As filed with the Securities and Exchange Commission on April 28, 1998
File No. 33-83354
File No. 811-8732
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8
FIRST CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
FIRST CITICORP LIFE INSURANCE COMPANY
(Name of Depositor)
666 Fifth Avenue
3rd Floor
New York, New York 10103
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (212) 830-4901
Catherine S. Mulholland, Esq.
General Counsel
First Citicorp Life Insurance Company
800 Silver Lake Boulevard
Dover, Delaware 19904
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
<PAGE>
It is proposed that this filling will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on ___ pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Title of Securities Being Registered: Individual Flexible Premium Deferred
Variable Annuity Contracts
<PAGE>
Cross Reference Sheet
Pursuant to Rules 481(a) and 495(a)
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page ..................... Cover Page
2. Definitions .................... Definitions
3. Synopsis ....................... Expense Tables; Summary
4. Condensed Financial
Information .................. Condensed Financial Information;
Yields and Total Returns
5. General
(a) Depositor ................ First Citicorp Life Insurance Company
(b) Registrant ............... The Separate Account
(c) Portfolio Company ........ The Funds
(d) Fund Prospectus .......... The Funds
(e) Voting Rights ............ Voting Privileges
(f) Administrators ........... N/A
6. Deductions and Expenses
(a) General .................. Charges and Deductions; Summary
(b) Sales Load ............... Charges and Deductions; Summary
(c) Special Purchase Plan .... N/A
(d) Commissions .............. Distribution of the Contracts
(e) Expenses - Registrant .... Charges and Deductions; Summary
(f) Fund Expenses ............ Charges and Deductions
(g) Organizational Expenses .. N/A
<PAGE>
7. Contracts
(a) Persons with Rights ...... Summary; Addition, Deletion or
Substitution of Investments;
Description of the Contract; Annuity
Payment Options; Voting Privileges;
Death Benefit Before the Annuity
Income Date; Modification; Election of
Annuity Payment Options
(b) (i) Allocation of
Purchase Payments ... Summary; Purchase Payments; Free-Look
Period; Allocation of Purchase
Payments
(ii) Transfers ........... Summary; Transfer Privileges
(iii) Exchanges ........... Transfers, Assignments
(c) Changes .................. Additions, Deletions or Substitutions
of Investments; Description of the
Contract; Modification;
(d) Inquiries ................ Cover page; Inquiries
8. Annuity Period ................. Summary; Annuity Payment Options
9. Death Benefit .................. Death Benefit Before the Annuity Date
10. Purchases and Contract Value
(a) Purchases ................ Summary; Issuance of a Contract;
Purchase Payments; Free Look Period;
Allocation of Purchase Payments;
Variable Contract Value; Transfer
Privileges
(b) Valuation ................ Definitions; Variable Contract Value;
(c) Daily Calculation ........ Definitions; Variable Contract Value;
(d) Underwriter .............. Issuance of a Contract; Distribution
of the Contracts
<PAGE>
11. Redemptions
(a) - By Owners .............. Summary; Transfer Privilege;
Surrenders and Partial Withdrawals;
Annuity Payments on the Annuity Date;
Payments; Annuity Payment Options;
Federal Tax Matters
- By Annuitant ........... Summary; Transfer Privilege;
Surrenders and Partial Withdrawals;
Proceeds on the Annuity Date;
Payments; Annuity Payment Options;
Federal Tax Matters
(b) Texas ORP ................ N/A
(c) Check Delay .............. Purchase Payments
(d) Lapse .................... N/A
(e) Free Look ................ Summary; Free Look Period
12. Taxes .......................... Summary; Federal Tax Matters
13. Legal Proceedings .............. Legal Proceedings
14. Table of Contents for the
Statement of Additional
Information ................... Statement of Additional Information
Table of Contents
<PAGE>
PART B
Item of Form N-4 Part B Caption
15. Cover Page ...................... Cover Page
16. Table of Contents ............... Table of Contents
17. General Information and
History ........................ N/A
18. Services
(a) Fees and Expenses of
Registrant ................ Charges and Deductions (prospectus)
(b) Management Contracts ...... N/A
(c) Custodian ................. N/A
Independent Public
Accountant ................ Experts
(d) Assets of Registrant ...... The Separate Account
(e) Affiliated Persons ........ First Citicorp Life Insurance Company
(prospectus)
(f) Principal Underwriter ..... Distribution of the Contracts
(prospectus)
19. Purchase of Securities
Being Offered .................. Distribution of the Contracts
(prospectus)
Offering Sales Load ............ N/A
20. Underwriters .................... Distribution of the Contracts
(prospectus)
21. Calculation of Performance
Data ............................ Calculation of Yields and Total
Returns; Yields and Total Returns
(prospectus)
22. Annuity Payments ................ Variable Annuity Payments; Annuity
Payment Options (prospectus)
23. Financial Statements ............ Financial Statements
