or other expenses reasonably incurred by an
Insurance Company Indemnified Person in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that the Trust will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or omission or alleged
omission made in such Registration Statement or prospectus in
conformity with written information furnished to the Trust by
Insurance Company specifically for use therein or in Insurance
Company-prepared sales literature. This indemnity agreement will be in
addition to any liability which the Trust may otherwise have.
(c) The Adviser agrees to indemnify and hold harmless each Insurance
Company Indemnified
6
<PAGE>
Person against any losses, claims, damages or liabilities to which an
Insurance Company Indemnified Person may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or prospectus or Adviser-
prepared sales literature of the Trust, or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or arise out of or are based upon the
Adviser's failure to comply with the diversification requirements of
the Investment Company Act of 1940 and of Section 817(h) of the Code
as amended, and to maintain the Fund as a Regulated Investment Company
under the Code, or arise out of a material breach of this Agreement by
the Adviser or its agents and the Adviser will reimburse any legal or
other expenses reasonably incurred by each Insurance Company
Indemnified Person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
the Adviser will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
an untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written
information furnished to the Adviser by Insurance Company specifically
for use therein or Insurance Company-prepared sales literature. This
indemnity agreement will be in addition to any liability which the
Adviser may otherwise have.
(d) The Trust and the Adviser shall indemnify and hold Insurance Company
harmless against any and all liability, loss, damages, costs or
expenses which Insurance Company may incur, suffer or be required to
pay directly due to the Trust's or Adviser's (or their designated
agent's) (1) incorrect calculation of the daily net asset value,
dividend rate or capital gain distribution rate; (2) incorrect
reporting of the daily net asset value, dividend rate or capital gain
distribution rate; or (3) untimely reporting of the net asset value,
dividend rate or capital gain distribution rate. Any gain to Insurance
Company attributable to the Trust's, or Adviser's (or their designated
agent's) incorrect calculation or reporting of the daily net asset
value shall be immediately returned to the Trust, to the extent
reasonably practicable, unless such gain has been paid to the Contract
owner and the owner is no longer invested in the Separate Account.
(e) Promptly after receipt by an indemnified party under this paragraph of
notice of the commencement of action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying
party under this paragraph, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this paragraph. In case any
such action is brought against any indemnified party, and it notified
the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that
it may wish, assume the defense thereof, with counsel satisfactory to
such indemnified party. After notice from the indemnifying party to
such indemnified party under this paragraph of indemnified party's
election to assume the defense thereof, the indemnified party will
bear the fees and expenses of any additional counsel retained by it
and the indemnifying party will not be liable to the indemnified party
under this paragraph for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
7
<PAGE>
(f) Nothing herein shall entitle an indemnified party to special,
consequential or exemplary damages or damages of like kind or nature
and with respect to section 15(d) hereof all liability, loss and
damages shall be limited to the amount required to correct the value
of the account as if there had been no incorrect calculation or
reporting or untimely reporting of net asset value, dividend rate or
capital gain distribution rate.
(g) No indemnifying party shall be liable under Sections 15(a), (b), or
(c) of this Agreement where such liability arises from the willful
misfeasance, bad faith, or gross negligence of the indemnified party
in the performance of such indemnified party's duties or by reason of
such indemnified party's reckless disregard of obligations or duties
under this Agreement.
16. If, in the course of future marketing of the Contracts, Insurance Company
or its agents shall request the continued assistance of the Trust's sales
personnel, compensation (which will be negotiated by the Trust and
Insurance Company) shall be paid by Insurance Company to the Trust.
17. Each party hereto agrees to furnish the California Insurance Commissioner
with any information or reports in connection with services provided under
this Agreement which such Commissioner may request in order to ascertain
whether the insurance operations Insurance Company are being conducted in a
manner consistent with the California Insurance Regulations and any other
applicable law or regulations. Insurance Company agrees to inform the Trust
and Adviser of any applicable law or regulation of the State of California
or any other State. Trust agrees that Insurance Company shall have the
right to inspect, audit and copy all records pertaining to the performance
of services under this Agreement pursuant to the requirements of the
California Insurance Department. However, Trust and Adviser shall own and
control all the pertinent records pertaining to their performance of
services under this Agreement.
8
<PAGE>
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
September 23, 1994 By /s/ ?????????????
- ---------------------------------- ----------------------------
Date
VAN ECK INVESTMENT TRUST
August 25, 1994 By /s/ ???????????????
- ---------------------------------- ----------------------------
Date
VAN ECK ASSOCIATES CORPORATION
August 25, 1994 By /s/ ????????????????
- ---------------------------------- ----------------------------
Date
9
<PAGE>
EXHIBIT A
---------
FUND
- ----
Gold and Natural Resources Fund
World Wide Balanced Fund
<PAGE>
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and among First ING Life Insurance Company of New
York, Van Eck Investment Trust, and Van Eck Associates Corporation
(collectively, the "Parties").
WHEREAS, the Parties executed a participation agreement dated August 25,
1994 (the "Participation Agreement"), governing how shares of Fund's portfolios
are to be made available to certain variable life insurance and/or variable
annuity contracts (the "Contracts") offered by Insurance Company through certain
separate accounts (the "Separate Accounts").
WHEREAS, Section 17 of the Participation Agreement requires the Parties to
share certain information with California Insurance regulators;
WHEREAS, states other than California require access to such information
before one can sell such insurance within their borders;
WHEREAS, the Parties have agreed that it is in their interests to make such
information available to states which require it;
NOW, THEREFORE, in consideration of their mutual promises, the Parties
agree as follows:
1. The Participation Agreement is hereby amended by substituting for the
first sentence of Section 17 the following amended sentence:
Each party hereto agrees to furnish any state insurance
regulatory agency with any information or reports in connection with
services provided under this Agreement which such agency may request
in order to ascertain whether the insurance operations of Insurance
Company are being conducted in a manner consistent with the state's
insurance regulations and any other applicable law and regulations.
<PAGE>
Executed this day of February, 1995.
First ING Life Insurance Company of New York
ATTEST: /s/ Brenda D. Jacobs BY: /s/ ????????????
--------------------- ----------------------------------------
Van Eck Investment Trust
ATTEST: /s/ ??????????? BY: /s/ Michael S. ???????
--------------------- ----------------------------------------
Van Eck Associates Corporation
ATTEST: /s/ ??????????? BY: /s/ Michael S. ??????????????
