<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1997
Registration No. 33-88794
811-8700
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM N-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 2
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:
JOHN R. BARMEYER DIANE E. AMBLER, ESQ.
First ING Life Insurance Company of New York Mayer, Brown & Platt
1290 Broadway 2000 Pennsylvania Avenue, N.W.
Denver, Colorado 80203-5699 Washington, D.C. 20006-1882
(Name and Address of Agent for Service) (202) 778-0641
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practical after the
effective date.
________________
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
---
___ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
___ on (date) pursuant to paragraph (a)(i) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(ii)
___ on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24F-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
elected to register an indefinite amount of securities under the Securities Act
of 1933. Registrant filed its Form 24F-2 on February 28, 1997 for its most
recent fiscal year ending December 31, 1996.
- --------------------------------------------------------------------------------
<PAGE>
FIRST ING OF NEW YORK SEPARATE ACCOUNT A1 (File No. 33-88794)
Cross-ReferenceSheet
Pursuant to Rule 495(a) Under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-4 Item No. Caption in Prospectus
- ----------------- ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Definitions Glossary of Terms
3. Synopsis Summary of The Fulcrum Fund(R)
Variable Annuity
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, Facts about First ING Life and the
Depositor and Portfolio Companies Variable Account; The Guaranteed
Interest Division
6. Deductions and Expenses Fee Table; Summary of The Fulcrum
Fund (R) Variable Annuity;
Certificate Charges and Fees
7. General Description of Variable Facts about the Contract and the
Annuity Contracts Certificates
8. Annuity Period Choosing an Annuity Option
9. Death Benefit Summary of The Fulcrum Fund(R)
Variable Annuity; Values under the
Certificate
10. Purchases and Contract Value Summary of The Fulcrum Fund(R)
Variable Annuity; Facts about the
Contact and the Certificates;
Values under the Certificate
11. Redemptions Summary of The Fulcrum Fund(R)
Variable Annuity; Certificate
Charges, and Fees; Values under the
Certificate, Choosing an Annuity
Option
12. Taxes Summary of The Fulcrum Fund(R)
Variable Annuity; Certificate
Charges and Fees; Federal Tax
Considerations
13. Legal Proceedings Regulatory Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Caption in Statement of Additional
----------------------------------
Information (or Prospectus, Where
---------------------------------
Form N-4 Item No. Indicated)
- ----------------- ----------
<S> <C> <C>
14. Table of Contents of Statement of Table of Contents of Statement of
Additional Information Additional Information
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History First ING Life; Prospectus -- Facts
about First ING Life and the
Variable Account
18. Services First ING Life; The Administrator
19. Purchase of Securities Being Offered Prospectus -- Facts About the
Contract and the Certificates
20. Underwriters First ING Life
21. Calculation of Performance Data Performance Information; Prospectus
- Appendix A, Performance
Information
22. Annuity Payouts Performance Information; Prospectus
-- Choosing an Annuity Option
23. Financial Statements Financial Statements of First ING
Separate Account A1 of First ING
Life Insurance Company of New York;
Financial Statements of First ING
Life Insurance Company of New York;
Prospectus - Condensed Financial
Information
</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.
(ii)
<PAGE>
THE FULCRUM FUND(R) VARIABLE ANNUITY
A GROUP 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 Fulcrum Fund(R) Variable Annuity, a group
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 issued to the Contract Holder, who
is the group Contract owner. The group Contract Holder holds legal title to the
group Contract and retains possession of the group Contract while it is in
force. The Owner ("you" or "your") purchases a Certificate (the "Certificate")
under the Contract with an initial Purchase Payment and is permitted to make
additional Purchase Payments. The Certificate is designed to aid in long-term
financial planning and provides automatic reinvestment and compounding of any
investment earnings on a tax-deferred basis for retirement or other long-term
purposes. Certificates are issued to those persons who apply for coverage under
the group Contract through a Certificate application and are accepted by us. In
the following, all references to rights and benefits under the Contract apply to
each Certificate application and are accepted by us. In the following, all
references to rights and benefits under the Contract apply to each Certificate
issued under the Contract.
The Certificate is funded by First ING of New York Separate Account A1 (the
"Variable Account"). Five Divisions of the Variable Account are currently
available under the Certificate. The investments available through the
Divisions of the Variable Account include mutual fund Portfolios of The
Palladian Trust (the "Trust") as indicated below.
Portfolio Portfolio Managers
--------- ------------------
The Value Portfolio GAMCO Investors, Inc.
The Growth Portfolio Stonehill Capital Management,
Inc.
The International Growth Portfolio Bee & Associates Incorporated
The Global Strategic Income Portfolio Fischer Francis Trees & Watts,
Inc.
The Global Interactive/Telecomm Portfolio GAMCO Investors, Inc.
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
Certificate 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 Certificate Year free of charge.
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 THE PALLADIAN TRUST.
Prospectus Date: May 1, 1997
<PAGE>
You may surrender the Certificate 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 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, the Certificates issued under it, and
your principal rights and limitations and sets forth the information concerning
the Variable Account that investors should know before investing. The
prospectus for the Trust, which must accompany this prospectus, provides
information regarding investment activities and objectives of the Trust and
should be read in conjunction with this prospectus. A Statement of Additional
Information, dated May 1, 1997, 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 41 of this prospectus. The Statement of Additional Information is
incorporated herein by reference.
It is currently anticipated that on or about July 24, 1997, the Contract will no
longer be offered to new investors. Notwithstanding the termination of new
sales, existing Owners will continue to be entitled to exercise all rights under
the Certificates, including the purchase of new Trust shares through Purchase
Payments, Dollar Cost Averaging, Automatic Rebalancing, and other transfers
between Divisions.
<TABLE>
ISSUED BY: DISTRIBUTED BY: CUSTOMER SERVICE CENTER:
<C> <S> <C>
First ING Life Insurance Company ING America Equities, Inc. P.O. Box 173778
of New York 1290 Broadway, Attn: Variable Denver, CO 80217-3778
1290 Broadway Denver, CO 80203-5699 1-800-249-9099
Denver, CO 80203-5699
1-800-525-9852
</TABLE>
Date of Prospectus: May 1, 1997
________________________________________________________________________________
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF TERMS............................................................... 5
FEE TABLE....................................................................... 8
SUMMARY OF THE FULCRUM FUND(R) VARIABLE ANNUITY................................. 12
General Description............................................................. 12
Purchase Payments............................................................... 13
Guaranteed Death Benefit........................................................ 13
Partial Withdrawals............................................................. 13
Surrendering Your Certificate................................................... 13
Your Right to Cancel the Certificate............................................ 14
Certificate Charges and Fees.................................................... 14
CONDENSED FINANCIAL INFORMATION................................................. 15
FACTS ABOUT FIRST ING LIFE AND THE VARIABLE ACCOUNT............................. 15
First ING Life.................................................................. 15
Customer Service Center......................................................... 15
The Variable Account............................................................ 16
The Palladian Trust............................................................. 16
Changes Within the Variable Account............................................. 17
FACTS ABOUT THE CONTRACT AND THE CERTIFICATES................................... 18
Your Right to Cancel the Certificate............................................ 18
Purchase Payments............................................................... 18
Dollar Cost Averaging........................................................... 19
Automatic Rebalancing........................................................... 19
Reports to Owners............................................................... 20
Group or Sponsored Arrangements................................................. 20
Offering the Certificate........................................................ 21
Termination of New Sales........................................................ 21
VALUES UNDER THE CERTIFICATE.................................................... 21
Guaranteed Death Benefit........................................................ 21
Death Benefit Proceeds.......................................................... 22
Your Accumulation Value......................................................... 22
Measurement of Investment Experience for the Divisions of the Variable Account.. 22
Division Accumulation Value of Each Division of the Variable Account............ 23
Division Accumulation Value of the Guaranteed Interest Division................. 23
Your Right to Transfer Among Divisions.......................................... 24
Partial Withdrawals............................................................. 25
Surrendering to Receive the Cash Surrender Value................................ 27
When We Make Payouts............................................................ 28
THE GUARANTEED INTEREST DIVISION................................................ 28
OTHER INFORMATION............................................................... 29
The Owner....................................................................... 29
The Annuitant................................................................... 29
</TABLE>
________________________________________________________________________________
3
The Fulcrum Fund(R)
<PAGE>
<TABLE>
<S> <C>
The Beneficiary................................................................. 30
Change of Owner, Beneficiary or Annuitant....................................... 30
Other Certificate Provisions.................................................... 30
Authority to Change Contract and Certificate Terms.............................. 31
CERTIFICATE CHARGES AND FEES.................................................... 31
Deduction of Charges............................................................ 31
Charges Deducted from the Accumulation Value.................................... 32
Charges Deducted From The Divisions of the Variable Account..................... 33
Portfolio Expenses.............................................................. 33
CHOOSING AN ANNUITY OPTION...................................................... 33
General Provisions.............................................................. 33
Payout Options.................................................................. 34
Payout Period Options........................................................... 35
REGULATORY INFORMATION.......................................................... 36
Voting Privileges............................................................... 36
State Regulation................................................................ 37
Legal Proceedings............................................................... 38
Legal Matters................................................................... 38
Experts......................................................................... 38
FEDERAL TAX CONSIDERATIONS...................................................... 38
Introduction.................................................................... 38
First ING Life Tax Status....................................................... 38
Taxation of Annuities........................................................... 39
Taxation of Individual Retirement Annuities..................................... 40
Distribution-at-Death Rules..................................................... 40
Taxation of Death Benefit Proceeds.............................................. 41
Certificates Owned by Non-Natural Persons....................................... 41
Section 1035 Exchanges.......................................................... 41
Assignments..................................................................... 41
Multiple Certificates Rule...................................................... 42
Diversification Standards....................................................... 42
TABLE OF CONTENTS OF STATEMENT.................................................. 43
OF ADDITIONAL INFORMATION....................................................... 43
APPENDIX A...................................................................... 44
APPENDIX B...................................................................... 47
Performance Information......................................................... 47
</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
The Fulcrum Fund(R)
<PAGE>
GLOSSARY OF TERMS
AS USED IN THE 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 charges assessed against that Division for a Valuation Period
during the Accumulation Period.
ACCUMULATION PERIOD - The period of time from the Certificate 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 Certificate 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.
ANNIVERSARY - The anniversary of the Certificate Date.
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 which we use to calculate 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 amount upon annuitization.
BUSINESS DAY - Any day which is a Valuation Date.
CASH SURRENDER VALUE - The amount the Owner receives upon surrendering the
Certificate.
CERTIFICATE - The part of the entire Contract which provides the provisions of
the Contract that apply to you.
________________________________________________________________________________
5
The Fulcrum Fund(R)
<PAGE>
CERTIFICATE DATE - The date as of which we have received and accepted the
initial Purchase Payment for the Certificate and as of which we begin
determining the Certificate values. The Certificate Date is used to determine
Certificate Processing Dates, Certificate Years and Anniversaries.
CERTIFICATE PROCESSING DATE - The day when we deduct the annual administration
charge from the Accumulation Value. Current practice is that the Certificate
Processing Date will be as of each Anniversary. Any Certificate Processing Date
that is not a Valuation Date will be deemed to occur as of the next succeeding
Valuation Date.
CERTIFICATE YEAR - A period of 12 months commencing with the Certificate Date or
any Anniversary.
CODE - 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, the
Certificate, any applications, the Certificate application, and any Riders or
Endorsements.
CONTRACT DATE - The date as of which the Contract was issued to the Contract
Holder.
CONTRACT HOLDER - The person or trust who is the group Contract owner and who
holds legal title to the group Contract and retains possession of the group
Contract while it is in force.
CUSTOMER SERVICE CENTER - Where service is provided to Owners. The mailing
address and telephone number of the Customer Service Center are shown on page 2.
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 Certificate.
FREE LOOK PERIOD - The period of time within which an Owner may examine the
Certificate 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 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 CERTIFICATE - 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 Certificate and who are entitled to
exercise all rights under the Certificate. 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.
________________________________________________________________________________
6
The Fulcrum Fund(R)
<PAGE>
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 Certificate 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 Certificate.
RIDER - A Rider adds benefits to the Certificate.
SEC - The United States Securities and Exchange Commission.
SUPPLEMENTARY CONTRACT - The Election and Supplementary Agreement for a
Settlement Option amends the entire Certificate 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 of New York Separate Account A1 established by First
ING Life to segregate the assets funding the variable benefits provided by the
Contract and the Certificates from the assets in our General Account.
________________________________________________________________________________
7
The Fulcrum Fund(R)
<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 Certificates, expenses of the Divisions and expenses
of the Portfolios. In addition to the expenses and charges described below, we
may also deduct from the Proceeds taxes incurred but not paid to cover the state
or local tax charge on Purchase Payments. See Taxes on Purchase Payments, page
22. We may reduce certain charges under certain 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>
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>
Excess Transfer Charge (does not apply to the first 12 transfers in a
Certificate Year)/2/........ $25
ANNUAL CERTIFICATE FEES
Administrative Charge (does not apply after the Annuity Date)/3/
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
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
surrender charge. See Charges Deducted from the Accumulation Value, page 30.
/2/ Any transfermunder Dollar Cost Averaging or Automatic Rebalancing is not
considered a transfer for this purpose. See Dollar Cost Averaging, page 18,
Automatic Rebalancing page 19. After the Annuity Date, transfers are limited
to four each Certificate Year, and no transfer charge applies. See Excess
Transfer Charge, page 31.
/3/ The administrative charge is deducted as of each Anniversary or upon
surrender. See Administrative Charge, page 22.