<PAGE>
PART C -- OTHER INFORMATION
Item of Form N - 4 Part C Caption
24. Financial Statements
and Exhibits ................... Financial Statements and Exhibits
(a) Financial Statements ....... (a) Financial Statements
(b) Exhibits ................... (b) Exhibits
25. Directors and Officers
of the Depositor ................ Directors and Officers of First
Citicorp Life Insurance Company
26. Persons Controlled By or
Under Common Control with the
Depositor or Registrant ......... Persons Controlled By or Under Common
Control with the Depositor or
Registrant
27. Number of Contractowners ........ Number of owners
28. Indemnification ................. Indemnification
29. Principal Underwriters .......... Principal Underwriter
30. Location of Accounts
and Records ..................... Location of Books and Records
31. Management Services ............. Management Services
32. Undertakings .................... Undertakings and Representations
Signature Page .................. Signatures
<PAGE>
PART A
PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
FIRST CITICORP LIFE INSURANCE COMPANY
666 Fifth Avenue
3rd Floor
New York, NY 10103
Telephone: (800) 497-4857
PROSPECTUS
May 1, 1998
- --------------------------------------------------------------------------------
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
FIRST CITICORP LIFE INSURANCE COMPANY
666 Fifth Avenue
3rd Floor
New York, NY 10103
Telephone: (800) 497-4857
This Prospectus describes the individual flexible premium deferred
variable annuity contract (the "Contract") being offered by First Citicorp Life
Insurance Company. The Contract may be sold to or in connection with retirement
plans, including those that qualify for special federal tax treatment under
Sections 403(b), 408 or 408A of the Internal Revenue Code.
Purchase payments and Contract Values are allocated, as designated by you,
to one or more of the subaccounts of First Citicorp Life Variable Annuity
Separate Account (the "Separate Account"), or to the Fixed Account, or both. The
assets of each subaccount will be invested in a corresponding portfolio of the
Variable Annuity Portfolios, the Fidelity Variable Insurance Products Fund
("Fidelity VIP"), the Fidelity Variable Insurance Products Fund II ("Fidelity
VIP II"), the AIM Variable Insurance Funds, Inc., or the MFS Variable Insurance
Trust (the "Funds").
The available portfolios of the Variable Annuity Portfolios include
CitiSelect(R) VIP Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP
Folio 400, CitiSelect(R) VIP Folio 500 and CitiFundsSM Small Cap Growth VIP
Portfolio (formerly Landmark Small Cap Equity VIP Fund), and are available for
investment under the Contract. The Fidelity VIP Growth, Fidelity VIP High
Income, Fidelity VIP Equity Income and Fidelity VIP Overseas Portfolios of the
Fidelity Variable Insurance Products Fund, the Fidelity VIP II Contrafund and
Fidelity VIP II Index 500 Portfolios of the Fidelity Variable Insurance Products
Fund II, the AIM V.I. Capital Appreciation Fund, AIM V.I. Government Securities
Fund, AIM V.I. Growth Fund, AIM V.I. International Equity Fund, AIM V.I. Value
Fund and AIM V.I. Growth and Income Fund of the AIM Variable Insurance Funds,
Inc. and the MFS World Governments Series, the MFS Money Market Series, the MFS
Bond Series, the MFS Total Return Series, the MFS Research Series and the MFS
Emerging Growth Series of the MFS Variable Insurance Trust are also available
for investment under the Contract. The accompanying prospectuses for the Funds
describe the investment objectives of the available portfolios. The Contract
Value prior to the Annuity Income Date, except for amounts in the Fixed Account,
will vary according to the investment performance of the portfolios in which the
selected subaccounts are invested. You bear the entire investment risk on
amounts allocated to the Separate Account.
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This Prospectus sets forth basic information about the Contract and the
Separate Account that a prospective investor should know before investing.
Additional information about the Contract and the Separate Account is contained
in the Statement of Additional Information, which has been filed with the
Securities and Exchange Commission. The Statement of Additional Information has
the same date as this Prospectus and is incorporated herein by reference. The
table of contents for the Statement of Additional Information is on page 38 of
this prospectus. You may obtain a copy of the Statement of Additional
Information free of charge by writing to or calling the Company at the address
or phone number shown above.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY CURRENT PROSPECTUSES FOR VARIABLE ANNUITY
PORTFOLIOS, THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND, THE FIDELITY VARIABLE
INSURANCE PRODUCTS FUND II, THE AIM VARIABLE INSURANCE FUNDS, INC. AND THE MFS
VARIABLE INSURANCE TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTRACTS AND SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK
GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION, REINVESTMENT RISK AND
POSSIBLE LOSS OF PRINCIPAL INVESTED.