--------------------- ----------------------------------------
-2-
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated April 5, 1996, with respect to the financial statements
of First ING Life Insurance Company of New York included in Post-Effective
Amendment No. 1 to the Registration Statement (Form N-4 No. 33-82890 and
811-8700) and related Prospectus of First ING of New York Separate Account A1
dated August 13, 1996.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Denver, Colorado
August 13, 1996
<PAGE>
VIP MONEY MARKET
7-DAY YIELD AND EFFECTIVE YIELD
7-day period ended 6/30/96
YIELD
- -----
( Base Period Return ) x (365/7)
= 0.00068265 x (365/7)
= 3.53%
EFFECTIVE YIELD
- ---------------
(1 + Base Period Return ) 365/7 - 1
= (1 + 0.000676528) 365/7 - 1
= 3.59%
WHERE:
UV = Unit Value
NCS = UV Beginning of Period - UV End of Period
= 10.66750300 - 10.66008669
= 0.00741631
ES = Annual Contract Charge per Week, based on Average Account Size
= (30 / (365/7) ) / Average Account Size of $30,000
= 0.00001918
Base Period Return = (NCS / UVBeginning of Period) - ES
= (0.00741631 / 10.66008669) - 0.00001918
= 0.000676528
<PAGE>
AVERAGE ANNUAL RETURN FOR NON-MONEY MARKET SUBACCOUNTS
P( 1 + T )/n/ = ERV
Where:
[P] equals a hypothetical initial purchase payment of $1,000
[T] equals the average total return (or fractional period thereof)
[n] equals the number of years
[ERV] equals the ending redeemable value of a hypothetical $1,000
Purchase Payment at the beginning of the period
2
<PAGE>
Neuberger & Berman Limited Maturity Bond
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.98856953 10.30725700 1031.91
- --------------------------------------------------------
6/30/96 -70.00 10.30725700 10.30725700 -70.00
- --------------------------------------------------------
6/30/96 -1.00 10.30725700 10.30725700 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: -3.91% TOTAL: 960.91
PERIOD : 5
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/91 1000.00 8.25324716 10.30725700 1248.87
- --------------------------------------------------------
6/30/92 -1.00 8.95094588 10.30725700 -1.15
- --------------------------------------------------------
6/30/93 -1.00 9.48998148 10.30725700 -1.09
- --------------------------------------------------------
6/30/94 -1.00 9.43041307 10.30725700 -1.09
- --------------------------------------------------------
6/30/95 -1.00 9.98856953 10.30725700 -1.03
- --------------------------------------------------------
6/30/96 -30.00 10.30725700 10.30725700 -30.00
- --------------------------------------------------------
6/30/96 -1.00 10.30725700 10.30725700 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 3.95% TOTAL: 1213.51
PERIOD : 10
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/86 1000.00 6.22175577 10.30725700 1656.65
- --------------------------------------------------------
6/30/87 -1.00 6.57836957 10.30725700 -1.57
- --------------------------------------------------------
6/30/88 -1.00 6.77623727 10.30725700 -1.52
- --------------------------------------------------------
6/30/89 -1.00 7.25046611 10.30725700 -1.42
- --------------------------------------------------------
6/30/90 -1.00 7.70710726 10.30725700 -1.34
- --------------------------------------------------------
6/30/91 -1.00 8.25324716 10.30725700 -1.25
- --------------------------------------------------------
6/30/92 -1.00 8.95094588 10.30725700 -1.15
- --------------------------------------------------------
6/30/93 -1.00 9.48998148 10.30725700 -1.09
- --------------------------------------------------------
6/30/94 -1.00 9.43041307 10.30725700 -1.09
- --------------------------------------------------------
6/30/95 -1.00 9.98856953 10.30725700 -1.03
- --------------------------------------------------------
6/30/96 0.00 10.30725700 10.30725700 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.30725700 10.30725700 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 5.10% TOTAL: 1644.19
DAYS= 0
10 YEARS= 10
</TABLE>
3
<PAGE>
Neuberger & Berman Limited Maturity Bond
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.98856953 10.30725700 1031.91
- --------------------------------------------------------
6/30/96 0.00 10.30725700 10.30725700 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.30725700 10.30725700 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 3.09% TOTAL: 1030.91
PERIOD : 5
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/91 1000.00 8.25324716 10.30725700 1248.87
- --------------------------------------------------------
6/30/92 -1.00 8.95094588 10.30725700 -1.15
- --------------------------------------------------------
6/30/93 -1.00 9.48998148 10.30725700 -1.09
- --------------------------------------------------------
6/30/94 -1.00 9.43041307 10.30725700 -1.09
- --------------------------------------------------------
6/30/95 -1.00 9.98856953 10.30725700 -1.03
- --------------------------------------------------------
6/30/96 0.00 10.30725700 10.30725700 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.30725700 10.30725700 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 4.46% TOTAL: 1243.51
PERIOD : 10
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/86 1000.00 6.22175577 10.30725700 1656.65
- --------------------------------------------------------
6/30/87 -1.00 6.57836957 10.30725700 -1.57
- --------------------------------------------------------
6/30/88 -1.00 6.77623727 10.30725700 -1.52
- --------------------------------------------------------
6/30/89 -1.00 7.25046611 10.30725700 -1.42
- --------------------------------------------------------
6/30/90 -1.00 7.70710726 10.30725700 -1.34
- --------------------------------------------------------
6/30/91 -1.00 8.25324716 10.30725700 -1.25
- --------------------------------------------------------
6/30/92 -1.00 8.95094588 10.30725700 -1.15
- --------------------------------------------------------
6/30/93 -1.00 9.48998148 10.30725700 -1.09
- --------------------------------------------------------
6/30/94 -1.00 9.43041307 10.30725700 -1.09
- --------------------------------------------------------
6/30/95 -1.00 9.98856953 10.30725700 -1.03
- --------------------------------------------------------
6/30/96 0.00 10.30725700 10.30725700 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.30725700 10.30725700 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 5.10% TOTAL: 1644.19
DAYS= 0
10 YEARS= 10
</TABLE>
4
<PAGE>
Neuberger & Berman Government Income
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.25513572 10.34366900 1008.63
- ---------------------------------------------------------
6/30/96 -70.00 10.34366900 10.34366900 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 10.34366900 10.34366900 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: -6.24% TOTAL: 937.63
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
3/22/94 1000.00 9.68101608 10.34366900 1068.45
- ---------------------------------------------------------
3/22/95 -1.00 9.99943370 10.34366900 -1.03
- ---------------------------------------------------------
3/22/96 -1.00 10.38250817 10.34366900 -1.00
- ---------------------------------------------------------
6/30/96 -1.00 10.34366900 10.34366900 -1.00
- ---------------------------------------------------------
6/30/96 -50.00 10.34366900 10.34366900 -50.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 0.68% TOTAL: 1015.42
2.273973 DAYS = 100
YEARS= 2
</TABLE>
5
<PAGE>
Neuberger & Berman Government Income
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.25513572 10.34366900 1008.63
- ---------------------------------------------------------
6/30/96 0.00 10.34366900 10.34366900 0.00
- ---------------------------------------------------------
6/30/96 -1.00 10.34366900 10.34366900 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 0.76% TOTAL: 1007.63
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
3/22/94 1000.00 9.68101608 10.34366900 1068.45
- ---------------------------------------------------------
3/22/95 -1.00 9.99943370 10.34366900 -1.03
- ---------------------------------------------------------
3/22/96 -1.00 10.38250817 10.34366900 -1.00
- ---------------------------------------------------------
6/30/96 0.00 10.34366900 10.34366900 0.00
- ---------------------------------------------------------
6/30/96 -1.00 10.34366900 10.34366900 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 2.83% TOTAL: 1065.42
2.273973 DAYS = 100
YEARS= 2
</TABLE>
6
<PAGE>
Neuberger & Berman Growth
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.51333125 12.98827600 1128.11
- --------------------------------------------------------
6/30/96 -70.00 12.98827600 12.98827600 -70.00
- --------------------------------------------------------
6/30/96 -1.00 12.98827600 12.98827600 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 5.71% TOTAL: 1057.11
PERIOD : 5
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/91 1000.00 7.88091365 12.98827600 1648.07
- --------------------------------------------------------
6/30/92 -1.00 8.58394403 12.98827600 -1.51
- --------------------------------------------------------