________________________________________________________________________________
8
The Fulcrum Fund(R)
<PAGE>
PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)/4/
Beginning February 1, 1997, each Portfolio has a performance-based advisory fee.
The base fee is 2.00%, but the total fee may vary from between 0.00% to 4.00%,
depending on the Portfolio's performance. The base fee of 2.00% would be paid
if Portfolio performance (net of all fees and expenses, including the advisory
fee) is between 1.5 and 3.0 percentage points better than the benchmark index.
A fee of 4.00% would be paid only if Portfolio performance (net of all fees and
expenses, including the advisory fee) was at least 7.5 percentage points better
than the benchmark index. No fee will apply if the Portfolio's performance is
more than 3.0 percentage points lower than the benchmark index. Because of this
variation, expense information assuming fees of 0.00%, 2.00%, and 4.00% is set
forth below. You should note, however, that the fee could be any figure between
0.00% and 4.00%. See the Prospectus of the Trust for complete details.
1. Assuming Management and Advisory Fee of 0.00%
An advisory fee of 0% would be paid if the Portfolio's performance (net of all
fees and expenses) was more than 3.0 percentage points lower than the benchmark
index.
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER ANY TOTAL
AND ADVISORY APPLICABLE OPERATING
FUND FEES /5/ REIMBURSEMENT) /6/ EXPENSES
================================================================================================
<S> <C> <C> <C>
Value Portfolio 0% 0.70% 0.70%
Growth Portfolio 0% 0.70% 0.70%
International Growth Portfolio 0% 1.20% 1.20%
Global Strategic Income Portfolio 0% 1.20% 1.20%
Global Interactive/Telecomm Portfolio 0% 1.20% 1.20%
</TABLE>
_________________________
/4/ The following 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 Certificate 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 prospectus for the Trust.
/5/ A performance-based advisory fee is in effect that may vary from 0.00% to
4.00%.
/6/ The Manager has agreed to limit operating expenses and reimburse those
expenses through December 31, 1997, to the extent a Portfolio's "other
expenses" (i.e., expenses other than management fees) exceed the following
expense limitations: Value Portfolio, 0.70%; Growth Portfolio, 0.70%;
International Growth Portfolio, 1.20%; Global Strategic Income Portfolio,
1.20%; Global Interactive/Telecomm Portfolio, 1.20%. Without those
limitations, it is estimated that the 1997 "other expenses" would be as
follows: Value Portfolio, 2.49%; Growth Portfolio, 2.64%; International
Growth Portfolio, 2.54%; Global Strategic Income Portfolio, 3.03%; Global
Interactive/Telecomm Portfolio, 2.38%. For the two years following the date
that the expense limitation ends, each Portfolio will reimburse the Manager
for any fees it waived or expenses it reimbursed pursuant to the expenses
limitation, provided that such reimbursement would not cause the Portfolio's
"other expense" ratio to exceed the expense limitation set forth above.
After this two year period, the Portfolio's reimbursement liability to the
Manager will cease. In addition, if at anytime the Investment Management
Agreement between the Manager and the Portfolio terminates, the Portfolio's
reimbursement liability to the Manager will cease.
________________________________________________________________________________
9
The Fulcrum Fund(R)
<PAGE>
2. Assuming Management and Advisory Fee of 2.00%
An advisory fee of 2.00% would be paid if the Portfolio's performance (net of
all fees and expenses, including 2.00% advisory fee) was bwtween 1.5 and 3.0
percentage points better than the benchmark index.
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER ANY TOTAL
AND ADVISORY APPLICABLE OPERATING
FUND FEES/5/ REIMBURSEMENT)/6/ EXPENSES
======================================================================================
<S> <C> <C> <C>
Value Portfolio 2.00% 0.70% 2.70%
Growth Portfolio 2.00% 0.70% 2.70%
International Growth Portfolio 2.00% 1.20% 3.20%
Global Strategic Income Portfolio 2.00% 1.20% 3.20%
Global Interactive/Telecomm Portfolio 2.00% 1.20% 3.20%
</TABLE>
3. Assuming Management and Advisory Fee of 4.00%
An advisory fee of 4.00% would be paid if the Portfolio's performance (net of
all fees and expenses, including the 4.00% advisory fee) was at least 7.5
percentage points better than the benchmark index.
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER ANY TOTAL
AND ADVISORY APPLICABLE OPERATING
FUND FEES/5/ REIMBURSEMENT)/6/ EXPENSES
=====================================================================================
<S> <C> <C> <C>
Value Portfolio 4.00% 0.70% 4.70%
Growth Portfolio 4.00% 0.70% 4.70%
International Growth Portfolio 4.00% 1.20% 5.20%
Global Strategic Income Portfolio 4.00% 1.20% 5.20%
Global Interactive/Telecomm 4.00% 1.20% 5.20%
Portfolio
</TABLE>
FEE EXAMPLES
The information presented in the following examples should not be considered a
representation of past or future expenses. The examples depict the dollar
amount of expenses that would be incurred under this Certificate 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 estimated average
Certificate account size. Since the estimated average Certificate account size
for Certificates issued under this prospectus is greater than $1,000, the
expense effect of the annual administrative charge is reduced accordingly. Other
expenses of the Portfolios are estimated. Actual Portfolio expenses may be
greater or less than those on which these examples were based. Taxes on Purchase
Payments may also be applicable but are not reflected in the expenses below. See
Taxes on Purchase Payments, page 33. The annual administrative charge does not
apply during the Annuity Period.
Because the advisory fee may vary from 0.00% to 4.00% depending on performance,
three separate examples are provided: Example (1) assumes no advisory fee is
paid; Example (2) assumes the advisory fee is paid at the annual rate of 2.00%
and Example (3) assumes the advisory fee is paid at the annual rate of
4.00%.
________________________________________________________________________________
10
The Fulcrum Fund(R)
<PAGE>
EXAMPLE 1 - ASSUMING MANAGEMENT AND ADVISORY FEE OF 0.00%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT IF YOU DO NOT SURRENDER YOUR
THE END OF THE APPLICABLE TIME CONTRACT OR IF YOU ANNUITIZE AT THE
PERIOD. END OF THE APPLICABLE TIME PERIOD.
- ---------------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10
DIVISION INVESTING IN: Year Years Years Years Year Years Years Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Value Portfolio 92 118 146 248 22 68 116 248
The Growth Portfolio 92 118 146 248 22 68 116 248
The International Growth Portfolio 97 132 170 296 27 82 140 296
The Global Strategic Income Portfolio 97 132 170 296 27 82 140 296
The Global Interactive/Telecomm Portfolio 97 132 170 296 27 82 140 296
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE 2 - ASSUMING MANAGEMENT AND ADVISORY FEE OF 2.00%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT IF YOU DO NOT SURRENDER YOUR
THE END OF THE APPLICABLE TIME CONTRACT OR IF YOU ANNUITIZE AT THE
PERIOD. END OF THE APPLICABLE TIME PERIOD.
- ---------------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10
DIVISION INVESTING IN: Year Years Years Years Year Years Years Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Value Portfolio 111 175 239 427 41 125 209 427
The Growth Portfolio 111 175 239 427 41 125 209 427
The International Growth Portfolio 116 189 261 466 46 139 231 466
The Global Strategic Income Portfolio 116 189 261 466 46 139 231 466
The Global Interactive/Telecomm Portfolio 116 189 261 466 46 139 231 466
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE 3 - ASSUMING MANAGEMENT AND ADVISORY FEE OF 4.00%/7/
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT IF YOU DO NOT SURRENDER YOUR
THE END OF THE APPLICABLE TIME CONTRACT OR IF YOU ANNUITIZE AT THE
PERIOD. END OF THE APPLICABLE TIME PERIOD.
- ---------------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10
DIVISION INVESTING IN: Year Years Years Years Year Years Years Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Value Portfolio 130 229 325 574 60 179 295 574
The Growth Portfolio 130 229 325 574 60 179 295 574
The International Growth Portfolio 135 243 346 606 65 193 316 606
The Global Strategic Income Portfolio 135 243 346 606 65 193 316 606
The Global Interactive/Telecomm Portfolio 135 243 346 606 65 193 316 606
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
______________________
/7/ In order to have both a 5% annual return and an advisory fee of 4%, a
Portfolio's performance would have to be 9% before deduction of the 4% fee
(resulting in performance of 5%) and the benchmark index would have to
decrease at least 2.5 percentage points (meaning that the Portfolio's
performance after fees and expenses was at least 7.5 percentage points
better than the benchmark index).
________________________________________________________________________________
11
The Fulcrum Fund(R)
<PAGE>
SUMMARY OF THE FULCRUM FUND(R) VARIABLE ANNUITY
GENERAL DESCRIPTION
This prospectus provides you with the necessary information to make a decision
on purchasing the Fulcrum Fund(R) Variable Annuity offered by First ING Life and
funded by the Variable Account as well as by our General Account. It is
currently anticipated that on or about July 24, 1997, the Contract will no
longer be offered to new investors. Notwithstanding the termination of new
sales, existing Owners will continue to be entitled to exercise all rights under
the Certificates, including the purchase of new Trust shares through Purchase
Payments, Dollar Cost Averaging, Automatic Rebalancing, and other transfers
between Divisions.
This summary provides a brief overview of the more significant aspects of the
Contract and the Certificates issued under it. Further detail is provided in
this prospectus, the related Statement of Additional Information, the
Certificate, and the prospectus for the Trust. The Contract and the
Certificate, together with any applications, the Certificate application and any
Riders or Endorsements, constitute the entire agreement between you and us and
should be retained. For further information about your Certificate, contact the
First ING Life Customer Service Center.
We can issue a Certificate if the Owner and Annuitant are not older than Age 80,
and we can accept additional Purchase Payments prior to the Annuity Date. For
an IRA Certificate, you may not make Purchase Payments after March 31 of the
year following the year in which you reach Age 70 1/2.
The Certificate may be used as an Individual Retirement Annuity, an IRA
Rollover, or an IRA Transfer ("IRA Certificates"). IRA Certificates 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
five Divisions of the Variable Account, a separate account of First ING Life, or
the Guaranteed Interest Division. We do not promise that your Accumulation Value
will increase. Depending on the Certificate'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, all dividends,
interest and capital gains 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 of The Palladian Trust (the "Trust"). The
Portfolios have their own distinct investment objectives and are managed by
Palladian Advisors, Inc. ("PAI"). The Trust and PAI have retained several
Portfolio Managers to manage the assets of each Portfolio. PAI has also retained
Tremont Partners, Inc., as Portfolio Adviser, to research, evaluate, recommend
and monitor the Portfolio Managers. Each Portfolio Manager is paid on an
incentive fee basis, which could result in either higher than average advisory
fees or, possibly, no advisory fee at all, depending on how well each Portfolio
Manager performs for you. Each Portfolio Manager has also agreed to invest $1
million in the Portfolio(s) it manages, so once that investment is made, it is
managing a portion of its money along with your money. 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 14, and The Palladian Trust, page 16.
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 28.
The Certificate 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 Fulcrum Fund(R)
12
<PAGE>
The ultimate effect of Federal income taxes on the amounts held under a
Certificate, 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 Certificate until some form of distribution is made
under it. There may be tax penalties if you make a partial withdrawal or
surrender the Certificate before reaching Age 59 1/2. See FEDERAL TAX
CONSIDERATIONS, page 38.
PURCHASE PAYMENTS
The minimum initial Purchase Payment is $25,000 ($1,000 for an IRA Certificate).
The minimum additional Purchase Payment we will accept is $500 ($250 for an IRA
Certificate 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 under the
Certificate to exceed $1,500,000.
The initial Purchase Payment is allocated to each Division according to your
most recent allocation instructions. 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 Division
investing in the Global Strategic Income 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 19.
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 Certificate Year during the Accumulation
Period. A $25 charge will be assessed for each transfer in excess of 12 during a
Certificate Year. If you elect a Variable Annuity Payout Option, you may make up
to four transfers per Certificate Year, and no transfer charge will be assessed.
GUARANTEED DEATH BENEFIT
The Certificate 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 21, and Death Benefit Proceeds, page 22.
PARTIAL WITHDRAWALS
After the Free Look period, prior to the Annuity Date and while the Certificate
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. See Partial Withdrawals, page 25.
A penalty tax may be assessed upon partial withdrawals. See Taxation of
Annuities, page 39.
SURRENDERING YOUR CERTIFICATE
You may surrender the Certificate 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 27.
A penalty tax may be assessed upon surrender. See Taxation of Annuities, page
39.
________________________________________________________________________________
13
The Fulcrum Fund(R)
<PAGE>
YOUR RIGHT TO CANCEL THE CERTIFICATE
At any time during the Free Look Period, you may cancel your Certificate and
receive a refund equal to your Accumulation Value plus charges deducted. The
Free Look Period is a ten day period of time beginning when the Certificate is
delivered to you. We deem this period as ending 15 days after the Certificate
is mailed from our Customer Service Center.
CERTIFICATE 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 reduce certain charges for certain 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 Certificate
Years since the Anniversary at the end of the Certificate 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 Certificate 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 Certificate Years since the Anniversary at the end of the
Certificate Year in which the Purchase Payment was made, then to the amount by
which 15% of the Accumulation Value as of the last Anniversary (less any Gross
Partial Withdrawals already made during the Certificate Year which are not
considered to be withdrawals of Purchase Payments) exceeds the Earnings in the
Certificate, 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 Certificate Year during which the Purchase Payment was made,
reduced by 1% each year for the next five Certificate Years and is 0% in the
sixth Certificate Year following the Certificate Year in which the Purchase
Payment was made. See Surrender Charge, page 32.