YOUR RIGHT TO LOOK TO A DELAWARE BANK OR TRUST COMPANY FOR PAYMENT ON ANY
INSURANCE POLICY IS LIMITED BY LAW. INSURANCE POLICIES ISSUED BY THE
SUBSIDIARIES OR DIVISIONS OF DELAWARE BANKS OR TRUST COMPANIES ARE NOT DIRECT
LIABILITIES OF SUCH BANKS OR TRUST COMPANIES. ONLY THE ASSETS OF THE INSURANCE
DIVISION OR SUBSIDIARY ISSUING A POLICY ARE APPLICABLE TO THE PAYMENT AND
SATISFACTION OF SUCH POLICY OR CLAIMS MADE THEREUNDER.
INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK OR
TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
May 1, 1998
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<PAGE>
TABLE OF CONTENTS
DEFINITIONS
EXPENSE TABLES
SUMMARY
The Contract
Charges and Deductions
Annuity Provisions
Federal Taxes
CONDENSED FINANCIAL INFORMATION
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
First Citicorp Life Insurance Company
First Citicorp Life Variable Annuity Separate Account
The Funds
Addition, Deletion or Substitution of Investments
DESCRIPTION OF THE CONTRACT
Issuance of a Contract
Purchase Payments
Free-Look Period
Allocation of Purchase Payments
Variable Contract Value
Transfer Privileges
Surrenders and Partial Withdrawals
Death Benefit Before the Annuity Income Date
Annuity Payments on the Annuity Income Date
Payments
Modification
Owner
Reports to Owners
Inquiries
THE FIXED ACCOUNT
Fixed Account Value
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
Annual Contract Fee
Asset-Based Administration Charge
Transfer Processing Fee
Mortality and Expense Risk Charge
Fund Expenses
Premium Taxes
Other Taxes
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ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
Fixed Annuity Payments
Legal Developments Regarding Unisex Actuarial Tables
Variable Annuity Payments
Description of Annuity Payment Options
YIELDS AND TOTAL RETURNS
FEDERAL TAX MATTERS
Introduction
Tax Status of the Contract
Taxation of Annuities
Transfers, Assignments or Exchange of a Contract
Withholding
Multiple Contracts
Taxation of Qualified Plans
Possible Charge for the Company's Taxes
Other Tax Consequences
DISTRIBUTION OF THE CONTRACTS
LEGAL PROCEEDINGS
VOTING PRIVILEGES
COMPANY HOLIDAYS
FINANCIAL STATEMENTS
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
6
<PAGE>
DEFINITIONS
Account Any of the subaccounts or the Fixed Account.
Accumulation Unit A unit of measure used to calculate Variable
Contract Value. We use Accumulation Units to calculate
the value of a subaccount before annuity payments.
Age Your age on your last birthday.
Annuitant The Annuitant is the person upon whose life annuity
benefits are based and to whom payments are made under
this contract, commencing on the Annuity Income Date.
The Annuitant must be a natural person.
Annuity Income Date The date on which annuity payments begin.
Annuity Unit A unit of measure used to calculate variable annuity
payments.
Attained Age Your age on the prior Contract Anniversary.
Beneficiary The person who becomes the Owner of the Contract upon
any Owner's death prior to the Annuity Income Date and
who receives the Death Benefit. The Contingent
Beneficiary is the person who will become the
Beneficiary if the named Beneficiary is not living. An
Irrevocable Beneficiary is one whose consent is
necessary to change Beneficiaries and exercise certain
other rights under the Contract.
The Code The Internal Revenue Code of 1986, as amended.
Contract Anniversary The same date each year after the Contract Date.
Contract Date The Contract Date is the date the Contract becomes
effective.
Contract Owner The person(s) who owns the Contract and who is
entitled to exercise all rights and privileges
provided in the Contract.
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Contract Value The total amount invested under the Contract. It is
the sum of the Variable Contract Value and the value
of the Contract in the Fixed Account.
Dollar Cost Averaging A series of systematic monthly transfers from either
the Money Market Subaccount or the Fixed Account to
the available subaccounts.
Fixed Account An allocation option under our General Account. Under
the Fixed Account, we credit any portion of the
initial purchase payment allocated to the Fixed
Account with the Initial Fixed Account Interest Rate
shown in the Contract Schedule. We may declare
different initial interest rates for each subsequent
purchase payment or transfer to the Fixed Account.
After the initial one year period, the interest rate
earned will be the Current Fixed Account Interest
Rate. The Current Fixed Account Interest Rate is
determined by us in our discretion and is guaranteed
for one year.
General Account Assets other than those allocated to the Separate
Account or any other separate account.
Home Office Our principal office at 666 Fifth Avenue, 3rd Floor,
New York, NY 10103.
"In writing" and
"written request" A written form satisfactory to us and received by us
at our Home Office. We have the right to require a
signature guarantee from an institution qualified to
give such a guarantee before acting on any written
request.