6/30/93 -1.00 9.65793476 12.98827600 -1.34
- --------------------------------------------------------
6/30/94 -1.00 9.08516100 12.98827600 -1.43
- --------------------------------------------------------
6/30/95 -1.00 11.51333125 12.98827600 -1.13
- --------------------------------------------------------
6/30/96 -30.00 12.98827600 12.98827600 -30.00
- --------------------------------------------------------
6/30/96 -1.00 12.98827600 12.98827600 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 10.02% TOTAL: 1611.65
PERIOD : 10
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/86 1000.00 5.52362390 12.98827600 2351.40
- --------------------------------------------------------
6/30/87 -1.00 6.33320881 12.98827600 -2.05
- --------------------------------------------------------
6/30/88 -1.00 5.77107311 12.98827600 -2.25
- --------------------------------------------------------
6/30/89 -1.00 7.14549066 12.98827600 -1.82
- --------------------------------------------------------
6/30/90 -1.00 7.77539042 12.98827600 -1.67
- --------------------------------------------------------
6/30/91 -1.00 7.88091365 12.98827600 -1.65
- --------------------------------------------------------
6/30/92 -1.00 8.58394403 12.98827600 -1.51
- --------------------------------------------------------
6/30/93 -1.00 9.65793476 12.98827600 -1.34
- --------------------------------------------------------
6/30/94 -1.00 9.08516100 12.98827600 -1.43
- --------------------------------------------------------
6/30/95 -1.00 11.51333125 12.98827600 -1.13
- --------------------------------------------------------
6/30/96 0.00 12.98827600 12.98827600 0.00
- --------------------------------------------------------
6/30/96 -1.00 12.98827600 12.98827600 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 8.85% TOTAL: 2335.55
DAYS= 0
10 YEARS= 10
</TABLE>
7
<PAGE>
Neuberger & Berman Growth
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.51333125 12.98827600 1128.11
- --------------------------------------------------------
6/30/96 0.00 12.98827600 12.98827600 0.00
- --------------------------------------------------------
6/30/96 -1.00 12.98827600 12.98827600 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 12.71% TOTAL: 1127.11
PERIOD : 5
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/91 1000.00 7.88091365 12.98827600 1648.07
- --------------------------------------------------------
6/30/92 -1.00 8.58394403 12.98827600 -1.51
- --------------------------------------------------------
6/30/93 -1.00 9.65793476 12.98827600 -1.34
- --------------------------------------------------------
6/30/94 -1.00 9.08516100 12.98827600 -1.43
- --------------------------------------------------------
6/30/95 -1.00 11.51333125 12.98827600 -1.13
- --------------------------------------------------------
6/30/96 0.00 12.98827600 12.98827600 0.00
- --------------------------------------------------------
6/30/96 -1.00 12.98827600 12.98827600 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 10.42% TOTAL: 1641.65
PERIOD : 10
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/86 1000.00 5.52362390 12.98827600 2351.40
- --------------------------------------------------------
6/30/87 -1.00 6.33320881 12.98827600 -2.05
- --------------------------------------------------------
6/30/88 -1.00 5.77107311 12.98827600 -2.25
- --------------------------------------------------------
6/30/89 -1.00 7.14549066 12.98827600 -1.82
- --------------------------------------------------------
6/30/90 -1.00 7.77539042 12.98827600 -1.67
- --------------------------------------------------------
6/30/91 -1.00 7.88091365 12.98827600 -1.65
- --------------------------------------------------------
6/30/92 -1.00 8.58394403 12.98827600 -1.51
- --------------------------------------------------------
6/30/93 -1.00 9.65793476 12.98827600 -1.34
- --------------------------------------------------------
6/30/94 -1.00 9.08516100 12.98827600 -1.43
- --------------------------------------------------------
6/30/95 -1.00 11.51333125 12.98827600 -1.13
- --------------------------------------------------------
6/30/96 0.00 12.98827600 12.98827600 0.00
- --------------------------------------------------------
6/30/96 -1.00 12.98827600 12.98827600 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 8.85% TOTAL: 2335.55
DAYS= 0
10 YEARS= 10
</TABLE>
8
<PAGE>
Neuberger & Berman Partners
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.76231732 14.68845200 1248.77
- ---------------------------------------------------------
6/30/96 -70.00 14.68845200 14.68845200 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 14.68845200 14.68845200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.78% TOTAL: 1177.77
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
3/22/94 1000.00 10.11957676 14.68845200 1451.49
- ---------------------------------------------------------
3/22/95 -1.00 10.43165427 14.68845200 -1.41
- ---------------------------------------------------------
3/22/96 -1.00 14.24784814 14.68845200 -1.03
- ---------------------------------------------------------
6/30/96 -1.00 14.68845200 14.68845200 -1.00
- ---------------------------------------------------------
6/30/96 -50.00 14.68845200 14.68845200 -50.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 15.88% TOTAL: 1398.05
2.273973 DAYS = 100
YEARS= 2
</TABLE>
9
<PAGE>
Neuberger & Berman Partners
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.76231732 14.68845200 1248.77
- ---------------------------------------------------------
6/30/96 0.00 14.68845200 14.68845200 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.68845200 14.68845200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 24.78% TOTAL: 1247.77
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
3/22/94 1000.00 10.11957676 14.68845200 1451.49
- ---------------------------------------------------------
3/22/95 -1.00 10.43165427 14.68845200 -1.41
- ---------------------------------------------------------
3/22/96 -1.00 14.24784814 14.68845200 -1.03
- ---------------------------------------------------------
6/30/96 0.00 14.68845200 14.68845200 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.68845200 14.68845200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.68% TOTAL: 1448.05
2.273973 DAYS = 100
YEARS= 2
</TABLE>
10
<PAGE>
Alger American Small Capitalization
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 13.36745106 15.55015400 1163.28
- ---------------------------------------------------------
6/30/96 -70.00 15.55015400 15.55015400 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 15.55015400 15.55015400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.23% TOTAL: 1092.28
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 7.19782629 15.55015400 2160.40
- ---------------------------------------------------------
6/30/92 -1.00 7.59476118 15.55015400 -2.05
- ---------------------------------------------------------
6/30/93 -1.00 9.43136471 15.55015400 -1.65
- ---------------------------------------------------------
6/30/94 -1.00 9.14124958 15.55015400 -1.70
- ---------------------------------------------------------
6/30/95 -1.00 13.36745106 15.55015400 -1.16
- ---------------------------------------------------------
6/30/96 -30.00 15.55015400 15.55015400 -30.00
- ---------------------------------------------------------
6/30/96 -1.00 15.55015400 15.55015400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 16.25% TOTAL: 2122.84
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
9/21/88 1000.00 3.64984439 15.55015400 4260.50
- ---------------------------------------------------------
9/21/89 -1.00 5.57662131 15.55015400 -2.79
- ---------------------------------------------------------
9/21/90 -1.00 5.37685765 15.55015400 -2.89
- ---------------------------------------------------------
9/21/91 -1.00 8.05653532 15.55015400 -1.93
- ---------------------------------------------------------
9/21/92 -1.00 8.37428664 15.55015400 -1.86
- ---------------------------------------------------------
9/21/93 -1.00 10.05236488 15.55015400 -1.55
- ---------------------------------------------------------
9/21/94 -1.00 9.88565238 15.55015400 -1.57
- ---------------------------------------------------------
9/21/95 -1.00 16.28470416 15.55015400 -0.95
- ---------------------------------------------------------
6/30/96 0.00 15.55015400 15.55015400 0.00
- ---------------------------------------------------------
6/30/96 -1.00 15.55015400 15.55015400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 20.44% TOTAL: 4245.96
7.775342 DAYS = 283
YEARS= 7
</TABLE>
11
<PAGE>
Alger American Small Capitalization
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 13.36745106 15.55015400 1163.28
- ---------------------------------------------------------
6/30/96 0.00 15.55015400 15.55015400 0.00
- ---------------------------------------------------------
6/30/96 -1.00 15.55015400 15.55015400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 16.23% TOTAL: 1162.28
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 7.19782629 15.55015400 2160.40
- ---------------------------------------------------------