We charge each Division of the Variable Account with a daily asset-based charge
equivalent to an annual rate of 1.25% for mortality and expense risks. See
Mortality and Expense Risk Charge, page 33.
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 Certificate
administration costs. See Asset-based Administrative Charge, page 33.
During the Accumulation Period, we deduct an annual administrative charge of $30
per Certificate 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 Certificate prior to the end of a Certificate Year. See Administrative
Charge, page 32.
A $25 charge will be assessed for each transfer in excess of 12 during a
Certificate Year during the Accumulation Period. See Excess Transfer Charge,
page 32.
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 33.
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 of the Variable Account in which you are
invested will affect your Accumulation Value. Please read the prospectus for
the Trust for details.
________________________________________________________________________________
14
The Fulcrum Fund(R)
<PAGE>
CONDENSED FINANCIAL INFORMATION
The audited financial statements of First ING Life at December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996, (as
well as the auditor's reports thereon) and the audited financial statements of
the Separate Account as of December 31, 1996, and for the year then ended, are
in the Statement of Additional Information. These financial statements have
been prepared according to generally accepted accounting principles.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
ACCUMULATION UNIT ACCUMULATION ACCUMULATION
VALUE AT BEGINNING UNIT VALUE UNITS AT END OF
DIVISIONS OF PERIOD AT END OF PERIOD THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
PALLADIAN ADVISORS, INC.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Value Portfolio $10.00 $11.24 27,860.970 1996*
- -------------------------------------------------------------------------------------------------------------------
The Growth Portfolio 10.00 9.60 14,334.490 1996*
- -------------------------------------------------------------------------------------------------------------------
The International Portfolio 10.00 10.40 8,357.410 1996*
- -------------------------------------------------------------------------------------------------------------------
The Global Strategic Income Portfolio 10.00 10.05 5,205.830 1996*
- -------------------------------------------------------------------------------------------------------------------
The Global Interactive/Telecomm Portfolio 10.00 9.86 8,279.460 1996*
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Investment became available on February 29, 1996.
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,
NY 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, 1996. 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 $277.9 billion on a Dutch
(modified U.S.) generally accepted accounting principles basis as of December
31, 1996.
The principal underwriter and distributor of the Contract and Certificates 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 173763, Denver, CO
80217-3763 The administrative services include processing Purchase Payments,
Annuity Payouts, Death Benefits, surrenders, partial withdrawals and transfers;
preparing confirmation
________________________________________________________________________________
15
The Fulcrum Fund(R)
<PAGE>
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 and the Certificates issued under it 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 Certificate 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 subject 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. Before making
any such transfer, First ING Life will consider any possible adverse effect the
transfer might have on the Variable 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.
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. It 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.
The Variable Account has several Divisions, each of which invests in shares of a
corresponding Portfolio of The Palladian Trust. Therefore, the investment
experience of your Certificate 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 PALLADIAN TRUST
Currently, each Division of the Variable Account offered pursuant to this
prospectus invests in a corresponding Portfolio of The Palladian Trust. PAI
serves as the manager to each Portfolio of the Trust. See the Trust prospectus
for details. The Trust and PAI have retained several Portfolio Managers to
manage the assets of the Portfolios as indicated below. PAI has also retained
Tremont Partners, Inc., as Portfolio Adviser to research, evaluate, recommend
and monitor the Portfolio Managers for each Portfolio.
The Trust pays PAI and the Portfolio Managers a monthly fee (the "advisory fee")
based on the average daily net assets of each Portfolio. There are two
components to the advisory fee: the basic fee and the incentive fee. The
advisory fee is structured to vary based upon the Portfolio's performance (after
expenses) compared to that of an appropriate market benchmark selected for that
Portfolio. The Management and Advisory fee schedule provides for an incentive
performance fee in excess of the listed fee for superior performance; it also
provides for a lower fee for sub-par performance. The base fee will be 2.00%,
but it may vary from 0.00% to 4.00% depending on the Portfolio's performance.
See the prospectus of the Trust for more details. PAI is responsible for paying
the fee of the Portfolio Adviser, which is structured to vary based on how well
the Portfolio Managers perform.
The Trust is an open-end management investment company, more commonly called a
mutual fund. The Trust's shares may also be 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
________________________________________________________________________________
16
The Fulcrum Fund(R)
<PAGE>
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 Certificates 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.
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 the Trust prospectus.
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 Trust's prospectus for more information.
Value Portfolio -- seeks to make money for investors by investing primarily in
companies that the Portfolio Manager believes are undervalued and that by
virtue of anticipated developments may, in the portfolio manager's judgment,
achieve significant capital appreciation.
Growth Portfolio -- seeks to make money for investors by investing primarily
in securities selected for their long-term growth prospects.
International Growth Portfolio -- seeks to make money for investors by
investing internationally for long-term capital appreciation, primarily in
equity securities.
Global Strategic Income Portfolio -- seeks to make money for investors by
investing for high current income and capital appreciation in a variety of
domestic and foreign fixed-income securities.
Global Interactive/Telecomm Portfolio -- seeks to make money for investors
primarily by investing globally in equity securities of companies engaged in
the development, manufacture or sale of interactive and/or telecommunications
services and products.
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 the 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 of the Palladian Trust.
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.
________________________________________________________________________________
17
The Fulcrum Fund(R)
<PAGE>
No such changes will be made until it becomes effective with the SEC or without
any necessary approval of the applicable state insurance departments. Owners
will be notified of any changes.
FACTS ABOUT THE CONTRACT AND THE CERTIFICATES
YOUR RIGHT TO CANCEL THE CERTIFICATE
You may cancel the Certificate within your Free Look Period, which is ten days
after you receive your Certificate or such other period as required by state
law. We deem this period to expire 15 days after the Certificate is mailed form
our Customer Service Center. If you decide to cancel, you may mail or deliver
the Certificate to us at our Customer Service Center. We will refund the
Accumulation Value plus any charges we deducted. See CERTIFICATE CHARGES AND
FEES, page 31.
PURCHASE PAYMENTS
INITIAL PURCHASE PAYMENT
You purchase the Certificate with an initial Purchase Payment. The minimum
initial Purchase Payment is $25,000 ($1,000 for an IRA). We may reduce the
minimum initial Purchase Payment requirements for certain group or sponsored
arrangements or with approval by us. See Group or Sponsored Arrangements, page
20. We may not accept an initial Purchase Payment in excess of $1,500,000.
ADDITIONAL PURCHASE PAYMENTS
We can accept additional Purchase Payments until the Annuity Date. 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 or with approval by First ING Life Insurance Company of
New York. We may refuse to accept a Purchase Payment if it would cause the sum
of all Net Purchase Payments to exceed $1,500,000.
We will accept rollover contributions to IRA rollover Certificates. The IRA
maximums for annual contributions to an IRA do not apply to any Purchase Payment
which is the result of a rollover or transfer from another qualified plan. For
individual IRA Certificates, the Purchase Payment in any year on behalf of an
individual Certificate may not exceed $2,000. For married individuals filing
joint returns, each spouse may establish an IRA contract and contriubte up to
$2,000 per year ($4,000 total even if one spouse does not work ), provided that
the combined contributions do not exceed the total combined compensation of both
spouses.
WHERE TO MAKE PAYMENTS
Send Purchase Payments to our Customer Service Center at the address shown on
page 2. We will send you a confirmation notice upon receipt. Make checks
payable to The Fulcrum Fund(R) Annuity/First ING Life.
CREDITING AND ALLOCATION OF PURCHASE PAYMENTS
We will credit the initial Purchase Payment within two business days of receipt
of a completed Certificate application at our Customer Service Center. We may
retain the initial Purchase Payment for up to five business days while
attempting to complete an incomplete Certificate application. If the
Certificate 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 Certificate application
is made complete. The initial Purchase Payment will then be credited within two
business days of the proper completion of the Certificate application.
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The Fulcrum Fund(R)
<PAGE>
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 any or all the available
Divisions according to your most recent allocation instructions. 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. While it may not achieve its intended results, this plan of
investing attempts to keep 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 the Division investing in the Global Strategic Income
Portfolio, you may choose to transfer a specified dollar amount each month from
this Division 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 of the Division investing in the Global Strategic Income
Portfolio 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 of the Division
investing in the Global Strategic Income Portfolio reaches this dollar amount,
Dollar Cost Averaging will terminate.
The transfer date will be the same calendar day each month as the Certificate
Date. If this calendar day is not a Valuation Date, the next Valuation Date will
be used. If on any transfer date the Accumulation Value in the Global Strategic
Income Division is equal to or less than the amount you have elected to have
transferred, 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 Certificate 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 transfer under this option will not be
included for the 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 make changes to
your Dollar Cost Averaging options by telephoning our Customer Service Center.
See Telephone Privileges, page 31.
AUTOMATIC REBALANCING
Automatic Rebalancing provides a method for maintaining a balanced approach to
investing your Accumulation Value and simplifying the process of asset
allocation over time. However, it may not achieve its intended results. There is
no charge for this feature, and any transfers as a result of the operation of
this feature are not counted toward the limit of 12 transfers per Certificate
Year without an additional transfer charge. If you wish to transfer among the
Divisions during the operation of Automatic Rebalancing, you must change your
Automatic Rebalancing allocation instructions to achieve the transfer.
________________________________________________________________________________
19
The Fulcrum Fund(R)
<PAGE>
When you apply for the Certificate, or at any subsequent time during the
Accumulation Period, you may elect Automatic Rebalancing by electing this
feature on the Certificate application, completing the client service
application, notifying us in writing or by telephoning us, if the proper
telephone authorization 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 under perform the other Divisions in certain
quarterly periods.
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 Certificate 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
Certificate Date, the first transfer will be processed as of the first Valuation
Date of the next calendar quarter after we receive 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 an Automatic Rebalancing allocation request which is in
conflict with these provisions.
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 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.
If you have elected telephone privileges in an application or sent written
notice to our Customer Service Center requesting this privilege, you may make
changes to your Automatic Rebalancing option by telephoning our Customer Service
Center. See Telephone Privileges, page 31.
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 Certificate 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 will include any
information that may be required by the SEC or the insurance supervisory
official of the jurisdiction in which the Certificate is delivered.
We will also send you copies of any shareholder reports of the Portfolios in
which the Divisions of the Variable Account 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
CERTIFICATE CHARGES AND FEES, page 31. We may also increase the amount of
partial withdrawals which may be withdrawn without surrender charge. Group
arrangements include those in which a trustee, an employer or an association,
for example, purchases Certificates
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20
The Fulcrum Fund(R)
<PAGE>
covering a group of individuals on a group basis or special exchange programs
first ing life may offer, including to officers, directors and employees (or
their families) of First ING Life and its affiliates. sponsored arrangements
include those in which an employer or association allows us to offer
Certificates 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, and any such reductions will apply uniformly to all
Certificates issued under that contract. 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 CERTIFICATE
ING America Equities is the principal underwriter and distributor of the
Certificate as well as of other contracts and certificates issued through the
Variable Account and other variable accounts of First ING Life and its
affiliates. ING America Equities is an affiliate 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 Certificate will be continuous.
ING America Equities will enter into sales agreements with broker-dealers to
solicit for the sale of the Certificate 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
6.0%). Compensation arrangements may vary among broker-dealers. In addition, we
may also pay override payments, wholesaler fees and training allowances. 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.
TERMINATION OF NEW SALES
It is currently anticipated that on or about July 24, 1997, the Contract will no
longer be offered to new investors. Notwithstanding the termination of new
sales, existing Owners will continue to be entitled to exercise all rights under
the Certificates, including the purchase of new Trust shares through Purchase
Payments, Dollar Cost Averaging, Automatic Rebalancing, and other transfers
between Divisions.
VALUES UNDER THE CERTIFICATE
GUARANTEED DEATH BENEFIT
The Death Benefit payable under the Certificate 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 greater 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 made since the last step-up anniversary. The greater of these
becomes the new Step-Up Benefit.
The step-up anniversaries are every 6th Anniversary for the duration of
the Certificate (i.e., the 6th, 12th, 18th, etc.).
_______________________________________________________________________________
21
The Fulcrum Fund(R)
<PAGE>
The Death Benefit payable to the Beneficiary is the Guaranteed Death Benefit as
calculated above minus taxes incurred but not deducted.
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 40. 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 33.
If a one-sum payout is elected, the Proceeds will usually 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 needed 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 38.
YOUR ACCUMULATION VALUE
The Accumulation Value of your Certificate is the sum of the Division
Accumulation Values of all the Divisions of the Variable Account in which your
Certificate 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 33.
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 Divisions of the Variable Account 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.
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The Fulcrum Fund(R)
<PAGE>
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:
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 Certificate 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 an 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
Certificate Date is equal to the amount of the initial Purchase Payment
allocated to that Division.
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The Fulcrum Fund(R)
<PAGE>
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 an Anniversary occurs during the
current Valuation Period.
YOUR RIGHT TO TRANSFER AMONG DIVISIONS
Prior to the Annuity Date, while the Certificate 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 Certificate 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 Certificate Year:
<TABLE>
<CAPTION>
Accumulation Period Annuity Period
------------------- --------------
<S> <C> <C>
Free Transfers 12 4
Total Number of Transfers Permitted Unlimited 4
Excess Transfer Charge $25 for each transfer in excess of 12 Not Applicable
</TABLE>
We reserve the right to limit the number of transfers per Certificate 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 Certificate Year, you may transfer amounts
from the Guaranteed Interest Division. Transfer requests received within 30 days
prior to the Anniversary will be deemed to occur as of the Anniversary. Transfer
requests received on the 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.