Net Asset Value
per Share The share value of any portfolio as of any Valuation
Day reflecting investment performance and decreased by
any expenses and fees assessed against the portfolio.
Net Investment Factor An index used to measure the investment performance of
a subaccount from one Valuation Period to the next.
Non-Qualified Contract A Contract that is not a "qualified contract."
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Premium Taxes Taxes charged by a state or municipality on purchase
payments. We deduct premium taxes from the Contract
Value either: (1) at the time the Contract is
surrendered; (2) on the Annuity Income Date; or (3) at
such other date as the taxes are assessed.
Qualified Contract A Contract that is issued in connection with
retirement plans that qualify for special federal
income tax treatment under Sections 403(b), 408 or
408A of the Code.
SEC U.S. Securities and Exchange Commission.
Subaccount A subdivision of the Separate Account, the assets of
which are invested in a corresponding portfolio.
Surrender Value The Contract Value less any applicable surrender
charges payable, premium taxes not previously deducted
and the Annual Contract Fee for that year.
Valuation Day For each subaccount, each day on which both we and the
New York Stock Exchange are open for business.
Valuation Period The period that starts following the close of regular
trading on the New York Stock Exchange on any
Valuation Day and ends at the close of regular trading
on the next succeeding Valuation Day.
Separate Account First Citicorp Life Variable Annuity Separate Account.
Assets of the Separate Account equal to the reserves
and other contract liabilities with respect to the
Separate Account are separate from our other assets
and are not chargeable with liabilities arising out of
any other business we may conduct.
Variable Contract The value of the Contract in the Separate Value
Account.
"We", "Our", "Us" First Citicorp Life Insurance Company.
and the "Company"
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"You" and "Your" The Owner of the Contract. In the event of Joint
Ownership, you and your apply equally to either Joint
Owner unless the context clearly indicates otherwise.
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EXPENSE TABLES
The following expense information assumes that the entire Contract Value is
Variable Contract Value.
Owner Transaction Expenses
Sales Charge Imposed on Purchase Payments None
Maximum Surrender Charge (contingent
deferred sales charge) as a percentage
of the premium payment withdrawn 7%
Surrender Fee None*
Transfer Processing Fee (imposed after the 18th $25**
transfer in any Contract Year)
Annual Contract Fee $30***
Separate Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge**** 0.84%
Administration Charge 0.15%
Total Separate Account Expenses 0.99%
Annual Fund Expenses
(as percentage of average net assets)
* We reserve the right to assess a processing charge equal to the lesser
of $25 or 2% of the amount withdrawn for each withdrawal (including the final
surrender) after the first 12 withdrawals in any Contract Year. See "Charges and
Deductions."
** We reserve the right to charge a $25 transfer fee on each transfer
after the first 12 transfers in any Contract Year. See "Charges and Deductions."
*** We will waive the Annual Contract Fee in its entirety if, at the time
this charge would be deducted, the Contract Value is at least $25,000. The
Annual Contract Fee will also be waived in its entirety for any Contract Year
during which purchase payments of at least $2,500 ($2,000 for Qualified
Contracts), excluding the initial purchase payment, are paid.
****We reserve the right to assess a Mortality and Expense Risk Charge of
not more than 1.25%.
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CitiSelect VIP Folio 200
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 0.95%
and reimbursements)
CitiSelect VIP Folio 300
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 0.95%
and reimbursements)
CitiSelect VIP Folio 400
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers 1.25%
and reimbursements)
CitiSelect VIP Folio 500
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers 1.25%
and reimbursements)
CitiFunds Small Cap Growth VIP Portfolio
(formerly Landmark Small Cap Equity VIP Fund)
Management Fees 0.75%
Other Expenses (after fee waivers and reimbursements) 0.15%
Total Annual Fund Expenses (after fee waivers 0.90%
and reimbursements)
Fidelity VIP Growth Portfolio
Management Fees 0.60%
Other Expenses 0.09%
Total Annual Fund Expenses 0.69%
Fidelity VIP High Income Portfolio
Management Fees 0.59%
Other Expenses 0.12%
Total Annual Fund Expenses 0.71%