6/30/92 -1.00 7.59476118 15.55015400 -2.05
- ---------------------------------------------------------
6/30/93 -1.00 9.43136471 15.55015400 -1.65
- ---------------------------------------------------------
6/30/94 -1.00 9.14124958 15.55015400 -1.70
- ---------------------------------------------------------
6/30/95 -1.00 13.36745106 15.55015400 -1.16
- ---------------------------------------------------------
6/30/96 0.00 15.55015400 15.55015400 0.00
- ---------------------------------------------------------
6/30/96 -1.00 15.55015400 15.55015400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 16.57% TOTAL: 2152.84
PERIOD : INCEPTION
- ----------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
9/21/88 1000.00 3.64984439 15.55015400 4260.50
- ---------------------------------------------------------
9/21/89 -1.00 5.57662131 15.55015400 -2.79
- ---------------------------------------------------------
9/21/90 -1.00 5.37685765 15.55015400 -2.89
- ---------------------------------------------------------
9/21/91 -1.00 8.05653532 15.55015400 -1.93
- ---------------------------------------------------------
9/21/92 -1.00 8.37428664 15.55015400 -1.86
- ---------------------------------------------------------
9/21/93 -1.00 10.05236488 15.55015400 -1.55
- ---------------------------------------------------------
9/21/94 -1.00 9.88565238 15.55015400 -1.57
- ---------------------------------------------------------
9/21/95 0.00 16.28470416 15.55015400 0.00
- ---------------------------------------------------------
6/30/96 -1.00 15.55015400 15.55015400 -1.00
- ---------------------------------------------------------
6/30/96 -1.00 15.55015400 15.55015400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 20.44% TOTAL: 4245.91
7.775342 DAYS = 283
YEARS= 7
</TABLE>
12
<PAGE>
Alger American MidCap Growth
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 12.81557425 15.56520300 1214.55
- ---------------------------------------------------------
6/30/96 -70.00 15.56520300 15.56520300 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 15.56520300 15.56520300 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 14.36% TOTAL: 1143.55
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
5/3/93 1000.00 7.60518085 15.56520300 2046.66
- ---------------------------------------------------------
5/3/94 -1.00 9.87651359 15.56520300 -1.58
- ---------------------------------------------------------
5/3/95 -1.00 11.37078104 15.56520300 -1.37
- ---------------------------------------------------------
5/3/96 -1.00 15.95352823 15.56520300 -0.98
- ---------------------------------------------------------
6/30/96 -40.00 15.56520300 15.56520300 -40.00
- ---------------------------------------------------------
6/30/96 -1.00 15.56520300 15.56520300 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 24.57% TOTAL: 2001.74
3.158904 DAYS = 58
YEARS= 3
</TABLE>
13
<PAGE>
Alge American MidCap Growth
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 12.81557425 15.56520300 1214.55
- ---------------------------------------------------------
6/30/96 0.00 15.56520300 15.56520300 0.00
- ---------------------------------------------------------
6/30/96 -1.00 15.56520300 15.56520300 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 21.36% TOTAL: 1213.55
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
5/3/93 1000.00 7.60518085 15.56520300 2046.66
- ---------------------------------------------------------
5/3/94 -1.00 9.87651359 15.56520300 -1.58
- ---------------------------------------------------------
5/3/95 -1.00 11.37078104 15.56520300 -1.37
- ---------------------------------------------------------
5/3/96 -1.00 15.95352823 15.56520300 -0.98
- ---------------------------------------------------------
6/30/96 0.00 15.56520300 15.56520300 0.00
- ---------------------------------------------------------
6/30/96 -1.00 15.56520300 15.56520300 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 25.35% TOTAL: 2041.74
3.158904 DAYS = 58
YEARS= 3
</TABLE>
14
<PAGE>
Alger American Growth
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.06507648 12.66131000 1144.26
- ---------------------------------------------------------
6/30/96 -70.00 12.66131000 12.66131000 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 12.66131000 12.66131000 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 7.33% TOTAL: 1073.26
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 5.45762900 12.66131000 2319.93
- ---------------------------------------------------------
6/30/92 -1.00 6.08457514 12.66131000 -2.08
- ---------------------------------------------------------
6/30/93 -1.00 7.70030142 12.66131000 -1.64
- ---------------------------------------------------------
6/30/94 -1.00 8.01442913 12.66131000 -1.58
- ---------------------------------------------------------
6/30/95 -1.00 11.06507648 12.66131000 -1.14
- ---------------------------------------------------------
6/30/96 -30.00 12.66131000 12.66131000 -30.00
- ---------------------------------------------------------
6/30/96 -1.00 12.66131000 12.66131000 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.95% TOTAL: 2282.48
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
1/9/89 1000.00 3.80531052 12.66131000 3327.27
- ---------------------------------------------------------
1/9/90 -1.00 4.67171460 12.66131000 -2.71
- ---------------------------------------------------------
1/9/91 -1.00 4.54732417 12.66131000 -2.78
- ---------------------------------------------------------
1/9/92 -1.00 6.92725629 12.66131000 -1.83
- ---------------------------------------------------------
1/9/93 -1.00 7.36165106 12.66131000 -1.72
- ---------------------------------------------------------
1/9/94 -1.00 9.08216821 12.66131000 -1.39
- ---------------------------------------------------------
1/9/95 -1.00 8.90184611 12.66131000 -1.42
- ---------------------------------------------------------
1/9/96 -1.00 11.13376263 12.66131000 -1.14
- ---------------------------------------------------------
6/30/96 -1.00 12.66131000 12.66131000 -1.00
- ---------------------------------------------------------
6/30/96 0.00 12.66131000 12.66131000 0.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.38% TOTAL: 3313.28
7.473973 DAYS = 173
YEARS= 7
</TABLE>
15
<PAGE>
Alger American Growth
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.06507648 12.66131000 1144.26
- ----------------------------------------------------------
6/30/96 0.00 12.66131000 12.66131000 0.00
- ----------------------------------------------------------
6/30/96 -1.00 12.66131000 12.66131000 -1.00
- ----------------------------------------------------------
AVG ANNUAL RETURN: 14.33% TOTAL: 1143.26
PERIOD : 5
- ----------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ----------------------------------------------------------
6/30/91 1000.00 5.45762900 12.66131000 2319.93
- ----------------------------------------------------------
6/30/92 -1.00 6.08457514 12.66131000 -2.08
- ----------------------------------------------------------
6/30/93 -1.00 7.70030142 12.66131000 -1.64
- ----------------------------------------------------------
6/30/94 -1.00 8.01442913 12.66131000 -1.58
- ----------------------------------------------------------
6/30/95 -1.00 11.06507648 12.66131000 -1.14
- ----------------------------------------------------------
6/30/96 0.00 12.66131000 12.66131000 0.00
- ----------------------------------------------------------
6/30/96 -1.00 12.66131000 12.66131000 -1.00
- ----------------------------------------------------------
AVG ANNUAL RETURN: 18.25% TOTAL: 2312.48
PERIOD : INCEPTION
- ----------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ----------------------------------------------------------
1/9/89 1000.00 3.80531052 12.66131000 3327.27
- ----------------------------------------------------------
1/9/90 -1.00 4.67171460 12.66131000 -2.71
- ----------------------------------------------------------
1/9/91 -1.00 4.54732417 12.66131000 -2.78
- ----------------------------------------------------------
1/9/92 -1.00 6.92725629 12.66131000 -1.83
- ----------------------------------------------------------
1/9/93 -1.00 7.36165106 12.66131000 -1.72
- ----------------------------------------------------------
1/9/94 -1.00 9.08216821 12.66131000 -1.39
- ----------------------------------------------------------
1/9/95 -1.00 8.90184611 12.66131000 -1.42
- ----------------------------------------------------------
1/9/96 -1.00 11.13376263 12.66131000 -1.14
- ----------------------------------------------------------
6/30/96 0.00 12.66131000 12.66131000 0.00
- ----------------------------------------------------------
6/30/96 -1.00 12.66131000 12.66131000 -1.00
- ----------------------------------------------------------
AVG ANNUAL RETURN: 17.38% TOTAL: 3313.28
7.47397 DAYS = 173
YEARS= 7
</TABLE>
16
<PAGE>
Alger American Leveraged AllCap
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 12.27962532 16.30786100 1328.04
- ---------------------------------------------------------
6/30/96 -70.00 16.30786100 16.30786100 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 16.30786100 16.30786100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 25.70% TOTAL: 1257.04