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The Fulcrum Fund(R)
<PAGE>
The maximum transfer amount from the Guaranteed Interest Division to the
Divisions of the Variable Account in any Certificate 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 total of all transfers and partial withdrawals (including Systematic
Income Program partial withdrawals) from the Guaranteed Interest Division
in the prior Certificate Year.
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 have elected telephone privileges by sending written notice to our
Customer Service Center requesting this privilege, you may make transfers by
telephoning our Customer Service Center. See Telephone Privileges, page 34.
PARTIAL WITHDRAWALS
Prior to the Annuity Date, while the Certificate 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 Certificate. Partial withdrawals may be subject to a 10% tax penalty.
See Tax Consequences of Partial Withdrawals, page 27.
Partial withdrawals from the Divisions of the Variable Account will be made by
redeeming Accumulation Units in the affected Divisions at their values 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 your
Certificate. The decrease is equal to the amount of the Gross Partial
Withdrawal. A surrender charge could be incurred for withdrawals in excess of
certain amounts. See Surrender Charge, page 32, and The Amount You May Withdraw
Without a Surrender Charge, page 27.
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 have elected telephone privileges by sending 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 31.
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.
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 27.
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.
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The Fulcrum Fund(R)
<PAGE>
A surrender charge could be incurred for demand withdrawals in excess of certain
amounts. See Charges Deducted from the Accumulation Value, page 33, The Amount
You May Withdraw Without a Surrender Charge, page 27, and Appendix A, page
44.
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 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 Certificate 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 Certificate 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, the Systematic
Income Program will be canceled. See Appendix A, page 44.
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 than $100, the withdrawal will be made, the Systematic
Income Program will be canceled.
During any Certificate 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 Certificate Year will be considered demand
withdrawals for purposes of calculating any applicable surrender charges. If a
demand withdrawal is not made in the same Certificate Year, Systematic Income
Program partial withdrawals will not be assessed a surrender charge. IRA Income
Program partial 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 Certificate Year. You may cancel your election at
any time by notifying 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 CERTIFICATES ONLY
If you have an IRA Certificate, 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 40.
________________________________________________________________________________
26
The Fulcrum Fund(R)
<PAGE>
You may either provide us with the minimum required distribution or we will
determine the amount that is required to be distributed from your Certificate
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 Certificate
and send you the amount of your Cash Surrender Value.
In no event will you be allowed to withdraw more than the Cash Surrender Value.
THE AMOUNT YOU MAY WITHDRAW WITHOUT A SURRENDER CHARGE
Each Certificate Year after the first you may withdraw 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 Anniversary (less any
Gross Partial Withdrawals already made during the Certificate 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 Certificate years.
Demand withdrawals and any Systematic Income Program partial withdrawals which
occur in the same Certificate Year as a demand withdrawal are deemed to be made
in the following order:
1) Any Earnings in the Certificate;
2) Purchase Payments held for at least five full Certificate Years since
the Anniversary at the end of the Certificate Year in which the
Purchase Payment was made;
3) The amount by which 15% of the Accumulation Value as of the last
Anniversary (less any Gross Partial Withdrawals already made during
the Certificate Year which are not considered to be withdrawals of
Purchase Payments) exceeds the Earnings in the Certificate, 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 Certificate Years since the Anniversary at the end of the
Certificate Year in which the Purchase Payment was made. If a Purchase Payment
is made as of the first day of a Certificate Year, a surrender charge will apply
against this Purchase Payment for six full years. See Surrender Charge, page 32.
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 Arrangement, page 20.
For an example illustrating how we 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 44.
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 an imposition of a tax penalty of 10% of the taxable
portion withdrawn. Please refer to FEDERAL TAX CONSIDERATIONS, page 38, for more
details.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
You may surrender the Certificate for its Cash Surrender Value at any time prior
to the Annuity Date.
Your Certificate's Cash Surrender Value fluctuates daily with the investment
experience of the Divisions of the Variable Account in which you are invested
and any interest credited to amounts you have invested in the Guaranteed
Interest Division. 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
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27
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<PAGE>
guaranteed for amounts allocated to the Guaranteed Interest Division. As of any
Valuation Date while the Certificate is in effect, the Cash Surrender Value is
calculated as follows:
1) We take the Certificate's Accumulation Value as of that date less any
taxes incurred but not deducted (see Taxes on Purchase Payments, page 33);
2) We deduct any surrender charge (see Surrender Charge, page 32);
3) We deduct the $30 annual administrative charge, if any, due at the end of
the Certificate Year (see Administrative Charge, page 32).
For an example illustrating how we determine the Cash Surrender Value, see
Appendix A, page 44.
When a Certificate 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 Certificate. All
benefits under the Certificate 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, page 28.
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 single-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 Certificate. See
CHOOSING AN ANNUITY OPTION, page 33.
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 other than death benefits from the Guaranteed Interest Division.
THE GUARANTEED INTEREST DIVISION
You may allocate all or a portion of your Purchase Payments and transfer your
Accumulation Value to or from the Guaranteed Interest Division, subject to
certain restrictions. The Guaranteed Interest Division is part of our General
Account and pays interests at a declared rate. See Your Right to Transfer Among
Divisions, page 27. 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 interests therein are generally subject to
regulation under these Acts. As a result, the staff of the SEC has not
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<PAGE>
reviewed the disclosures which are included in this prospectus which related 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 Certificate.
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 Certificate application. You have the rights and options described in
the Certificate. 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 81 as of the Certificate Date.
Subject to the applicable provisions of Distribution-at-Death Rules, page 40, if
the owner (or a Deemed Owner as defined in Distribution-at-Death Rules) 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 our receipt of due proof of death and prior to
the distribution of Proceeds; 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 21.
THE ANNUITANT
The Annuitant will receive the annuity benefits of the Certificate as of the
Annuity Date if the Annuitant is living and the Certificate 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 remaining
designated-period payouts will be paid to the estate of the last to die of the
Annuitant and Contingent Annuitants.
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<PAGE>
Amounts may be released in one sum if the Owner's election allows. See CHOOSING
AN ANNUITY OPTION, page 33.
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
Certificate 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 Certificate is in effect after the Free
Look period, you may transfer Ownership of the Certificate (unless the
Certificate is an IRA Certificate) subject to our published rules at the time of
the change. A new Owner must be less than Age 81.
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 Certificate is an IRA Certificate 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 38.
OTHER CERTIFICATE PROVISIONS
IN CASE OF ERRORS ON THE CERTIFICATE APPLICATION OR ENROLLMENT FORM
If an Age or sex given in the Certificate application is misstated, the amounts
payable or benefits provided by the Certificate will be those that the Purchase
Payment would have bought at the correct Age or sex, with interest at 6% per
year on any overpayments or underpayments previously made.
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 Certificate for any Certificate
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 Certificate. If your Certificate has
been lost, we will require that you complete and return a Certificate
Replacement Form. The effective date of any change in provisions of the
Certificate 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 at the address shown on the cover.
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
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30
The Fulcrum Fund(R)
<PAGE>
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, change 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 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, and we will provide you notice if we do
so.
ASSIGNING THE CERTIFICATE AS COLLATERAL
You may assign this Certificate 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
Certificates may not be assigned. See Assignments, page 41.
NON-PARTICIPATING
The Certificate does not participate in First ING Life's surplus earnings.
AUTHORITY TO CHANGE CONTRACT AND CERTIFICATE 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 or Certificate's terms or make
any agreements binding on us.
CERTIFICATE CHANGES - APPLICABLE TAX LAW
The Certificate is intended to qualify as an annuity contract under the Code.
To that end, all terms and provisions of the Certificate shall be interpreted to
ensure or maintain such qualification. Payouts and distributions under the
Certificate 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 the Certificate is issued.
We reserve the right to amend the Certificate, 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 Certificate as an
annuity. Any such changes will apply uniformly to all Contracts and
Certificates that are affected. We will send you written notice of such
changes.
CERTIFICATE 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 certain group or sponsored
arrangements. See Group or Sponsored Arrangements, page 20. A description of
the charges we deduct follows.
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<PAGE>
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
SURRENDER CHARGE
The withdrawal of Purchase Payments held less than five full Certificate Years
since the Anniversary at the end of the Certificate Year in which the Purchase
Payment was made, either by surrender or partial withdrawal, is subject to a
surrender charge. If a Purchase Payment is made as of the first day of a
Certificate 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>
Anniversaries Since Purchase Surrender Charge as a Percentage of
Payment Was Made Purchase Payment Withdrawn
---------------- --------------------------
<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 27.
Any applicable surrender charges will reduce the Division Accumulation Value of
each Division in the same proportion that the Division Accumulation Value in
that 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 Certificates. 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.
ADMINISTRATIVE CHARGE
The administrative charge is deducted each year during the Accumulation Period
as of the Certificate Processing Date. We deduct this charge when determining
the Cash Surrender Value payable if you surrender the Certificate prior to the
end of a Certificate Year. The amount deducted is $30 per Certificate 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.
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.
EXCESS TRANSFER CHARGE
We allow you 12 free transfers among Divisions per Certificate Year during the
Accumulation Period. For each additional transfer, we will charge you $25 at
the time each 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 Certificates 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 18, will not be included in determining if the excess
transfer charge should apply.
After the Annuity Date, only four transfers each Certificate Year are allowed,
and no transfer charge will be deducted.
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<PAGE>
TAXES ON PURCHASE PAYMENTS
We make a charge for state and local taxes on Purchase Payments in certain
states, which currently ranges 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 Certificate, 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.
CHARGES DEDUCTED FROM THE DIVISIONS OF THE VARIABLE ACCOUNT
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 Certificate. 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 Certificate.
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 Certificate than we expected in setting the charge levels
guaranteed in the Certificate.
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 Certificate. 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 Certificates, on
average, excluding costs that are properly categorized as distribution expenses,
over the period that the Certificates are in force.
PORTFOLIO EXPENSES
There are fees and charges deducted from the Portfolios, as described in the
FEE TABLE on page 8. Please read the Trust prospectus for complete details.
CHOOSING AN ANNUITY OPTION
GENERAL PROVISIONS
SUPPLEMENTARY CONTRACT
When an Annuity Option becomes effective, your Certificate 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.
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<PAGE>
ELECTION AND CHANGES OF ANNUITY DATE
The Annuity Date is the date as of which Annuity Payouts begin. It may be
elected on your Certificate application. Your elected Annuity Date must follow
the second Anniversary but may not be later than the Annuitant's 85/th/
birthday. If no Annuity Date is elected in the Certificate application, the
Annuity Date will be the first day of the month following the Annuitant's 85/th/
birthday. For an IRA Certificate, distribution must commence no later than
April 1/st/ of the calendar year following the calendar year in which you attain
Age 70 1/2 unless these 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 Certificate.
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 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.
Commutation rights are provided to an Annuitant or Contingent Annuitant as
provided in Commuting Provisions, page 36. The available options are described
in the Annuity Option provisions of the Certificate.
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 that Division bears to the 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 II for a Variable Annuity Payout, using a Benchmark
Total Return of 3%, with a designated period of 20 years.
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.
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 Owner may transfer, up to four times each Certificate 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.
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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 Payout 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 36.
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 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
are not guaranteed and could decrease, 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 35. 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 Certificate.
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<PAGE>
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 35. 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, 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 Certificate. This option is only available for Ages 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 35.
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 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 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 Certificate.
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 Certificate 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%. 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 Palladian Trust, page 17. 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 Trust's current prospectus or requiring a vote by shareholders
under the 1940 Act.
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36
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<PAGE>
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 Certificate. 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 Certificates 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 Certificate 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. 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, possibly 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 semi-annual 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 18) 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
not attributable to Certificates 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 Certificate 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.
________________________________________________________________________________
37
The Fulcrum Fund(R)
<PAGE>
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 Certificate 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 contracts, is not
engaged in any litigation of any material nature.
LEGAL MATTERS
The legality of the Certificate described in this prospectus has been passed on
by the General Counsel and Secretary of First ING Life.
EXPERTS
The financial statements of First ING Life at December 31, 1996 and 1995, and
for each of the three years in the period ended December 31, 1996, and the
financial statements of First ING Separate Account A1 at December 31, 1996 and
for the year then ended, appearing in this prospectus and registration statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein and in the registration
statement, and are included in reliance upon such reports 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 a
Certificate, on the investment return on assets held under a Certificate, on
Annuity Payouts, and on the economic benefits to the Owner, Annuitant, or
Beneficiary depends upon the terms of the Certificate, 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
prospectus for the Trust.
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 Certificate'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.
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<PAGE>
TAXATION OF ANNUITIES
Section 72 of the Code governs taxation of annuities. In general, the Owner of
an annuity Certificate will not be taxed on increases in value under the
Certificate 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
Certificate is treated as a payout received on account of a partial withdrawal
from the Certificate.) Under certain circumstances, however, the amount of any
increase in the value of a Certificate may be subject to current Federal income
tax. See Certificates Owned by Non-Natural Persons, page 41, and
Diversification Standards, page 42.