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Fidelity VIP Equity Income Portfolio
Management Fees 0.50%
Other Expenses 0.08%
Total Annual Fund Expenses 0.58%
Fidelity VIP Overseas Portfolio
Management Fees 0.75%
Other Expenses 0.17%
Total Annual Fund Expenses 0.92%
Fidelity VIP II Contrafund Portfolio
Management Fees 0.60%
Other Expenses 0.11%
Total Annual Fund Expenses 0.71%
Fidelity VIP II Index 500 Portfolio
Management Fees (after fee waivers and reimbursements) 0.24%
Other Expenses (after fee waivers and reimbursements) 0.04%
Total Annual Fund Expenses (after fee waivers and 0.28%
reimbursements)
AIM V.I. Capital Appreciation Fund
Management Fees 0.63%
Other Expenses 0.05%
Total Annual Fund Expenses 0.68%
AIM V.I. Government Securities Fund
Management Fees 0.50%
Other Expenses 0.37%
Total Annual Fund Expenses 0.87%
AIM V.I. Growth Fund
Management Fees 0.65%
Other Expenses 0.08%
Total Annual Fund Expenses 0.73%
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AIM V.I. International Equity Fund
Management Fees 0.75%
Other Expenses 0.18%
Total Annual Fund Expenses 0.93%
AIM V.I. Value Fund
Management Fees 0.62%
Other Expenses 0.08%
Total Annual Fund Expenses 0.70%
AIM V.I. Growth and Income Fund
Management Fees 0.63%
Other Expenses 0.06%
Total Annual Fund Expenses 0.69%
MFS World Governments Series
Management Fees 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Money Market Series
Management Fees 0.50%
Other Expenses (after fee reduction) 0.10%
Total Annual Fund Expenses (after fee reduction) 0.60%
MFS Bond Series
Management Fees 0.60%
Other Expenses (after fee reduction) 0.40%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Total Return Series
Management Fees 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
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MFS Research Series
Management Fees 0.75%
Other Expenses 0.17%
Total Annual Fund Expenses 0.92%
MFS Emerging Growth Series
Management Fees 0.75%
Other Expenses 0.15%
Total Annual Fund Expenses 0.90%
Premium taxes may be applicable, depending on the laws of various
jurisdictions. Various states and other governmental entities levy a premium
tax, currently ranging up to 3.5%, on annuity contracts issued by insurance
companies.
The above tables are intended to assist the Owner in understanding the
costs and expenses that he or she will bear directly or indirectly. The tables
reflect fiscal year 1997 expenses for the Separate Account and fiscal year 1997
expenses for the portfolios. Absent fee waivers and reimbursements, "Other
Expenses" and "Total Annual Fund Expenses" for the CitiSelect VIP Portfolios and
CitiFunds Small Cap VIP Portfolio were: CitiSelect VIP Folio 200 - 3.49% and
4.44%; CitiSelect VIP Folio 300 - 3.30% and 4.25%; CitiSelect VIP Folio 400 -
3.21% and 4.46%; CitiSelect VIP Folio 500 - 3.27% and 4.52% and CitiFunds Small
Cap Growth VIP Portfolio - 4.60% and 5.50%, respectively. AIM Advisors, Inc.
("AIM") may from time to time voluntarily waive or reduce its respective fees.
Effective May 1, 1998, the Funds reimburse AIM in an amount up to 0.25% of the
average net asset value of each Fund, for expenses incurred in providing, or
assuring that participating insurance companies provide, certain administrative
services. Currently, the fee only applies to the average net asset value of each
Fund in excess of the net asset value of each Fund as calculated on April 30,
1998. MFS has agreed to bear, subject to reimbursement, expenses such that the
"Other Expenses" of the MFS Bond Series, the MFS Money Market Series and all
other Series do not exceed, on an annualized basis, 0.40%, 0.10% and 0.25%
respectively of the average daily net assets. This offset arrangement does not,
however, apply to the MFS Emerging Growth Series and MFS Research Series. Absent
such fee waivers and reimbursements, "Other Expenses" and "Total Annual Fund
Expenses" incurred for fiscal year 1997 were: MFS World Governments Series 0.40%
and 1.15%; MFS Money Market Series 0.86% and 1.36%; MFS Bond Series 2.98% and
3.58%; MFS Total Return Series 0.27% and 1.02%, respectively. The Investment
Advisor for the Fidelity VIP II Index 500 Portfolio voluntarily agreed to
reimburse a portion of the fund's operating expenses during the period. Absent
this reimbursement, the "Management Fees," "Other Expenses" and "Total Annual
Fund Expenses" incurred for fiscal year 1997 would have been 0.27%, 0.13% and
0.40%, respectively. There can be no assurance that the fee waivers and
reimbursements reflected in the table will continue at their reflected levels.
For a more complete description of the various costs and expenses see "Charges
and Deductions" and the prospectuses for the Funds.