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
1/25/95 1000.00 8.57100042 16.30786100 1902.68
- ---------------------------------------------------------
1/25/96 -1.00 14.75655514 16.30786100 -1.11
- ---------------------------------------------------------
6/30/96 -60.00 16.30786100 16.30786100 -60.00
- ---------------------------------------------------------
6/30/96 -1.00 16.30786100 16.30786100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 53.20% TOTAL: 1840.57
1.430137 DAYS = 157
YEARS= 1
</TABLE>
17
<PAGE>
Alger American Leveraged AllCap
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 12.27962532 16.30786100 1328.04
- ---------------------------------------------------------
6/30/96 0.00 16.30786100 16.30786100 0.00
- ---------------------------------------------------------
6/30/96 -1.00 16.30786100 16.30786100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 32.70% TOTAL: 1327.04
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
1/25/95 1000.00 8.57100042 16.30786100 1902.68
- ---------------------------------------------------------
1/25/96 -1.00 14.75655514 16.30786100 -1.11
- ---------------------------------------------------------
6/30/96 0.00 16.30786100 16.30786100 0.00
- ---------------------------------------------------------
6/30/96 -1.00 16.30786100 16.30786100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 56.68% TOTAL: 1900.57
1.430137 DAYS = 157
YEARS= 1
</TABLE>
18
<PAGE>
Fidelity VIP Growth
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 12.42134268 14.83478800 1194.30
- ---------------------------------------------------------
6/30/96 -70.00 14.83478800 14.83478800 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 14.83478800 14.83478800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 12.33% TOTAL: 1123.30
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 6.41255280 14.83478800 2313.40
- ---------------------------------------------------------
6/30/92 -1.00 7.46877285 14.83478800 -1.99
- ---------------------------------------------------------
6/30/93 -1.00 9.64689050 14.83478800 -1.54
- ---------------------------------------------------------
6/30/94 -1.00 9.19612380 14.83478800 -1.61
- ---------------------------------------------------------
6/30/95 -1.00 12.42134268 14.83478800 -1.19
- ---------------------------------------------------------
6/30/96 -30.00 14.83478800 14.83478800 -30.00
- ---------------------------------------------------------
6/30/96 -1.00 14.83478800 14.83478800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.88% TOTAL: 2276.07
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
10/9/86 1000.00 4.28152813 14.83478800 3464.83
- ---------------------------------------------------------
10/9/87 -1.00 5.38798427 14.83478800 -2.75
- ---------------------------------------------------------
10/9/88 -1.00 5.07541559 14.83478800 -2.92
- ---------------------------------------------------------
10/9/89 -1.00 6.65070275 14.83478800 -2.23
- ---------------------------------------------------------
10/9/90 -1.00 5.23167943 14.83478800 -2.84
- ---------------------------------------------------------
10/9/91 -1.00 7.12712161 14.83478800 -2.08
- ---------------------------------------------------------
10/9/92 -1.00 7.51064086 14.83478800 -1.98
- ---------------------------------------------------------
10/9/93 -1.00 10.24144051 14.83478800 -1.45
- ---------------------------------------------------------
10/9/94 -1.00 9.83569752 14.83478800 -1.51
- ---------------------------------------------------------
10/9/95 -1.00 13.16122929 14.83478800 -1.13
- ---------------------------------------------------------
6/30/96 -1.00 14.83478800 14.83478800 -1.00
- ---------------------------------------------------------
6/30/96 0.00 14.83478800 14.83478800 0.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 13.56% TOTAL: 3444.95
9.726027 DAYS = 265
YEARS= 9
</TABLE>
19
<PAGE>
Fidelity VIP Growth
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 12.42134268 14.83478800 1194.30
- ---------------------------------------------------------
6/30/96 0.00 14.83478800 14.83478800 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.83478800 14.83478800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 19.33% TOTAL: 1193.30
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 6.41255280 14.83478800 2313.40
- ---------------------------------------------------------
6/30/92 -1.00 7.46877285 14.83478800 -1.99
- ---------------------------------------------------------
6/30/93 -1.00 9.64689050 14.83478800 -1.54
- ---------------------------------------------------------
6/30/94 -1.00 9.19612380 14.83478800 -1.61
- ---------------------------------------------------------
6/30/95 -1.00 12.42134268 14.83478800 -1.19
- ---------------------------------------------------------
6/30/96 0.00 14.83478800 14.83478800 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.83478800 14.83478800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 18.19% TOTAL: 2306.07
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
10/9/86 1000.00 4.28152813 14.83478800 3464.83
- ---------------------------------------------------------
10/9/87 -1.00 5.38798427 14.83478800 -2.75
- ---------------------------------------------------------
10/9/88 -1.00 5.07541559 14.83478800 -2.92
- ---------------------------------------------------------
10/9/89 -1.00 6.65070275 14.83478800 -2.23
- ---------------------------------------------------------
10/9/90 -1.00 5.23167943 14.83478800 -2.84
- ---------------------------------------------------------
10/9/91 -1.00 7.12712161 14.83478800 -2.08
- ---------------------------------------------------------
10/9/92 -1.00 7.51064086 14.83478800 -1.98
- ---------------------------------------------------------
10/9/93 0.00 10.24144051 14.83478800 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.83478800 14.83478800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 13.58% TOTAL: 3449.04
9.726027 DAYS = 265
YEARS= 9
</TABLE>
20
<PAGE>
Fidelity VIP Overseas
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.87931126 11.02526200 1116.00
- ---------------------------------------------------------
6/30/96 -70.00 11.02526200 11.02526200 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02526200 11.02526200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 4.50% TOTAL: 1045.00
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 7.30607780 11.02526200 1509.05
- ---------------------------------------------------------
6/30/92 -1.00 8.37615007 11.02526200 -1.32
- ---------------------------------------------------------
6/30/93 -1.00 8.31986366 11.02526200 -1.33
- ---------------------------------------------------------
6/30/94 -1.00 9.74245916 11.02526200 -1.13
- ---------------------------------------------------------
6/30/95 -1.00 9.87931126 11.02526200 -1.12
- ---------------------------------------------------------
6/30/96 -30.00 11.02526200 11.02526200 -30.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02526200 11.02526200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 8.06% TOTAL: 1473.16
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
1/28/87 1000.00 6.23606030 11.02526200 1767.99
- ---------------------------------------------------------
1/28/88 -1.00 5.63805731 11.02526200 -1.96
- ---------------------------------------------------------
1/28/89 -1.00 6.46711672 11.02526200 -1.70
- ---------------------------------------------------------
1/28/90 -1.00 7.62744196 11.02526200 -1.45
- ---------------------------------------------------------
1/28/91 -1.00 7.44880253 11.02526200 -1.48
- ---------------------------------------------------------
1/28/92 -1.00 8.07519423 11.02526200 -1.37
- ---------------------------------------------------------
1/28/93 -1.00 7.27884524 11.02526200 -1.51
- ---------------------------------------------------------
1/28/94 -1.00 9.84409756 11.02526200 -1.12
- ---------------------------------------------------------
1/28/95 -1.00 9.22327514 11.02526200 -1.20
- ---------------------------------------------------------
1/28/96 -1.00 10.39214549 11.02526200 -1.06
- ---------------------------------------------------------
6/30/96 -1.00 11.02526200 11.02526200 -1.00
- ---------------------------------------------------------
6/30/96 0.00 11.02526200 11.02526200 0.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 6.15% TOTAL: 1754.14
9.421918 DAYS = 154
YEARS= 9
</TABLE>
21
<PAGE>
Fidelity VIP Overseas
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.87931126 11.02526200 1116.00
- ---------------------------------------------------------
6/30/96 0.00 11.02526200 11.02526200 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02526200 11.02526200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 11.50% TOTAL: 1115.00
PERIOD : 5
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 7.30607780 11.02526200 1509.05
- ---------------------------------------------------------
6/30/92 -1.00 8.37615007 11.02526200 -1.32