1. WITHDRAWALS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
Section 72 of the Code provides, in effect, that the Proceeds from a surrender
of the Certificate or a partial withdrawal from the Certificate prior to the
Annuity Date will be treated as taxable income to the extent that the amount
held under the Certificate immediately prior to the distribution exceeds the
"investment in the Certificate". The "investment in the Certificate" is defined
in the Code as that portion, if any, of Purchase Payments by or on behalf of a
taxpayer under the Certificate which was not excluded from the taxpayer's gross
income at the time of such payments less any amounts previously received under
the Certificate which were excluded from the taxpayer's gross income at the time
of their receipt. For these purposes, the "investment in the Certificate" is not
affected by the Owner's or Annuitant's death. That is, the investment in the
Certificate 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 Certificate is treated as
a payout received on account of a partial withdrawal of a Certificate.
2. ANNUITY PAYOUTS AFTER THE ANNUITY DATE.
Upon receipt of the Proceeds of a surrender of the Certificate after the Annuity
Date, the recipient is taxed to the extent the Proceeds exceed the investment in
the Certificate. Upon receipt of an Annuity Payout under the Certificate, the
recipient will be taxed on a portion of each payout received if the value of the
Certificate exceeds the investment in the Certificate. 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 Certificate bears to the total expected amount of Annuity
Payouts for the term of the Certificate. 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 Certificate by the
total number of expected periodic payouts. The remaining portion of each payout
is taxed at ordinary income rates. For Certificates with Annuity Dates after
December 31, 1986, once the excludable portion of Annuity Payouts to date equals
the investment in the Certificate, 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 affecting the timing and amount of the payout under the
Certificate;
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) allocable to investment in the Certificate prior to August 14, 1982;
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39
The Fulcrum Fund(R)
<PAGE>
5) under a qualified funding asset (as defined in Code Section 130(d));
6) under an immediate annuity contract; or
7) on certificates 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
1/st/ 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 ten 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 the Certificate 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 the Certificate 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 Annuitant under the Certificate 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 Certificate.
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<PAGE>
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 but prior to the distribution of Proceeds to receive such
portion 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 Certificate complies with these rules. See the Required Distribution
section of your Certificate.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non-qualified Certificate 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 Certificate, as described above, or (b)
if distributed under an Annuity Option, they are taxed in the same manner as
Annuity Payouts, as described above.
CERTIFICATES OWNED BY NON-NATURAL PERSONS
For contributions to Certificates where the Certificate is held by a non-natural
person (for example, a corporation), the income on that Certificate (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 Certificate and the Beneficiary is a
natural person. The rule also does not apply where the Certificate is acquired
by the estate of a decedent, where the Certificate is an IRA Certificate, where
the Certificate is a qualified funding asset for structured settlements, or
where the Certificate is purchased on behalf of an employee upon termination of
a qualified plan.
If the certificate is held by a trust, contact your tax adviser for the tax
effects.
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. (For this purpose, your
Certificate is considered an annuity contract.) 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 Certificate
should contact a competent tax adviser with respect to the potential tax effects
of such a transaction. IRA Contracts may not be transferred or assigned.
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<PAGE>
MULTIPLE CERTIFICATES RULE
The Technical and Miscellaneous Revenue Act of 1988 (the "1988 Act") provides
that, for Certificates 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 Certificates issued by the same (or an affiliated) insurer to
the same Owner during any calendar year are to be aggregated and treated as one
Certificate. Thus, any amount received under any such Certificate prior to the
Certificate'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 Certificates. The Treasury Department
has specific authority to issue regulations that prevent the avoidance of
Section 72(e) income through the serial purchase of annuity Certificates 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
Certificates purchased by the same Owner. Accordingly, an Owner should consult a
competent tax adviser before purchasing more than one annuity Certificate.
DIVERSIFICATION STANDARDS
To comply with the diversification regulations ("Regulations") issued under Code
Section 817(h), the Divisions of the Variable Account will be required to
diversify their investments. The Regulations generally require that on the last
day of each quarter of a calendar year (i) no more than 55% of the value of each
Division is represented by any one investment, (ii) no more than 70% is
represented by any two investments, (iii) no more than 80% is represented by any
three investments, and (iv) 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 Certificate may need to be
modified in order to remain in compliance. For these reasons, First ING Life
reserves the right to modify the Certificate, as necessary, to prevent the Owner
from being considered the Owner of the assets of the Variable Account.
The Trust has committed to comply with the Regulations to ensure that the
Certificate continues to be treated as an annuity Certificate for Federal income
tax purposes.
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<PAGE>
TABLE OF CONTENTS OF STATEMENT
OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
FIRST ING LIFE.................................................................. 2
THE ADMINISTRATOR............................................................... 2
PERFORMANCE INFORMATION......................................................... 2
SEC Standard Average Annual Total Return for Non-Money Market Divisions......... 2
Accumulation Unit Value......................................................... 3
Illustration of Calculation of Accumulation Unit Value.......................... 3
Illustration of Purchase of Units (Assuming No State Tax on Purchase Payments).. 3
Determination of Annuity Payouts................................................ 3
IRA INCOME PROGRAM OPTION....................................................... 6
OTHER INFORMATION............................................................... 6
FINANCIAL STATEMENTS............................................................ 7
</TABLE>
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<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 26.
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 for a
hypothetical series of three demand withdrawals made in the third Certificate
Year.
For example, assume that:
1) An Owner has made an initial Purchase Payment of $30,000 to a
Certificate;
2) The Owner has not subsequently made any additional Purchase Payments
to the Certificate;
3) The Owner has not taken any partial withdrawals during the first two
Certificate Years; and
4. The Accumulation Value of the Certificate as of the second Certificate
Anniversary is $34,000.
The surrender charges associated with each of the following three hypothetical
demand withdrawals would therefore be as follows. For more information, see
Demand Withdrawal Option, page 25, and The Amount You May Withdraw Without a
Surrender Charge, page 27.
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The Fulcrum Fund(R) 44
<PAGE>
<TABLE>
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 Certificate Anniversary (Less
Any Gross Partial Withdrawals
Already Made During The Certificate
Year That Are Not Considered To Be
Withdrawals Of Purchase Payments
3) Amount Of Accumulation Value $ 4,200/5/ $ 3,000/6/ $ 400/7/
Attributable To Earnings
4) Gross Demand Withdrawal Requested/8/ $ 2,000 $ 4,000 $ 3,000
5) Amount Withdrawn Attributable To $ 2,000 $ 3,000 $ 400
Any Earnings In The Certificate
6) Amount Withdrawn Attributable To $ 0 $ 0 $ 0
Purchase Payments Held For At Least
Five Full Certificate Years Since The
Certificate Anniversary At The End Of
The Certificate 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 $ 2,600
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 Third Certificate Year.]
10) Amount Of Net Demand Withdrawal $ 2,000 $ 3,930 $ 2,845
[4) minus 9)]
</TABLE>
____________________
/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 Certificate 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 Certificate 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.
________________________________________________________________________________
The Fulcrum Fund(R) 45
<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
Certificate; and
2) The Owner has not made any additional Purchase Payments to the
Certificate;
the Owner's Cash Surrender Value would be as follows, based on hypothetical
Accumulation Values, if the Certificate was surrendered at the end of the
applicable time periods.
<TABLE>
<CAPTION>
If You
Surrender Your Hypothetical Purchase Surrender Cash
Certificate in Accumulation Earnings Payment Charge Surrender Administrative Surrender
Certificate Year Value Withdrawn 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 5% $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 32, and Administrative Charge,
page 32.
________________________________________________________________________________
The Fulcrum Fund(R) 46
<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.
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 Certificate. 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 Adviser, 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 will reflect
only the performance of a hypothetical Certificate 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 will be
based on historical results and is not intended to indicate past or future
performance under an actual Certificate.
Quotations of the average annual total returns will be 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 Division). They will reflect the deduction of the surrender charge that
would apply if an Owner terminated the Certificate at the end of the period
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 quotation may
also be accompanied by total return quotation, computed on the same basis as
described above, except deductions will not include the surrender charge.
Average annual total return will be calculated as shown in the Statement of
Additional Information.
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
________________________________________________________________________________
The Fulcrum Fund(R) 47
<PAGE>
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, 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.
PERFORMANCE CHART
The information below shows how the actual charges of a hypothetical contract
held for specified time periods ending December 31, 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 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 Years 10 Years
or or
Division 1 Year 5 Years Inception 1 Year 5 Years Inception
- -------- ------ ------- ----------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Value N/A N/A 13.58% N/A N/A 6.58%
Growth N/A N/A 6.93% N/A N/A -0.07%
International Growth N/A N/A 3.90% N/A N/A -3.10%
Global Strategic Income N/A N/A -0.92% N/A N/A -7.92%
Global Interactive/Telecomm N/A N/A -0.89% N/A N/A -7.89%
</TABLE>
________________________________________________________________________________
48
The Fulcrum Fund(R)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE FULCRUM FUND 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 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 FULCRUM FUND(R) 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
1-800-249-9099.
TABLE OF CONTENTS
<TABLE>
<S> <C>
FIRST ING LIFE.......................................................................... 2
THE ADMINISTRATOR....................................................................... 2
PERFORMANCE INFORMATION................................................................. 2
SEC Standard Average Annual Total Return for Non-Money Market Divisions................. 2
Accumulation Unit Value................................................................. 3
Illustration of Calculation of Accumulation Unit Value.................................. 3
Illustration of Purchase of Units (Assuming No State Tax on Purchase Payments).......... 3
Determination of Annuity Payouts........................................................ 3
IRA INCOME PROGRAM OPTION............................................................... 6
OTHER INFORMATION....................................................................... 6
FINANCIAL STATEMENTS.................................................................... 7
</TABLE>
Date of Prospectus: May 1, 1997
Date of Statement of Additional Information: May 1, 1997
<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 aggregate amount of
underwriting commisisons paid to the principal underwriter during the fiscal
year ended December 31, 1996, was $50,855.
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 Certificates, such as Certificate 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 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 Certificate 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
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 Certificate at
________________________________________________________________________________
2
<PAGE>
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
Certificate 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):
ILLUSTRATION OF CALCULATION OF ACCUMULATION UNIT VALUE
<TABLE>
<S> <C> <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%
</TABLE>
ILLUSTRATION OF PURCHASE OF UNITS (ASSUMING NO STATE TAX ON PURCHASE PAYMENTS)
<TABLE>
<S> <C> <C>
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>
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.
________________________________________________________________________________
3
<PAGE>
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
Certificate Schedule for each day in the current Valuation Period.
HYPOTHETICAL EXAMPLES
The following illustrations show, by use of 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 the current Valuation Period $ 0.55
5) Charge for taxes per share in 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 charge 0.00003425
8) Less daily asset based administration charge 0.00000411
9) Annuity Experience Factor for the current Valuation 1.03996164
Period = [6) minus 7) minus 8)]
10) Daily factor to compensate for Benchmark Total Return of 3% 1.00008099
11) Adjusted Annuity Experience Factor the current Valuation 1.03987743
Period = [9 divided by 10)]
12) Annuity Unit Value at the end of the current Valuation period
= [1) times 11)] 10.39877428
</TABLE>
________________________________________________________________________________
5
<PAGE>
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 Certificate value = [1) times 2)] $ 12,555.48
4) First monthly annuity payment per $1,000 of adjusted
Certificate Value $ 9.63
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 OPTION
If the Owner has an IRA Certificate, we will provide payout of amounts required
to be distributed by the Internal Revenue Service unless the minimum
distributions are otherwise satisfied.
You may either provide us with the minimum required distribution or we will
determine the amount that is required to be distributed from your Certificate
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 Certificate during the calendar year, no
further distributions will be made for that year. If there have not been
sufficient distributions made from the Certificate 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 Certificate and send you the amount of the
Cash Surrender Value.
First ING Life provides the Owner with the IRA Disclosure Statement which you
will receive with your contract. 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 unless otherwise elected. 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 Certificates 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 Certificates 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.
________________________________________________________________________________
6
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP, independent auditors, 370 17th Street, Suite 4300, Denver, CO
80202, performs annual audits of the financial statements of First ING Life and
the financial statements of the First ING 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 Certificate.
________________________________________________________________________________
7
<PAGE>
Financial Statements
First ING Life Insurance
Company of New York
Years ended December 31, 1996, 1995 and 1994
with Report of Independent Auditors
________________________________________________________________________________
8
<PAGE>
First ING Life Insurance Company of New York
Financial Statements
Years ended December 31, 1996, 1995 and 1994
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. 10
Audited Financial Statements
Balance Sheets............................................................. 11
Statements of Operations................................................... 13
Statements of Stockholder's Equity......................................... 14
Statements of Cash Flows................................................... 15
Notes to Financial Statements.............................................. 16
</TABLE>
________________________________________________________________________________
9
<PAGE>
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, 1996 and 1995, and the related statements
of operations, stockholder's equity, and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
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, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Denver, Colorado
April 11, 1997
________________________________________________________________________________
10
<PAGE>
First ING Life Insurance Company of New York
Balance Sheets
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
----------------------
<S> <C> <C>
ASSETS
Investments (Note 2):
Fixed maturity investments, at fair value (amortized
cost: 1996--$17,161; 1995--$18,698) $17,162 $19,002
Short-term investments 3,997 -
Total investments 21,159 19,002
-----------------------
Cash (2,129) 123
Accrued investment income 156 324
Reinsurance recoverable (Note 3):
Paid benefits 2,817 2,569
Unpaid benefits 1,804 1,584
Prepaid reinsurance premiums (Notes 3 and 4) 8,326 8,838
Deferred policy acquisition costs 51 -
Federal income taxes recoverable (Note 5) 12 9
Other assets 5 -
Separate account assets (Note 10) 673 -
-----------------------
Total assets $32,874 $32,449
=======================
</TABLE>
See accompanying notes.