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Examples
An owner would pay the following expenses on a $1,000 investment, assuming
a 5% annual return on assets:
1. If the Contract is surrendered or annuitized under an annuity option
not providing a life annuity or a life annuity with a period certain of at least
five years at the end of the applicable time period:
<TABLE>
<CAPTION>
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 200 $ 88 $ 121 $ 154 $ 264
CitiSelect VIP Folio 300 $ 88 $ 121 $ 154 $ 264
CitiSelect VIP Folio 400 $ 91 $ 130 $ 169 $ 295
CitiSelect VIP Folio 500 $ 91 $ 130 $ 169 $ 295
CitiFunds Small Cap Growth VIP $ 88 $ 121 $ 154 $ 264
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
Fidelity VIP Growth Portfolio $ 86 $ 113 $ 141 $ 236
Fidelity VIP High Income $ 86 $ 114 $ 142 $ 238
Portfolio
Fidelity VIP Equity Income $ 84 $ 110 $ 135 $ 224
Portfolio
Fidelity VIP Overseas Portfolio $ 88 $ 120 $ 152 $ 261
Fidelity VIP II Contrafund $ 86 S 114 $ 142 $ 238
Portfolio
Fidelity VIP II Index 500 $ 82 $ 101 $ 120 $ 191
Portfolio
AIM V.I. Capital Appreciation Fund $ 85 $ 113 $ 140 $ 235
AIM V.I. Government Securities $ 89 $ 122 $ 157 $ 269
Fund
AIM V.I. Growth Fund $ 85 $ 110 $ 136 $ 226
AIM V.I. International Equity $ 89 $ 122 $ 157 $ 269
Fund
AIM V.I. Value Fund $ 89 $ 122 $ 157 $ 269
AIM V.I. Growth and Income Fund $ 88 $ 120 $ 152 $ 261
MFS World Governments Series $ 89 $ 122 $ 157 $ 269
MFS Money Market Series $ 85 $ 110 $ 136 $ 226
MFS Bond Series $ 89 $ 122 $ 157 $ 269
MFS Total Return Series $ 89 $ 122 $ 157 $ 269
MFS Research Series $ 88 $ 120 $ 152 $ 261
MFS Emerging Growth Series $ 88 $ 119 $ 151 $ 258
</TABLE>
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2. If the Contract is annuitized under an annuity option providing either
a life annuity or a life annuity with a period certain of at least five years at
the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
CitiSelect VIP Folio 200 $ 23 $ 72 $ 123 $ 264
CitiSelect VIP Folio 300 $ 23 $ 72 $ 123 $ 264
CitiSelect VIP Folio 400 $ 26 $ 81 $ 139 $ 295
CitiSelect VIP Folio 500 $ 26 $ 81 $ 139 $ 295
CitiFunds Small Cap Growth VIP $ 23 $ 72 $ 123 $ 264
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
Fidelity VIP Growth Portfolio $ 21 $ 64 $ 110 $ 236
Fidelity VIP High Income $ 21 $ 64 $ 111 $ 238
Portfolio
Fidelity VIP Equity Income $ 20 $ 60 $ 104 $ 224
Portfolio
Fidelity VIP Overseas Portfolio $ 23 $ 71 $ 122 $ 261
Fidelity VIP II Contrafund $ 21 $ 64 $ 111 $ 238
Portfolio
Fidelity VIP II Index 500 $ 16 $ 51 $ 88 $ 191
Portfolio
AIM V.I. Capital Appreciation Fund $ 21 $ 64 $ 109 $ 235
AIM V.I. Government Securities $ 24 $ 74 $ 126 $ 269
Fund
AIM V.I. Growth Fund $ 20 $ 61 $ 105 $ 226
AIM V.I. International Equity $ 24 $ 74 $ 126 $ 269
Fund
AIM V.I. Value Fund $ 24 $ 74 $ 126 $ 269
AIM V.I. Growth and Income Fund $ 23 $ 71 $ 122 $ 261
MFS World Governments Series $ 24 $ 74 $ 126 $ 269
MFS Money Market Series $ 20 $ 61 $ 105 $ 226
MFS Bond Series $ 24 $ 74 $ 126 $ 269
MFS Total Return Series $ 24 $ 74 $ 126 $ 269
MFS Research Series $ 23 $ 71 $ 122 $ 261
MFS Emerging Growth Series $ 23 $ 70 $ 121 $ 258
17
<PAGE>
3. If the Contract is not surrendered or annuitized at the end of the
applicable time period:
<TABLE>
<CAPTION>
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 200 $ 23 $ 72 $ 123 $ 264
CitiSelect VIP Folio 300 $ 23 $ 72 $ 123 $ 264
CitiSelect VIP Folio 400 $ 26 $ 81 $ 139 $ 295
CitiSelect VIP Folio 500 $ 26 $ 81 $ 139 $ 295
CitiFunds Small Cap Growth VIP $ 23 $ 72 $ 123 $ 264
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
Fidelity VIP Growth Portfolio $ 21 $ 64 $ 110 $ 236
Fidelity VIP High Income $ 21 $ 64 $ 111 $ 238
Portfolio
Fidelity VIP Equity Income $ 20 $ 60 $ 104 $ 224
Portfolio
Fidelity VIP Overseas Portfolio $ 23 $ 71 $ 122 $ 261
Fidelity VIP II Contrafund $ 21 $ 64 $ 111 $ 238
Portfolio
Fidelity VIP II Index 500 $ 16 $ 51 $ 88 $ 191
Portfolio
AIM V.I. Capital Appreciation Fund $ 21 $ 64 $ 109 $ 235
AIM V.I. Government Securities $ 24 $ 74 $ 126 $ 269
Fund
AIM V.I. Growth Fund $ 20 $ 61 $ 105 $ 226
AIM V.I. International Equity $ 24 $ 74 $ 126 $ 269
Fund
AIM V.I. Value Fund $ 24 $ 74 $ 126 $ 269
AIM V.I. Growth and Income Fund $ 23 $ 71 $ 122 $ 261
MFS World Governments Series $ 24 $ 74 $ 126 $ 269
MFS Money Market Series $ 20 $ 61 $ 105 $ 226
MFS Bond Series $ 24 $ 74 $ 126 $ 269
MFS Total Return Series $ 24 $ 74 $ 126 $ 269
MFS Research Series $ 23 $ 71 $ 122 $ 261
MFS Emerging Growth Series $ 23 $ 70 $ 121 $ 258
</TABLE>
The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples also assume that the Annual Contract Fee
is $30 and that the average Contract Value is $10,000, which translates the
Annual Contract Fee into an assumed .30% charge for the purposes of the examples
based on a $1,000 investment.