- ---------------------------------------------------------
6/30/93 -1.00 8.31986366 11.02526200 -1.33
- ---------------------------------------------------------
6/30/94 -1.00 9.74245916 11.02526200 -1.13
- ---------------------------------------------------------
6/30/95 -1.00 9.87931126 11.02526200 -1.12
- ---------------------------------------------------------
6/30/96 0.00 11.02526200 11.02526200 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02526200 11.02526200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 8.49% TOTAL: 1503.16
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
1/28/87 1000.00 6.23606030 11.02526200 1767.99
- ---------------------------------------------------------
1/28/88 -1.00 5.63805731 11.02526200 -1.96
- ---------------------------------------------------------
1/28/89 -1.00 6.46711672 11.02526200 -1.70
- ---------------------------------------------------------
1/28/90 -1.00 7.62744196 11.02526200 -1.45
- ---------------------------------------------------------
1/28/91 -1.00 7.44880253 11.02526200 -1.48
- ---------------------------------------------------------
1/28/92 -1.00 8.07519423 11.02526200 -1.37
- ---------------------------------------------------------
1/28/93 -1.00 7.27884524 11.02526200 -1.51
- ---------------------------------------------------------
1/28/94 -1.00 9.84409756 11.02526200 -1.12
- ---------------------------------------------------------
1/28/95 -1.00 9.22327514 11.02526200 -1.20
- ---------------------------------------------------------
1/28/96 -1.00 10.39214549 11.02526200 -1.06
- ---------------------------------------------------------
6/30/96 0.00 11.02526200 11.02526200 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02526200 11.02526200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 6.15% TOTAL: 1754.14
9.421918 DAYS = 154
YEARS= 9
</TABLE>
22
<PAGE>
Fidelity VIP Money Market
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.24717934 10.66750300 1041.02
- --------------------------------------------------------
6/30/96 -70.00 10.66750300 10.66750300 -70.00
- --------------------------------------------------------
6/30/96 -1.00 10.66750300 10.66750300 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: -3.00% TOTAL: 970.02
PERIOD : 5
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/91 1000.00 9.15900682 10.66750300 1164.70
- --------------------------------------------------------
6/30/92 -1.00 9.47654962 10.66750300 -1.13
- --------------------------------------------------------
6/30/93 -1.00 9.66510651 10.66750300 -1.10
- --------------------------------------------------------
6/30/94 -1.00 9.83480111 10.66750300 -1.08
- --------------------------------------------------------
6/30/95 -1.00 10.24717934 10.66750300 -1.04
- --------------------------------------------------------
6/30/96 -30.00 10.66750300 10.66750300 -30.00
- --------------------------------------------------------
6/30/96 -1.00 10.66750300 10.66750300 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 2.46% TOTAL: 1129.35
PERIOD : 10
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/86 1000.00 6.85487720 10.66750300 1556.19
- --------------------------------------------------------
6/30/87 -1.00 7.17116039 10.66750300 -1.49
- --------------------------------------------------------
6/30/88 -1.00 7.55132496 10.66750300 -1.41
- --------------------------------------------------------
6/30/89 -1.00 8.09483971 10.66750300 -1.32
- --------------------------------------------------------
6/30/90 -1.00 8.65841714 10.66750300 -1.23
- --------------------------------------------------------
6/30/91 -1.00 9.15900682 10.66750300 -1.16
- --------------------------------------------------------
6/30/92 -1.00 9.47654962 10.66750300 -1.13
- --------------------------------------------------------
6/30/93 -1.00 9.66510651 10.66750300 -1.10
- --------------------------------------------------------
6/30/94 -1.00 9.83480111 10.66750300 -1.08
- --------------------------------------------------------
6/30/95 -1.00 10.24717934 10.66750300 -1.04
- --------------------------------------------------------
6/30/96 0.00 10.66750300 10.66750300 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.66750300 10.66750300 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 4.44% TOTAL: 1544.22
DAYS= 0
10 YEARS= 10
</TABLE>
23
<PAGE>
Fidelity VIP Money Market
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- --------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.24717934 10.66750300 1041.02
- --------------------------------------------------------
6/30/96 0.00 10.66750300 10.66750300 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.66750300 10.66750300 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 4.00% TOTAL: 1040.02
PERIOD : 5
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/91 1000.00 9.15900682 10.66750300 1164.70
- --------------------------------------------------------
6/30/92 -1.00 9.47654962 10.66750300 -1.13
- --------------------------------------------------------
6/30/93 -1.00 9.66510651 10.66750300 -1.10
- --------------------------------------------------------
6/30/94 -1.00 9.83480111 10.66750300 -1.08
- --------------------------------------------------------
6/30/95 -1.00 10.24717934 10.66750300 -1.04
- --------------------------------------------------------
6/30/96 0.00 10.66750300 10.66750300 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.66750300 10.66750300 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 3.00% TOTAL: 1159.35
PERIOD : 10
DATE PAYMENT AUV BEG AUV END VALUE
- --------------------------------------------------------
6/30/86 1000.00 6.85487720 10.66750300 1556.19
- --------------------------------------------------------
6/30/87 -1.00 7.17116039 10.66750300 -1.49
- --------------------------------------------------------
6/30/88 -1.00 7.55132496 10.66750300 -1.41
- --------------------------------------------------------
6/30/89 -1.00 8.09483971 10.66750300 -1.32
- --------------------------------------------------------
6/30/90 -1.00 8.65841714 10.66750300 -1.23
- --------------------------------------------------------
6/30/91 -1.00 9.15900682 10.66750300 -1.16
- --------------------------------------------------------
6/30/92 -1.00 9.47654962 10.66750300 -1.13
- --------------------------------------------------------
6/30/93 -1.00 9.66510651 10.66750300 -1.10
- --------------------------------------------------------
6/30/94 -1.00 9.83480111 10.66750300 -1.08
- --------------------------------------------------------
6/30/95 -1.00 10.24717934 10.66750300 -1.04
- --------------------------------------------------------
6/30/96 0.00 10.66750300 10.66750300 0.00
- --------------------------------------------------------
6/30/96 -1.00 10.66750300 10.66750300 -1.00
- --------------------------------------------------------
AVG ANNUAL RETURN: 4.44% TOTAL: 1544.22
DAYS= 0
10 YEARS= 10
</TABLE>
24
<PAGE>
Fidelity VIP II Asset Manager
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.95720773 11.44883400 1149.80
- ---------------------------------------------------------
6/30/96 -70.00 11.44883400 11.44883400 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 11.44883400 11.44883400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 7.88% TOTAL: 1078.80
PERIOD : 5
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 7.18501223 11.44883400 1593.43
- ---------------------------------------------------------
6/30/92 -1.00 8.12151222 11.44883400 -1.41
- ---------------------------------------------------------
6/30/93 -1.00 9.24019791 11.44883400 -1.24
- ---------------------------------------------------------
6/30/94 -1.00 9.55468324 11.44883400 -1.20
- ---------------------------------------------------------
6/30/95 -1.00 9.95720773 11.44883400 -1.15
- ---------------------------------------------------------
6/30/96 -30.00 11.44883400 11.44883400 -30.00
- ---------------------------------------------------------
6/30/96 -1.00 11.44883400 11.44883400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.27% TOTAL: 1557.44
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
9/6/89 1000.00 6.07270447 11.44883400 1885.29
- ---------------------------------------------------------
9/6/90 -1.00 6.06101641 11.44883400 -1.89
- ---------------------------------------------------------
9/6/91 -1.00 7.46973917 11.44883400 -1.53
- ---------------------------------------------------------
9/6/92 -1.00 8.25458170 11.44883400 -1.39
- ---------------------------------------------------------
9/6/93 -1.00 9.56195710 11.44883400 -1.20
- ---------------------------------------------------------
9/6/94 -1.00 9.88573930 11.44883400 -1.16
- ---------------------------------------------------------
9/6/95 -1.00 10.50657649 11.44883400 -1.09
- ---------------------------------------------------------
6/30/96 -1.00 11.44883400 11.44883400 -1.00
- ---------------------------------------------------------
6/30/96 0.00 11.44883400 11.44883400 0.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.67% TOTAL: 1876.04
6.816438 DAYS = 298
YEARS= 6
</TABLE>
25
<PAGE>
Fidelity VIP II Asset Manager