________________________________________________________________________________
11
<PAGE>
First ING Life Insurance Company of New York
Balance Sheets
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-----------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits (Note 3):
Life and annuity reserves $ 8,427 $ 8,921
Unpaid claims 1,804 1,583
-----------------------
Total future policy benefits 10,231 10,504
Accounts payable and accrued expenses (118) 8
Indebtedness to related parties 500 156
Amounts due to reinsurers (Note 3) (1) 10
Deferred federal income taxes (Note 5) 359 421
Separate account liabilities (Note 10) 673
-----------------------
Total liabilities 11,644 11,099
Commitments and contingent liabilities
(Notes 3 and 7)
Stockholder's equity (Note 6):
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 23,330
Net unrealized gains on investments 1 198
Retained earnings (deficit) (3,201) (3,278)
-----------------------
Total stockholder's equity 21,230 21,350
-----------------------
Total liabilities and stockholder's equity $32,874 $32,449
=======================
</TABLE>
See accompanying notes.
________________________________________________________________________________
12
<PAGE>
First ING Life Insurance Company of New York
Statements of Operations
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Revenues:
Reinsurance premiums assumed $ 7,402 $ 7,426 $ 7,696
Investment product charges 5 - -
-------------------------------
7,407 7,426 7,696
Reinsurance ceded premiums (7,402) (7,426) (7,616)
-------------------------------
5 - 80
Net investment income 1,070 789 567
Net realized gains (losses) on investments (91) 83 (412)
-------------------------------
Total revenues 984 872 235
Benefits and expenses:
Benefits:
Death benefits 11,765 6,765 7,917
Other benefits 316 206 163
Increase in policy reserves and other funds 2 3 80
Reinsurance recoveries (12,081) (6,970) (8,080)
-------------------------------
2 4 80
Expenses:
Commissions (330) (344) (402)
Insurance operating expenses 1,188 714 753
Amortization of deferred policy
acquisition costs 6 - -
Miscellaneous expenses (2) (2) 2
-------------------------------
Total benefits and expenses 864 372 433
-------------------------------
Income (loss) before federal income taxes 120 500 (198)
Federal income tax benefit (expense)
(Note 5) (43) 254 46
-------------------------------
Net income (loss) $ 77 $ 754 $ (152)
===============================
</TABLE>
See accompanying notes.
________________________________________________________________________________
13
<PAGE>
First ING Life Insurance Company of New York
Statements of Stockholder's Equity
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
--------------------------------
<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 $23,330 $14,330 $14,330
Capital contribution - 9,000 -
Balance at end of year $23,330 $23,330 $14,330
================================
Net unrealized gain (loss) on
investments:
Balance at beginning of year $ 198 $ (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 (197) 689 (509)
--------------------------------
Balance at end of year $ 1 $ 198 $ (491)
================================
Retained earnings (deficit):
Balance at beginning of year $(3,278) $(4,032) $(3,880)
Net income (loss) 77 754 (152)
================================
Balance at end of year $(3,201) $(3,278) $(4,032)
================================
Total stockholder's equity $21,230 $21,350 $10,907
================================
</TABLE>
See accompanying notes.
________________________________________________________________________________
14
<PAGE>
First ING Life Insurance Company of New York
Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years ended December 31
1996 1995 1997
------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 77 $ 754 $ (152)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Increase (decrease) in future policy benefits (895) (513) 423
Net increase (decrease) in federal income taxes 40 524 (107)
Increase (decrease) in accounts payable, accrued
expenses, and amounts due to reinsurers (137) (858) 392
Decrease (increase) in accrued investment income 168 (229) 103
Increase in reinsurance recoverable (468) (2,160) (316)
Decrease in prepaid reinsurance premiums 512 188 47
Net realized (gain) loss on sale of investments 91 (83) 412
Policy acquisition costs deferred (57) - -
Amortization of deferred policy acquisition costs 6 - -
Other, net 23 57 97
Net cash provided (used) by operating activities ------------------------------------------------
(640) (2,320) 899
Investing activities
Sales of fixed maturity investments, available-
for-sale 15,904 1,075 9,698
Maturities of fixed maturity investments,
available-for-sale 15 750 -
Purchase of fixed maturity investments,
available-for-sale (14,501) (11,002) (8,277)
Short-term investments, net (3,997) - -
------------------------------------------------
Net cash provided (used) by investing activities (2,579) (9,177) 1,421
Financing activities
Increase (decrease) in indebtedness to related parties 344 (142) 256
Capital contribution - 9,000 -
Receipts from interest sensitive products credited to
policyholder account balances 648 - -
Return of policyholder account balances on interest
sensitive policies (25) - -
------------------------------------------------
Net cash provided by financing activities 967 8,858 256
------------------------------------------------
Net increase (decrease) in cash (2,252) (2,639) 2,576
Cash at beginning of year 123 2,762 186
------------------------------------------------
Cash at end of year $ (2,129) $ 123 $ 2,762
================================================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
15
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements
December 31, 1996
1. Significant Accounting Policies
Nature of Operations
First ING Life Insurance Company of New York (the Company) 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. It changed its name to First
ING Life Insurance Company of New York in 1994. The Company is a wholly-owned
subsidiary of Security Life of Denver Insurance Company (Security Life).
Security Life is a wholly-owned subsidiary of ING America Insurance Holdings,
Inc., an indirectly owned subsidiary of ING Groep, N.V. of the Netherlands. The
Company is licensed to do business in twenty states and in the District of
Columbia. Currently, the Company operates in two product markets:
. The Company assumes closed blocks of business from various insurance
companies, which it then retrocedes to other reinsurers. The Company
receives compensation in the form of an inforce-based fee for administering
these reinsurance contracts. The contracts are primarily comprised of
traditional life policies, with some accident and health business.
. During 1996, the Company entered the direct variable annuity insurance
market in the state of New York. Most of the variable business is
transferred to a Separate Account.
The significant accounting policies followed by the Company that materially
affect the financial statements are summarized below:
Basis of Presentation
The accompanying 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
________________________________________________________________________________
16
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
1. Significant Accounting Policies (Continued)
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. 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.
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 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 debt securities classified as held-to-maturity or
trading.
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.
________________________________________________________________________________
17
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
1. Significant Accounting Policies (Continued)
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.
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.
Revenues for investment products consist of policy charges for the cost of
insurance, policy administration charges, and surrender charges assessed against
policyholder account balances during the year.
Future Policy Benefits
The liabilities for traditional 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, 1996 and 1995.
The liabilities calculated using this method are not materially different than
liabilities calculated using generally accepted accounting principles.
Benefit reserves for Separate Account annuity contracts (including interest
sensitive products) and investment products are computed under a retrospective
deposit method and represent contract account balances before applicable
surrender charges. Contract benefits and claims that are charged to expense
include benefits and claims incurred during the year in excess of related
contract account balances. Interest crediting rates for amounts invested in the
general account were 4.6% during 1996.
________________________________________________________________________________
18
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 of 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. No interest was paid in 1996,
1995, and 1994.
In accordance with the Company's cash management policy of maximizing the amount
of funds invested in income-earning assets, the Company routinely anticipates
the timing and amount of future cash flows. This policy frequently results in
the existence of negative cash book balances.
DEFERRED POLICY ACQUISITION COSTS
Commissions and other costs of acquiring investment products that vary with and
are primarily related to the production of new business have been deferred. For
investment products, acquisition costs are being amortized generally in
proportion to the present value (using the assumed crediting rate) of expected
gross margins from surrender charges and investment, mortality, and expense
margins. This amortization is adjusted retrospectively when estimates of
current or future gross profits to be realized from a group of products are
revised.
________________________________________________________________________________
19
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
1. Significant Accounting Policies (continued)
Pending Accounting Standard
During 1996, the FASB issued Statement No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which requires
an entity to recognize the financial and servicing assets it controls and the
liabilities it has incurred and to derecognize financial assets when control has
been surrendered in accordance with the criteria provided in the Statement. The
Company will apply the new rules prospectively to transactions beginning in the
first quarter of 1997. Based on current circumstances, the Company believes the
application of the new rules will not have a material impact on the financial
statements.
Reclassifications
Certain amounts in the 1994 and 1995 financial statements have been reclassified
to conform with the 1996 presentation.
2. Investments
The amortized cost and fair value of investments in fixed maturities are as
follows at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
1996 Available-for-Sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 6,060 $ 71 $ 7 $ 6,124
Corporate securities 9,116 36 97 9,055
Other asset-backed securities 1,985 1 3 1,983
--------------------------------------------
$17,161 $108 $107 $17,162
============================================
</TABLE>
________________________________________________________________________________
20
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
<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
Other asset-backed securities 3,293 36 - 3,329
--------------------------------------------
$18,698 $311 $7 $19,002
============================================
</TABLE>
The amortized cost and fair value of investments in fixed maturities at December
31, 1996, 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.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------------------
<S> <C> <C>
Available-for-sale:
Due in one year or less $ - $ -
Due after one year through five years 8,194 8,232
Due after five years through ten years 2,995 2,956
Due after ten years 3,987 3,991
---------------------------
15,176 15,179
Other asset-backed securities 1,985 1,983
---------------------------
Total available-for-sale $17,161 $17,162
===========================
</TABLE>
________________________________________________________________________________
21
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
Changes in unrealized gains (losses) on investments in fixed maturities for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Gross unrealized gains $ 108 $ 311 $ 12
Gross unrealized losses 107 7 769
------------------------------
Net unrealized gains (losses) 1 304 (757)
Deferred income tax (expense) benefit - (106) 266
------------------------------
Net unrealized gains (losses) after taxes 1 198 (491)
Less:
Balance at beginning of year 198 (491) -
Adjustment for change in accounting method - - 18
------------------------------
Change in net unrealized gains (losses)
on fixed maturities $(197) $ 689 $(509)
==============================
</TABLE>
Major categories of investment income for the years ended December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities $1,070 $797 $578
Other investments 20 - -
------------------------------
1,090 797 578
Investment expenses (20) (8) (11)
------------------------------
Net investment income $1,070 $789 $567
==============================
</TABLE>
Debt and marketable equity securities available-for-sale with fair values at the
date of sale of $15,904,000, $1,075,000 and $9,698,000 were sold during 1996,
1995 and 1994, respectively. Gross gains of $27,000, $83,000 and $0 and gross
losses of $118,000, $0 and $412,000 were realized on those sales during 1996,
1995 and 1994, respectively.
________________________________________________________________________________
22
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
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,
1996 and 1995.
At December 31, 1996 and 1995, bonds with an amortized cost of $1,695,000 and
$1,679,000, respectively, were on deposit with various state insurance
departments to meet regulatory requirements.
3. 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, 1996, the Company's retention limit for acceptance of
risk on assumed 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.
________________________________________________________________________________
23
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
3. REINSURANCE (CONTINUED)
To the extent that the retrocessionaires become unable to meet their obligations
under these treaties, the Company remains contingently liable to its
policyholders for the portion retroceded. Consequently, allowances are
established for amounts deemed uncollectible. To minimize its exposure to
significant losses from retrocessionaire insolvencies, the Company evaluates the
financial condition of its retrocessionaires. A summary of the reinsured
premiums is as follows:
<TABLE>
<CAPTION>
PERCENTAGE
ASSUMED RETROCEDED TO OF AMOUNT
GROSS FROM OTHER OTHER NET ASSUMED TO
AMOUNT COMPANIES COMPANIES AMOUNT NET
---------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
As of December 31, 1996:
Life insurance in force $ - $670,345 $670,245 $ 100 N/A
=========================================================
Premiums:
Life insurance $ - $ 7,403 $ 7,403 $ - N/A
Accident and health insurance - (1) (1) - N/A
---------------------------------------------------------
Total premiums $ - $ 7,402 $ 7,402 $ - N/A
=========================================================
As of December 31, 1995:
Life insurance in force $ - $797,204 $797,106 $ 98 N/A
=========================================================
Premiums:
Life insurance $ - $ 7,426 $ 7,426 $ - N/A
Accident and health insurance - - - - N/A
---------------------------------------------------------
Total premiums $ - $ 7,426 $ 7,426 $ - N/A
=========================================================
As of December 31, 1994:
Life insurance in force $ - $942,819 $942,722 $ 97 N/A
=========================================================
Premiums:
Life insurance $ - $ 7,698 $ 7,618 $ 80 9,623%
Accident and health insurance - (2) (2) N/A
---------------------------------------------------------
Total premiums $ - $ 7,696 $ 7,616 $ 80 9,620%
=========================================================
</TABLE>
________________________________________________________________________________
24
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
4. CONCENTRATIONS OF CREDIT RISK
At both December 31, 1996 and 1995, the Company held no less-than-investment-
grade bonds in its portfolio.
At December 31, 1996 and 1995, $8,323,000 and $8,600,000, 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, 1996 and 1995.
5. 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>
1996 1995
-----------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Cession adjustment $(1,250) $(1,250)
Other (7) (102)
Total deferred tax liabilities (1,257) (1,352)
-----------------------------
Deferred tax assets:
Tax-basis deferred acquisition costs 357 581
Net operating loss carryforward 541 350
-----------------------------
Total deferred tax assets 898 931
-----------------------------
Net deferred tax liabilities $ (359) $ (421)
=============================
</TABLE>
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, 1996, 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
________________________________________________________________________________
25
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
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.
For financial reporting purposes, federal income tax benefit (expense) consists
of the following:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current $ - $726 $44
Deferred (43) (910) 2
Current year change in
valuation allowance - 438 -
-----------------------------
Federal income tax benefit (expense) $(43) $254 $46
=============================
</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 judgment about the realization of the deferred tax asset
occurred and the valuation allowance was removed.