The examples should not be considered a representation of past or future
expenses. The assumed 5% annual rate of return is hypothetical and should not be
considered a representation of past or future annual returns, which may be
greater or less than this assumed rate.
18
<PAGE>
SUMMARY
UNLIKE BANK ACCOUNTS, CONTRACT VALUE IS NOT INSURED. INVESTMENT OF
CONTRACT VALUE INVOLVES CERTAIN RISKS INCLUDING LOSS OF PURCHASE PAYMENTS
(PRINCIPAL). CONTRACT VALUE IS NOT DEPOSITED IN OR GUARANTEED BY ANY BANK AND IS
NOT GUARANTEED BY ANY GOVERNMENT AGENCY.
The Contract
Issuance of a Contract. Contracts may be issued in connection with
retirement plans that may or may not qualify for special federal tax treatment
under the Code. The maximum age for Owners on the Contract date is 90. (See
"Issuance of a Contract.")
Free-Look Period. You have the right to return the Contract within 10 days
(30 days if purchased as a result of mail or telephone solicitation) after you
receive it. We will consider the Contract received five days after it is mailed
to your last known address. The returned Contract will become void. We will
return to you an amount equal to the sum of (i) and (ii) on the date the
Contract is received either at our home office or by the sales representative
who sold it plus any premium taxes deducted, where: (i) is the difference
between the premiums paid, including any contract fees or charges, and the
amounts, if any, allocated to the Separate Account; and (ii) is the cash value
of the contract attributable to the amounts so allocated. (See "Free-Look
Period.")
Purchase Payments. The minimum amount we will accept as an initial
purchase payment is $5,000 for Non-Qualified Contracts and $2,000 for Qualified
Contracts. Subsequent purchase payments may be paid under the Contract at any
time before the Annuity Income Date; however, we reserve the right not to accept
payments less than $500 for Non-Qualified Contracts and less than $100 for
Qualified Contracts. Our approval is required for payments that exceed
$1,000,000 per Contract Year. (See "Purchase Payments".)
Allocation of Purchase Payments. Purchase payments under a Contract will
be allocated, as designated by you, to one or more of the subaccounts of the
Separate Account or to the Fixed Account or to both. In states where we must
refund purchase payments in the event you exercise the free-look right, any
portion of the initial net purchase payment to be allocated to any subaccount
will be allocated to the subaccount investing in the MFS Money Market Series
(the "Money Market Subaccount") during the "free-look" period. At the end of
that period, the value in the Money Market Subaccount will be allocated to the
subaccounts as selected by you. The assets of each subaccount will be invested
solely in a corresponding portfolio. The Contract Value, except for amounts in
the Fixed Account, will vary according to the investment performance of the
portfolio(s) in which the selected subaccount(s)
19
<PAGE>
is invested. Interest will be credited to amounts in the Fixed Account at a
guaranteed minimum rate of 3% per year, or a higher current interest rate
declared by us. (See "Allocation of Purchase Payments.") The Fixed Account may
not be available in all states.
Transfers. On or before the Annuity Income Date, you may transfer all or
part of the value in a subaccount or the Fixed Account to another subaccount or
the Fixed Account.
We reserve the right to defer transfers from the Fixed Account for up to 6
months following the date of request.
Currently, a $25 fee is assessed on the 19th and each subsequent transfer
during a Contract Year. We reserve the right, however, to charge this fee for
the 13th and each subsequent transfer during a Contract Year. (See "Transfer
Privilege.")