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.95720773 11.44883400 1149.80
- ---------------------------------------------------------
6/30/96 0.00 11.44883400 11.44883400 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.44883400 11.44883400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 14.88% TOTAL: 1148.80
PERIOD : 5
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 7.18501223 11.44883400 1593.43
- ---------------------------------------------------------
6/30/92 -1.00 8.12151222 11.44883400 -1.41
- ---------------------------------------------------------
6/30/93 -1.00 9.24019791 11.44883400 -1.24
- ---------------------------------------------------------
6/30/94 -1.00 9.55468324 11.44883400 -1.20
- ---------------------------------------------------------
6/30/95 -1.00 9.95720773 11.44883400 -1.15
- ---------------------------------------------------------
6/30/96 0.00 11.44883400 11.44883400 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.44883400 11.44883400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.68% TOTAL: 1587.44
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
9/6/89 1000.00 6.07270447 11.44883400 1885.29
- ---------------------------------------------------------
9/6/90 -1.00 6.06101641 11.44883400 -1.89
- ---------------------------------------------------------
9/6/91 -1.00 7.46973917 11.44883400 -1.53
- ---------------------------------------------------------
9/6/92 -1.00 8.25458170 11.44883400 -1.39
- ---------------------------------------------------------
9/6/93 -1.00 9.56195710 11.44883400 -1.20
- ---------------------------------------------------------
9/6/94 -1.00 9.88573930 11.44883400 -1.16
- ---------------------------------------------------------
9/6/95 -1.00 10.50657649 11.44883400 -1.09
- ---------------------------------------------------------
6/30/96 0.00 11.44883400 11.44883400 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.44883400 11.44883400 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.67% TOTAL: 1876.04
6.816438 DAYS = 298
YEARS= 6
</TABLE>
26
<PAGE>
Fidelity VIP II Index 500
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.53968626 14.32654600 1241.50
- ---------------------------------------------------------
6/30/96 -70.00 14.32654600 14.32654600 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 14.32654600 14.32654600 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.05% TOTAL: 1170.50
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
8/27/92 1000.00 8.48580214 14.32654600 1688.30
- ---------------------------------------------------------
8/27/93 -1.00 9.55798430 14.32654600 -1.50
- ---------------------------------------------------------
8/27/94 -1.00 9.96826093 14.32654600 -1.44
- ---------------------------------------------------------
8/27/95 -1.00 11.85956933 14.32654600 -1.21
- ---------------------------------------------------------
6/30/96 -1.00 14.32654600 14.32654600 -1.00
- ---------------------------------------------------------
6/30/96 -40.00 14.32654600 14.32654600 -40.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 13.80% TOTAL: 1643.15
3.841096 DAYS = 307
YEARS= 3
</TABLE>
27
<PAGE>
Fidelity VIP II Index 500
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.53968626 14.32654600 1241.50
- ---------------------------------------------------------
6/30/96 0.00 14.32654600 14.32654600 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.32654600 14.32654600 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 24.05% TOTAL: 1240.50
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
8/27/92 1000.00 8.48580214 14.32654600 1688.30
- ---------------------------------------------------------
8/27/93 -1.00 9.55798430 14.32654600 -1.50
- ---------------------------------------------------------
8/27/94 -1.00 9.96826093 14.32654600 -1.44
- ---------------------------------------------------------
8/27/95 -1.00 11.85956933 14.32654600 -1.21
- ---------------------------------------------------------
6/30/96 0.00 14.32654600 14.32654600 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.32654600 14.32654600 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 14.52% TOTAL: 1683.15
3.841096 DAYS = 307
YEARS= 3
</TABLE>
28
<PAGE>
INVESCO Total Return
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.13042115 12.65197200 1136.70
- ---------------------------------------------------------
6/30/96 -70.00 12.65197200 12.65197200 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 12.65197200 12.65197200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 6.57% TOTAL: 1065.70
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/2/94 1000.00 9.92521879 12.65197200 1274.73
- ---------------------------------------------------------
6/2/95 -1.00 11.13609933 12.65197200 -1.14
- ---------------------------------------------------------
6/2/96 -1.00 12.56467053 12.65197200 -1.01
- ---------------------------------------------------------
6/30/96 -1.00 12.65197200 12.65197200 -1.00
- ---------------------------------------------------------
6/30/96 -50.00 12.65197200 12.65197200 -50.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 10.13% TOTAL: 1221.59
2.073973 DAYS = 27
YEARS= 2
</TABLE>
29
<PAGE>
INVESCO Total Return
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.13042115 12.65197200 1136.70
- ---------------------------------------------------------
6/30/96 0.00 12.65197200 12.65197200 0.00
- ---------------------------------------------------------
6/30/96 -1.00 12.65197200 12.65197200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 13.57% TOTAL: 1135.70
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/2/94 1000.00 9.92521879 12.65197200 1274.73
- ---------------------------------------------------------
6/2/95 -1.00 11.13609933 12.65197200 -1.14
- ---------------------------------------------------------
6/2/96 -1.00 12.56467053 12.65197200 -1.01
- ---------------------------------------------------------
6/30/96 0.00 12.65197200 12.65197200 0.00
- ---------------------------------------------------------
6/30/96 -1.00 12.65197200 12.65197200 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 12.28% TOTAL: 1271.59
2.073973 DAYS = 27
YEARS= 2
</TABLE>
30
<PAGE>
INVESCO Industrial Income
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.47248394 14.31710500 1247.95
- ---------------------------------------------------------
6/30/96 -70.00 14.31710500 14.31710500 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 14.31710500 14.31710500 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.70% TOTAL: 1176.95
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
8/10/94 1000.00 10.10629720 14.31710500 1416.65
- ---------------------------------------------------------
8/10/95 -1.00 11.60430763 14.31710500 -1.23
- ---------------------------------------------------------
6/30/96 -1.00 14.31710500 14.31710500 -1.00
- ---------------------------------------------------------
6/30/96 -60.00 14.31710500 14.31710500 -60.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 17.41% TOTAL: 1354.42
1.890411 DAYS = 325
YEARS= 1
</TABLE>
31
<PAGE>
INVESCO Industrial Income
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 11.47248394 14.31710500 1247.95
- ---------------------------------------------------------
6/30/96 0.00 14.31710500 14.31710500 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.31710500 14.31710500 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 24.70% TOTAL: 1246.95
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
8/10/94 1000.00 10.10629720 14.31710500 1416.65
- ---------------------------------------------------------
8/10/95 -1.00 11.60430763 14.31710500 -1.23
- ---------------------------------------------------------
6/30/96 0.00 14.31710500 14.31710500 0.00
- ---------------------------------------------------------
6/30/96 -1.00 14.31710500 14.31710500 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 20.13% TOTAL: 1414.42
1.890411 DAYS = 325
YEARS= 1
</TABLE>
32
<PAGE>
INVESCO HIGH YIELD
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.99815533 12.30291600 1118.63
- ---------------------------------------------------------
6/30/96 -70.00 12.30291600 12.30291600 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 12.30291600 12.30291600 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 4.76% TOTAL: 1047.63
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
5/27/94 1000.00 10.09330718 12.30291600 1218.92
- ---------------------------------------------------------
5/27/95 -1.00 10.93430182 12.30291600 -1.13
- ---------------------------------------------------------
5/27/96 -1.00 12.41387755 12.30291600 -0.99
- ---------------------------------------------------------
6/30/96 -1.00 12.30291600 12.30291600 -1.00
- ---------------------------------------------------------
6/30/96 -40.00 12.30291600 12.30291600 -40.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 8.04% TOTAL: 1175.80
2.093151 DAYS = 34
YEARS= 2
</TABLE>
33
<PAGE>
INVESCO HIGH YIELD
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.99815533 12.30291600 1118.63
- ---------------------------------------------------------