In 1996 and 1994, the Company's effective income tax rate does not vary
significantly from the statutory federal income tax rate. In 1995, the
Company's effective income tax rate varies from the statutory federal income tax
rate due to changes in the valuation allowance.
________________________________________________________________________________
26
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
As of December 31, 1996, the Company had net operating loss (NOL) carryforwards
for tax purposes of $1,547,000 which are available to offset future taxable
income. These NOLs expire as follows (dollars in thousands):
<TABLE>
<S> <C>
2008 $1,001
2011 546
----------
$1,547
==========
</TABLE>
The Company had net income tax payments (receipts) of $3,000, ($778,000), and
$61,000 during 1996, 1995 and 1994, respectively, for current income tax
payments and settlements of prior year returns.
6. 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 1998, will
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.
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 its state of domicile. As of December 31, 1996 and 1995, the
Company had no significant permitted accounting practices.
________________________________________________________________________________
27
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
6. Statutory Accounting Information and Practices (Continued)
The NAIC prescribes Risk-Based Capital (RBC) requirements for life/health
insurance companies. At December 31, 1996, the Company exceeded all minimum
RBC requirements.
Stockholder's equity, determined in accordance with statutory accounting
practices (SAP), was $21,427,000 and $21,441,000 at December 31, 1996 and 1995,
respectively. Net income determined in accordance with SAP was $175,000,
$1,154,000, and $126,000 for the years ended December 31, 1996, 1995 and 1994,
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, 1996. 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 its state of domicile based on the
Department's review of the Company's financial condition.
7. 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.
8. Financing Arrangement
The Company is the beneficiary of two separate renewable letters of credit
totaling $12,237,000 that were established in accordance with the terms of
certain reinsurance agreements. These letters of credit expired on December 31,
1996 and were renewed in 1997. The letters of credit were unused during both
1996 and 1995.
9. Related Party Transactions
The Company obtains administrative, investment and other operating services from
its parent. Amounts expensed for these services were $621,000, $41,000, and
$362,000 during 1996, 1995 and 1994, respectively.
________________________________________________________________________________
28
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
9. Related Party Transactions (Continued)
In 1994 the Company entered into a reinsurance contract with its parent to
assume the reserves on a block of whole life insurance policies. Reserves were
$85,000 and $83,000 at December 31, 1996 and 1995, respectively.
10. Separate Accounts
Separate account assets and liabilities represent funds segregated by the
Company for the benefit of certain contractholders who bear the investment risk.
The separate account assets and liabilities are carried at fair value. Revenues
and expenses on the separate account assets and related liabilities equal the
benefits paid to the separate account contractholders and are excluded from the
amounts reported in the statements of operations except for fees charged for
administration services and mortality risk.
11. 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
values 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.
________________________________________________________________________________
29
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
--------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities $17,162 $17,162 $19,002 $19,002
Short-term investments 3,997 3,997 - -
LIABILITIES
Individual annuities 16 15 - -
</TABLE>
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 $12,237,000. These letters of credit have a fair
value to the Company of $0 (see Note 8).
INDIVIDUAL ANNUITIES: The fair values of the Company's deferred annuity
contracts are estimated based on the cash surrender value.
The carrying values of all other assets and liabilities approximate their fair
values.
________________________________________________________________________________
30
<PAGE>
First ING Life Insurance Company of New York
Notes to Financial Statements (continued)
12. SUBSEQUENT EVENTS
Certain divisions of the Separate Account invest in corresponding mutual fund
portfolios of The Palladian Trust. On January 24, 1997, the Company received
notification that The Palladian Trust intends to terminate the participation
agreement for the Fulcrum Fund variable annuity product effective July 24,
1997.
________________________________________________________________________________
31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholder
First ING Life Insurance Company of New York
We have audited the financial statements of First ING Life Insurance Company of
New York (a wholly-owned subsidiary of Security Life of Denver Insurance
Company) as of December 31, 1996 and 1995, and for each of the three years in
the period ended December 31, 1996, and have issued our report thereon dated
April 11, 1997 (included elsewhere in this Registration Statement). Our audits
also included the financial statement schedule listed in Item 23 of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Denver, Colorado
April 11, 1997
________________________________________________________________________________
32
<PAGE>
SCHEDULE III
FIRST ING LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTARY INSURANCE INFORMATION
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996
Individual 1996 1995 1994
Description Annuity Life Life Life
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred policy acquisition cost $ 51,000 $ - $ - $ -
Future policy benefits, losses,
claims, and loss expenses 16,000 8,411,000 8,921,000 -
Unearned premiums [1] - - - -
Other policy claims and benefits
payable - 1,804,000 1,583,000
Premium revenue 5,000 - - -
Net investment income - - - -
Benefits, claims, losses, and
settlement expenses [3] - - - -
Amortization of deferred policy
acquisition costs 6,000 - - -
Other operating expenses 891,000 297,000 714,000 753,000
Premiums written [2] - - - -
</TABLE>
[1] N/A, as all of FING's A&H premiums are immaterial and are fully retroceded.
[2] Per the S-X instructions, this is N/A for life insurance. This information
is used to measure A&H business.
[3] $25,198 in annuity benefits were collapsed under FAS 97.
________________________________________________________________________________
33
<PAGE>
Report of Independent Auditors
Contractholders
First ING Separate Account A1 of
First ING Life Insurance Company of New York
We have audited the accompanying statement of net assets of First ING Separate
Account A1 (comprising, respectively, the GAMCO Investors, Inc. Value Portfolio
("GAMCO Value"), the GAMCO Investors, Inc. Global Interactive/Telecom Portfolio
("GAMCO Global Interactive"), the Stonehill Capital Management, Inc. Growth
Portfolio ("Stonehill Growth"), the Bee & Associates Incorporated International
Growth Portfolio ("Bee & Associates International Growth"), and the Fischer
Francis Trees & Watts, Inc. Global Strategic Income Portfolio ("Fischer Francis
Global Strategic") Divisions) as of December 31, 1996, and the related
statements of operations and changes in net assets for the year then ended.
These financial statements are the responsibility of the Separate Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of December 31, 1996, by
correspondence with the transfer agent. 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
audit provides 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 Separate Account A1
at December 31, 1996, and the results of its operations and changes in its net
assets for the year then ended, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Denver, Colorado
April 9, 1997
________________________________________________________________________________
34
<PAGE>
First ING Separate Account A1
Statement of Net Assets
December 31, 1996
<TABLE>
<CAPTION>
BEE & FISCHER
TOTAL GAMCO ASSOCIATES FRANCIS
ALL GAMCO GLOBAL STONEHILL INTERNATIONAL GLOBAL
DIVISIONS VALUE INTERACTIVE GROWTH GROWTH STRATEGIC
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in mutual funds at
market value; combined cost
$624,057(See Note C) $672,775 $ 313,725 $ 81,800 $ 137,781 $ 87,069 $ 52,400
-----------------------------------------------------------------------------
Total assets 672,755 313,725 81,800 137,781 87,069 52,400
-----------------------------------------------------------------------------
LIABILITIES
Due to Security Life of Denver 1,037 438 144 218 152 85
Total liabilities 1,037 438 144 218 152 85
-----------------------------------------------------------------------------
Net assets $671,738 $ 313,287 $ 81,656 $ 137,563 $ 86,917 $ 52,315
=============================================================================
CONTRACT OWNER RESERVES
Reserves for redeemable annuity
contracts (See Note B) $671,738 $ 313,287 $ 81,656 $ 137,563 $ 86,917 $ 52,315
-----------------------------------------------------------------------------
TOTAL CONTRACT OWNER RESERVES $671,738 $ 313,287 $ 81,656 $ 137,563 $ 86,917 $ 52,315
=============================================================================
Number of division units outstanding
(See Note F) 27,860.970 8,279.460 14,334.490 8,357.410 5,205.830
==================================================================
Value per divisional unit $ 11.24 $ 9.86 $ 9.60 $ 10.40 $ 10.05
==================================================================
</TABLE>
See accompanying notes.
________________________________________________________________________________
35
<PAGE>
First ING Separate Account A1
Statement of Operations
Year Ended December 31, 1996
<TABLE>
<CAPTION>
BEE & FISCHER
TOTAL GAMCO ASSOCIATES FRANCIS
ALL GAMCO GLOBAL STONEHILL INTERNATIONAL GLOBAL
DIVISIONS VALUE INTERACTIVE GROWTH GROWTH STRATEGIC
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends from mutual funds $19,501 $17,249 $ 397 $ - $ 1,519 $ 336
Less: Valuation period deductions
(See Note B) 4,629 2,272 668 1,033 522 134
--------------------------------------------------------------------------
Net investment income (loss) 14,872 14,977 (271) (1,033) 997 202
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains (losses) on
investments (4,999) 100 (328) 211 (2,269) (2,713)
Net unrealized gains on investments 48,718 14,303 1,022 21,024 11,971 398
--------------------------------------------------------------------------
Net realized and unrealized gains
(losses) on investments 43,719 14,403 694 21,235 9,702 (2,315)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $58,591 $29,380 $ 423 $20,202 $10,699 $(2,113)
==========================================================================
</TABLE>
See accompanying notes.
________________________________________________________________________________
36
<PAGE>
First ING Separate Account A1
Statement of Changes in Net Assets
Year Ended December 31, 1996
<TABLE>
<CAPTION>
BEE & FISCHER
TOTAL GAMCO ASSOCIATES FRANCIS
ALL GAMCO GLOBAL STONEHILL INTERNATIONAL GLOBAL
DIVISIONS VALUE INTERACTIVE GROWTH GROWTH STRATEGIC
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 14,872 $ 14,977 $ (271) $ (1,033) $ 997 $ 202
Net realized gains (losses) on
investments (4,999) 100 (328) 211 (2,269) (2,713)
Net unrealized gains on investments 48,718 14,303 1,022 21,024 11,971 398
----------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 58,591 29,380 423 20,202 10,699 (2,113)
----------------------------------------------------------------------------
CHANGES FROM PRINCIPAL
TRANSACTIONS
Contract purchase payments 635,993 280,848 85,200 140,700 77,502 51,743
Surrenders (25,198) (41) (5,139) (14,987) (4,992) (39)
Net transfers among divisions
(including the guaranteed interest
division in the general account) - 3,084 1,226 (8,225) 3,886 29
Other 2,352 16 (54) (127) (178) 2,695
----------------------------------------------------------------------------
Increase from principal
transactions 613,147 283,907 81,233 117,361 76,218 54,428
----------------------------------------------------------------------------
Total increase in net assets 671,738 313,287 81,656 137,563 86,917 52,315
Net assets at beginning of year - - - - - -
----------------------------------------------------------------------------
Net assets at end of year $671,738 $313,287 $81,656 $137,563 $86,917 $52,315
============================================================================
</TABLE>
See accompanying notes.
________________________________________________________________________________
37
<PAGE>
First ING Separate Account A1
Notes to Financial Statements
December 31, 1996
NOTE A. ORGANIZATION
First ING Separate Account A1 (the "Separate Account") was established by
resolution of the Board of Directors of First ING Life Insurance Company of New
York (the "Company") on March 15, 1994. The Separate Account is organized as a
unit investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940.
The Separate Account supports the operations of the Fulcrum Fund variable
annuity ("Fulcrum") contracts offered by the Company. The Separate Account may
be used to support other variable annuity contracts as they are offered by the
Company. The assets of the Separate Account are the property of the Company.
However, the portion of the Separate Account's assets attributable to the
contracts will not be chargeable with liabilities arising out of any other
operations of the Company.
The Separate Account currently consists of five investment divisions available
to the contractholders, each of which invests in an independently managed mutual
fund portfolio of the Palladian Trust ("Fund"). The Funds are as follows:
PORTFOLIO MANAGERS/PORTFOLIOS (FUNDS)
GAMCO Investors, Inc.
Value Portfolio
Global Interactive/Telecom Portfolio
Stonehill Capital Management, Inc.
Growth Portfolio
Bee & Associates Incorporated
International Growth Portfolio
Fischer Francis Trees & Watts, Inc.
Global Strategic Income Portfolio
________________________________________________________________________________
38
<PAGE>
First ING Separate Account A1
Notes to Financial Statements (continued)
NOTE A. ORGANIZATION (CONTINUED)
The Fulcrum contracts allow the contractholders to specify the allocation of
their purchase payments to the various Funds. They can also transfer their
account values among the Funds. The Fulcrum product also provides the
contractholders the option to allocate their purchase payments, or to transfer
their account values, to a Guaranteed Interest Division ("GID") in the Company's
general account. The GID guarantees a rate of interest to the contractholder,
and it is not variable in nature. Therefore, it is not included in the Separate
Account statements.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Separate Account have been prepared
on the basis of generally accepted accounting principles ("GAAP"). 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.
The accounting principles followed by the Separate Account and the methods of
applying those principles are presented below or in the footnotes which
follow.
INVESTMENT VALUATION--The investments in shares of the funds are valued at the
closing net asset value (market value) per share as determined by the Funds on
the day of measurement.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME--The investments in shares
of the Funds are accounted for on the date the order to buy or sell is
confirmed. Dividend income and distributions of capital gains are recorded on
the ex-dividend date. Realized gains and losses from security transactions are
reported using the first-in-first-out ("FIFO") method of accounting for cost.
the difference between cost and current market value of investments owned on the
day of measurement is recorded as unrealized gain or loss on investment.