6/30/96 0.00 12.30291600 12.30291600 0.00
- ---------------------------------------------------------
6/30/96 -1.00 12.30291600 12.30291600 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 11.76% TOTAL: 1117.63
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
5/27/94 1000.00 10.09330718 12.30291600 1218.92
- ---------------------------------------------------------
5/27/95 -1.00 10.93430182 12.30291600 -1.13
- ---------------------------------------------------------
5/27/96 -1.00 12.41387755 12.30291600 -0.99
- ---------------------------------------------------------
6/30/96 0.00 12.30291600 12.30291600 0.00
- ---------------------------------------------------------
6/30/96 -1.00 12.30291600 12.30291600 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.79% TOTAL: 1215.80
2.093151 DAYS = 34
YEARS= 2
</TABLE>
34
<PAGE>
INVESCO UTILITIES
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.09619799 11.63587800 1152.50
- ---------------------------------------------------------
6/30/96 -70.00 11.63587800 11.63587800 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 11.63587800 11.63587800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 8.15% TOTAL: 1081.50
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
1/1/95 1000.00 10.06260912 11.63587800 1156.35
- ---------------------------------------------------------
1/1/96 -1.00 10.82589872 11.63587800 -1.07
- ---------------------------------------------------------
6/30/96 -1.00 11.63587800 11.63587800 -1.00
- ---------------------------------------------------------
6/30/96 -60.00 11.63587800 11.63587800 -60.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 6.21% TOTAL: 1094.27
1.49589 DAYS = 181
YEARS= 1
</TABLE>
35
<PAGE>
INVESCO UTILITIES
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 10.09619799 11.63587800 1152.50
- ---------------------------------------------------------
6/30/96 0.00 11.63587800 11.63587800 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.63587800 11.63587800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 15.15% TOTAL: 1151.50
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
1/1/95 1000.00 10.06260912 11.63587800 1156.35
- ---------------------------------------------------------
1/1/96 -1.00 10.82589872 11.63587800 -1.07
- ---------------------------------------------------------
6/30/96 0.00 11.63587800 11.63587800 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.63587800 11.63587800 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 10.07% TOTAL: 1154.27
1.49589 DAYS = 181
YEARS= 1
</TABLE>
36
<PAGE>
VAN ECK WORLDWIDE BALANCED
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.92374702 10.13252500 1021.04
- ---------------------------------------------------------
6/30/96 -70.00 10.13252500 10.13252500 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 10.13252500 10.13252500 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: -5.00% TOTAL: 950.04
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
12/23/94 1000.00 10.00766583 10.13252500 1012.48
- ---------------------------------------------------------
12/23/95 -1.00 9.83616359 10.13252500 -1.03
- ---------------------------------------------------------
6/30/96 -1.00 10.13252500 10.13252500 -1.00
- ---------------------------------------------------------
6/30/96 -60.00 10.13252500 10.13252500 -60.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: -3.30% TOTAL: 950.45
1.512329 DAYS = 187
YEARS= 1
</TABLE>
37
<PAGE>
Van Eck Worldwide Balanced
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.92374702 10.13252500 1021.04
- ---------------------------------------------------------
6/30/96 0.00 10.13252500 10.13252500 0.00
- ---------------------------------------------------------
6/30/96 -1.00 10.13252500 10.13252500 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 2.00% TOTAL: 1020.04
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
12/23/94 1000.00 10.00766583 10.13252500 1012.48
- ---------------------------------------------------------
12/23/95 -1.00 9.83616359 10.13252500 -1.03
- ---------------------------------------------------------
6/30/96 0.00 10.13252500 10.13252500 0.00
- ---------------------------------------------------------
6/30/96 -1.00 10.13252500 10.13252500 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 0.69% TOTAL: 1010.45
1.512329 DAYS = 187
YEARS= 1
</TABLE>
38
<PAGE>
VAN ECK GOLD & NATURAL RESOURCES
ASSUMING CONTRACT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.43087399 11.02688100 1169.23
- ---------------------------------------------------------
6/30/96 -70.00 11.02688100 11.02688100 -70.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02688100 11.02688100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.82% TOTAL: 1098.23
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 6.71933767 11.02688100 1641.07
- ---------------------------------------------------------
6/30/92 -1.00 6.50451313 11.02688100 -1.70
- ---------------------------------------------------------
6/30/93 -1.00 8.64695434 11.02688100 -1.28
- ---------------------------------------------------------
6/30/94 -1.00 9.18390736 11.02688100 -1.20
- ---------------------------------------------------------
6/30/95 -1.00 9.43087399 11.02688100 -1.17
- ---------------------------------------------------------
6/30/96 -30.00 11.02688100 11.02688100 -30.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02688100 11.02688100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 9.92% TOTAL: 1604.73
PERIOD : INCEPTION
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
9/1/89 1000.00 7.30859168 11.02688100 1508.76
- ---------------------------------------------------------
9/1/90 -1.00 7.30598546 11.02688100 -1.51
- ---------------------------------------------------------
9/1/91 -1.00 6.47159271 11.02688100 -1.70
- ---------------------------------------------------------
9/1/92 -1.00 6.59071145 11.02688100 -1.67
- ---------------------------------------------------------
9/1/93 -1.00 8.90400087 11.02688100 -1.24
- ---------------------------------------------------------
9/1/94 -1.00 10.26581081 11.02688100 -1.07
- ---------------------------------------------------------
9/1/95 -1.00 9.92636100 11.02688100 -1.11
- ---------------------------------------------------------
6/30/96 -1.00 11.02688100 11.02688100 -1.00
- ---------------------------------------------------------
6/30/96 0.00 11.02688100 11.02688100 0.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 6.11% TOTAL: 1499.45
6.830137 DAYS = 303
YEARS= 6
</TABLE>
39
<PAGE>
VAN ECK GOLD & NATURAL RESOURCES
ASSUMING CONTRACT NOT SURRENDERED
PERIOD : 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
6/30/95 1000.00 9.43087399 11.02688100 1169.23
- ---------------------------------------------------------
6/30/96 0.00 11.02688100 11.02688100 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02688100 11.02688100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 16.82% TOTAL: 1168.23
PERIOD : 5
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
6/30/91 1000.00 6.71933767 11.02688100 1641.07
- ---------------------------------------------------------
6/30/92 -1.00 6.50451313 11.02688100 -1.70
- ---------------------------------------------------------
6/30/93 -1.00 8.64695434 11.02688100 -1.28
- ---------------------------------------------------------
6/30/94 -1.00 9.18390736 11.02688100 -1.20
- ---------------------------------------------------------
6/30/95 -1.00 9.43087399 11.02688100 -1.17
- ---------------------------------------------------------
6/30/96 0.00 11.02688100 11.02688100 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02688100 11.02688100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 10.33% TOTAL: 1634.73
PERIOD : INCEPTION
- ---------------------------------------------------------
DATE PAYMENT AUV BEG AUV END VALUE
- ---------------------------------------------------------
9/1/89 1000.00 7.30859168 11.02688100 1508.76
- ---------------------------------------------------------
9/1/90 -1.00 7.30598546 11.02688100 -1.51
- ---------------------------------------------------------
9/1/91 -1.00 6.47159271 11.02688100 -1.70
- ---------------------------------------------------------
9/1/92 -1.00 6.59071145 11.02688100 -1.67
- ---------------------------------------------------------
9/1/93 -1.00 8.90400087 11.02688100 -1.24
- ---------------------------------------------------------
9/1/94 -1.00 10.26581081 11.02688100 -1.07
- ---------------------------------------------------------
9/1/95 -1.00 9.92636100 11.02688100 -1.11
- ---------------------------------------------------------
6/30/96 0.00 11.02688100 11.02688100 0.00
- ---------------------------------------------------------
6/30/96 -1.00 11.02688100 11.02688100 -1.00
- ---------------------------------------------------------
AVG ANNUAL RETURN: 6.11% TOTAL: 1499.45
6.830137 DAYS = 303
YEARS= 6
</TABLE>
40
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST ING
LIFE OF NEW YORK LIFE SEPARATE ACCOUNT A1 FINANCIAL STATEMENTS AT 12/31/95 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