VALUATION PERIOD DEDUCTIONS--Charges are made directly against the assets of the
Separate Account divisions and are reflected daily in the computation of the
unit values of the divisions.
________________________________________________________________________________
39
<PAGE>
First ING Separate Account A1
Notes to Financial Statements (continued)
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For Fulcrum contracts, a daily deduction, at an annual rate of 1.25% of the
daily asset value of the Separate Account divisions, is charged to the Separate
Account for mortality and expense risks assumed by the Company. Total mortality
and expense charges for the year ended December 31, 1996 were $4,136.
Fulcrum contracts are subject to a daily deduction, at an annual rate of .15% of
the daily asset value of the Separate Account divisions, for an asset based
administrative charge to compensate the Company for a portion of the
administrative expenses under the contract. Total asset based administrative
charges for the year ended December 31, 1996 were $493.
ANNUITY RESERVES--None of the Fulcrum contracts in the Separate Account have
annuitized (reached the annuity date) and are redeemable for the net cash
surrender value of the contracts. the annuity reserves are recorded in the
Separate Account at the aggregate account values of the contractholders invested
in the Separate Account divisions.
NOTE C. INVESTMENTS
Fund shares are purchased at net asset value with contract payments and
divisional transfers from other Funds. Fund shares are redeemed at net asset
value for the payment of benefits, for surrenders, for transfers to other
divisions, and for certain administrative charges by the Company, which were $0
for the year ended December 31, 1996. Distributions made by the Funds are
reinvested in the Funds.
________________________________________________________________________________
40
<PAGE>
First ING Separate Account A1
Notes to Financial Statements
NOTE C. INVESTMENTS (CONTINUED)
The following is a summary of fund shares owned as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER NET VALUE
OF ASSET OF SHARES COST OF
FUND SHARES VALUE AT MARKET SHARES
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GAMCO Investors, Inc.
Value Portfolio 28,835.02 $10.88 $313,725 $299,422
Global Interactive/Telecom 8,179.98 10.00 81,800 80,778
Stonehill Capital Management, Inc.
The Growth Portfolio 12,710.39 10.84 137,781 116,757
Bee & Associates Incorporated
International Growth 8,428.74 10.33 87,069 75,098
Fischer Francis Trees & Watts, Inc.
Global Strategic Income 5,250.53 9.98 52,400 52,002
---------------------
Total $672,775 $624,057
=====================
</TABLE>
For the year ended December 31, 1996, the aggregate cost of purchases (plus
reinvested dividends) and the proceeds from sales of investments were $666,986
and $37,930, respectively.
NOTE D. OTHER CONTRACT DEDUCTIONS
The Fulcrum contracts provide for certain deductions for surrender charges and
taxes from amounts paid to contractholders. Such deductions are taken after the
redemption of divisional units in the Separate Account and are not included in
the Separate Account financial statements.
NOTE E. FEDERAL INCOME TAXES
The Separate Account is not taxed separately because the operations of the
Separate Account are part of the total operations of the Company. The Company
is taxed as a life insurance company under the Internal Revenue Code. The
Separate Account is not taxed as a "Regulated Investment Company" under
subchapter "M" of the Internal Revenue Code.
________________________________________________________________________________
41
<PAGE>
First ING Separate Account A1
Notes to Financial Statements (continued)
NOTE F. SUMMARY OF CHANGES IN UNITS
The following schedule summarizes the changes in divisional units for the year
ended December 31, 1996:
<TABLE>
<CAPTION>
INCREASE
OUTSTANDING INCREASE (DECREASE)
AT FOR FOR (DECREASE) OUTSTANDING
BEGINNING PAYMENTS DIVISIONAL FOR AT END
DIVISION OF YEAR RECEIVED TRANSFERS SURRENDERS OF YEAR
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAMCO Investors, Inc.
Value Portfolio 0.000 27,564,290 300,280 (3,600) 27,860,970
Global Interactive/Telecom
Portfolio 0.000 8,710,310 124,590 (555,440) 8,279,460
Stonehill Capital Management, Inc.
Growth Portfolio 0.000 16,878,790 (895,900) (1,648,400) 14,334,490
Bee & Associates Incorporated
International Growth Portfolio 0.000 8,721,290 352,490 (716,370) 8,357,410
Fischer Francis Trees & Watts, Inc.
Global Strategic Income
Portfolio 0.000 5,206,860 2,880 (3,910) 5,205,830
</TABLE>
________________________________________________________________________________
42
<PAGE>
First ING Separate Account A1
Notes to Financial Statements (continued)
NOTE G. NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
ACCUMULATED NET
ACCUMULATED NET REALIZED UNREALIZED
INVESTMENT GAINS GAINS
PRINCIPAL INCOME (LOSSES) ON ON
DIVISION TRANSACTIONS (LOSS) INVESTMENTS INVESTMENTS NET ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAMCO Investors, Inc.
Value Portfolio $283,907 $14,977 $ 100 $14,303 $313,287
Global Interactive/Telecom
Portfolio 81,233 (271) (328) 1,022 81,656
Stonehill Capital Management, Inc.
Growth Portfolio 117,361 (1,033) 211 21,024 137,563
Bee & Associates Incorporated
International Growth Portfolio 76,218 997 (2,269) 11,971 86,917
Fischer Francis Trees & Watts, Inc.
Global Strategic Income Portfolio 54,428 202 (2,713) 398 52,315
--------------------------------------------------------------------
Total $613,147 $14,872 $(4,999) $48,718 $671,738
====================================================================
</TABLE>
NOTE H. SUBSEQUENT EVENT
Certain divisions of the Separate Account invest in corresponding mutual fund
portfolios of the Palladian Trust. On January 24, 1997, the Company received
notification that the Palladian Trust intends to terminate the participation
agreement for the Fulcrum Fund variable annuity product effective July 24,
1997.
________________________________________________________________________________
43
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) All required financial statements are included in Parts A or B of this
Registration Statement.
(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.2/
(b) Specimen Broker-Dealer Supervisory and Selling Agreement for
Variable Contracts.1/
(c) Marketing Services Agreement.2/
4. (a) Variable Annuity Contract.2/
(b) Variable Annuity Certificate.2/
(c) Supplementary Variable Annuity Contract.2/
5. (a) Contract Application.2/
(b) Fulcrum Fund Certificate Application.2/
6. (a) Articles of Incorporation of First ING Life Insurance
Company of New York.2/
(b) By-Laws of First ING Life Insurance Company of New
York.2/
7. Not Applicable.
8. (a) Participation Agreement.2/
(b) Administration Services Agreement between First ING Life
Insurance Company of New York and Financial Administrative
Services Corporation.2/
(c) License Agreement.2/
(d) Service Agreement.2/
9. Opinion and Consent of Eugene L. Copeland as to the legality of
the securities being registered.1/
10. Consent of Independent Auditors.
- --------------------------------------------------------------------------------
C-1
<PAGE>
11. None.
12. None.
13. Schedule for Computation of Performance Quotations.
14. Financial Data Schedules.
15. Powers of Attorney.
16. List of Affiliated Companies of First ING Life Insurance Company
of New York.
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 Post-Effective Amendment No. 1 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
April 23, 1996 (File Nos. 33-82890 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.
<TABLE>
<CAPTION>
Name and Principal Business Address Position and Offices with First ING
- ----------------------------------- -----------------------------------
<S> <C>
R. Glenn Hilliard Chairman of the Board
ING
North American Insurance Corporation
5780 Powers Ferry Road
Atlanta, GA 30327-4390
Stephen M. Christopher Director, President and Chief Executive
Officer, Chief Operating Officer
Stephen J. Yarina Director, Vice Chairman, Vice President,
Treasurer and Chief Financial Officer,
Chief Administrative Officer
Fred A. Deering Director
Weaver H. Gaines Director
528 Bayberry
Ocean City, NY 11770
Rodger 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
Thomas F. Conroy Director, President, Reinsurance and
Institutional Markets
Wayne D. Bidelman Director
Evelyn A. Bentz Director
Eugene L. Copeland Director
</TABLE>
- --------------------------------------------------------------------------------
C-3
<PAGE>
<TABLE>
Name and Principal Business Address Position and Offices with First ING
- ----------------------------------- -----------------------------------
<S> <C>
William S. Lutter Director, Vice President, Administration
First ING Life Insurance Company of
New York
225 Broadway, Suite 1901
New York 10007
Linda B. Emory Executive Vice President and Appointed
ING Actuary
North American Insurance Corporation
5780 Powers Ferry Road
Atlanta, GA 30327-4390
John R. Barmeyer Chief Legal Officer and Corporate
Secretary
Benjamin Currier Senior Vice President, Operations
Micheal B. Stevens Chief Investment Officer
ING
North American Insurance Corporation
5780 Powers Ferry Road
Atlanta, GA 30327-4390
James Livingston Senior Vice President, Chief Actuary
Carol D. Hard Senior Vice President, Variable Sales
Richard Lyons Vice President, Sales
Richard D. King Vice President, Medical Director
Amy L. Winsor Tax and Finance Officer
Sandra Forte' Assistant Secretary
Shari Enger Assistant Treasurer
Shirley A. Knarr Actuarial Officer
</TABLE>
- --------------------------------------------------------------------------------
C-4
<PAGE>
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 shares of ING are owned by and registered in the name of a
Netherlands trustee, Stichting Administratiekantoor ING Groep N.V. ("Trustee"),
under a trust agreement by which the Trustee has issued against these shares
non-voting depositary receipts in bearer form which are traded and quoted on
several European stock exchanges. This kind of trust arrangement is not uncommon
among public companies in The Netherlands. The Trustee's principal business is
the administration of such trust arrangements with respect to the common stock
of ING. Although trustees in The Netherlands formally have and exercise limited
voting rights, the Trustee adheres to the general policy in The Netherlands that
these trustees follow the recommendations of the boards of directors and the
management of corporations whose stock they hold and do 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 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) CAMVEST Company No. 3, a wholly owned Colorado subsidiary.
3) United Protective Company, a wholly owned Colorado subsidiary
corporation.
4) First Secured Mortgage Deposit Corp., a wholly owned Colorado
subsidiary corporation.
- --------------------------------------------------------------------------------
C-5
<PAGE>
5) Midwestern United Life Insurance Company, a wholly owned Indiana
subsidiary corporation.
6) ING America Equities, Inc., a wholly owned Colorado subsidiary
corporation
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).
Included herein as Exhibit 16 is a list of the U.S. holdings of ING
America Holdings as of December, 1996.
Items 27. Number of Contract Owners
As of March 31, 1996, a date within 90 days prior to the date of
filing, there was 1 contract owner and 20 owners of the certificates offered by
the prospectus filed as part of the Registrant's Registration Statement (File
No. 33-88794).
Item 28. Indemnification
---------------
Incorporated herein by reference to the Form N-4 Pre-Effective
Amendment No. 1 to the 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).
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
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business and Address with Underwriter
- -------------------- ----------------
<S> <C>
Carol D. Hard Director and President
Edward K. Campbell Director, Vice President and
Chief Legal Officer
</TABLE>
- --------------------------------------------------------------------------------
C-6
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business and Address with Underwriter
- -------------------- ----------------
<S> <C>
Daniel B. Lazarus Director
5780 Powers Ferry Road
Atlanta, Georgia 30327
Melodie A. Maxwell-Jones Director and Chief Compliance Officer
Debra Bell Chief Financial Officer and Financial
Operations Officer
Wesley A. Coleman Vice President
Shari A. Enger Treasurer
Martha K. Evans Vice President
Jerrianne Smith Chief Operating Officer
Gary W. Waggoner Secretary
</TABLE>
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
------------
(a) First ING Life Insurance Company of New York represents that the
fees and charges deducted under the Contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred and
the risks assumed by the Company.
(b)-(d) Additional undertakings are 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).
- --------------------------------------------------------------------------------
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 certifies that
it meets the requirements of Securities Act Rule 485(b) for effectiveness of
Post-Effective Amendment No. 2 to the Registration Statement, and has duly
caused this Post-Effective Amendment No. 2 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 29th day of April, 1997.
FIRST ING INSURANCE COMPANY OF NEW YORK
(Depositor)
By: /s/ Stephen M. Christopher
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Stephen M. Christopher
President and Chief Executive 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 Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 2 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/ Stephen M. Christopher
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Stephen M. Christopher
Chief Executive Officer
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PRINCIPAL FINANCIAL OFFICER
/s/ Stephen J. Yarina
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Stephen J. Yarina
Vice President, Treasurer, Chief Financial Officer,
Chief Administrative Officer
PRINCIPAL ACCOUNTING OFFICER
/s/ Stephen J. Yarina
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Stephen J. Yarina
Vice President, Treasurer, Chief Financial Officer,
Chief Administrative Officer
DIRECTORS:
/s/ Stephen M. Christopher*
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Stephen M. Christopher
/s/ Stephen J. Yarina
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Stephen J. Yarina
/s/ Thomas F. Conroy*
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Thomas F. Conroy
/s/ Wayne D. Bidelman*
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Wayne D. Bidelman
/s/ Evelyn A. Bentz*
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Evelyn A. Bentz
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/s/ Eugene L. Copeland*
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Eugene L. Copeland
/s/ William S. Lutter*
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William S. Lutter
/s/ Fred A. Deering*
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Fred A. Deering
/s/ Weaver H. Gaines*
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Weaver H. Gaines
/s/ Roger D. Roenfeldt*
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Roger D. Roenfeldt
/s/ Stephen K. West*
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Stephen K. West
* By: /s/Edward K. Campbell
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Edward K. Campbell
April 29, 1997