Partial Withdrawal. Before the Annuity Income Date, you may, by written
notice, withdraw part of the surrender value subject to certain limitations. Any
withdrawal request must be in writing and must specify from which Account(s) the
withdrawal will be made. (See "Partial Withdrawals.")
Surrender. Upon written notice before the Annuity Income Date, you may
surrender the Contract and receive its surrender value. (See "Surrender.")
Charges and Deductions
The following charges and deductions are assessed under the Contract:
Surrender Charge (Contingent Deferred Sales Charge). No charge for sales
expenses is deducted from purchase payments at the time purchase payments are
made. However, a surrender charge may be deducted from amounts surrendered or
withdrawn. A surrender charge also may be deducted from amounts applied to
annuity payment options not providing a life annuity or a life annuity with a
period certain of at least five years. Surrender charges are not deducted upon
payment of a death benefit.
The surrender charge imposed on partial withdrawals, surrenders and upon
application of proceeds to certain annuity options equals a specified percentage
of the purchase payments withdrawn or applied. The surrender charge is
calculated by multiplying the applicable specified percentages by the purchase
payments withdrawn. For purchase payments withdrawn or surrendered within one
year of having been paid, the charge is 7% of the amount of purchase payments
withdrawn or surrendered. For each purchase payment, the surrender charge
decreases each full year that has elapsed since the payment was made. Surrenders
and withdrawals are considered to come first from earnings and then from the
oldest
20
<PAGE>
purchase payment, then the next oldest payment, and so forth. No surrender
charge is assessed upon the withdrawal or surrender of earnings or purchase
payments made more than 5 years prior to the withdrawal or surrender. (See
"Charges for Surrender or Partial Withdrawals.")
During each Contract Year, up to 10% of purchase payments less any prior
withdrawal of purchase payments may be withdrawn without a Surrender Charge.
The surrender charge also may be waived in certain circumstances as
provided in the Contracts. (See "Waiver of Surrender Charge.")
We reserve the right to assess a processing charge equal to the lesser of
$25.00 or 2% of the amount withdrawn for each withdrawal (including the final
surrender) after the first 12 withdrawals in any Contract Year.
Annual Contract Fee. On the last day of each Contract Year prior to the
Annuity Income Date, or the surrender of the Contract, if earlier, we will
deduct an Annual Contract Fee of $30 from the Contract Value. A pro-rated
portion of the fee is deducted from all active Accounts. (See "Annual Contract
Fee.")
The Annual Contract Fee will be waived in its entirety if, at the time of
deduction, the Contract Value is $25,000 or more. In addition, the Annual
Contract Fee will be waived in its entirety for any Contract Year in which
purchase payments of at least $2,500 ($2,000 for Qualified Contracts), exclusive
of the initial purchase payment, are paid.
Mortality and Expense Risk Charge. We deduct a daily mortality and expense
risk charge to compensate us for assuming certain mortality and expense risks.
The charge is deducted from the assets of the Separate Account at an annual rate
of 0.84% (approximately 0.34% for mortality risk and 0.50% for expense risks).
We reserve the right to change this charge in the future but guarantee it will
not exceed 1.25% per annum. (See "Mortality and Expense Risk Charge.")
Asset-Based Administration Charge. We deduct a daily administration charge
to compensate us for certain expenses we incur in administration of the Contract
and the Separate Account. The charge is deducted from the assets of the Separate
Account at an annual rate of 0.15%. We reserve the right to change this charge
in the future but guarantee it will not exceed 0.15% per annum. (See
"Asset-Based Administration Charge".) We do not expect to make a profit from
this charge.
Premium Taxes. If state or other premium taxes are applicable to a
Contract, they will be deducted from the Contract Value. Premium taxes will be
deducted from the Contract Value either: (1) at the
21
<PAGE>
time the Contract is surrendered; (2) on the Annuity Income Date; or (3) at such
other date as the taxes are assessed.
Annuity Provisions
The Annuity Income Date may be elected by you at the time of application
or anytime thereafter. If no Annuity Income Date is elected, it will be the
first day of the calendar month following the Annuitant's 65th birthday or ten
years after the Contract Date, if later. The Annuity Income Date may not be
later than the first day of the month following the Annuitant's 85th birthday.
Qualified Contracts may require an earlier Annuity Income Date. (See "Federal
Tax Matters.")
On the Annuity Income Date, the Contract Value (adjusted as described
below) will be applied to an Annuity Income Option, unless you choose to receive
the surrender value in a lump sum. The Contract Value is adjusted by deducting
applicable premium taxes not yet deducted, and for annuity options other than a
life annuity or a life annuity with a period certain of at least five years,
less any applicable surrender charge. (See "Annuity Payment Options.")
Federal Taxes
Generally, a distribution (including a surrender, partial withdrawal or
death benefit payment) may result in taxable income. In certain circumstances, a
10% penalty tax may apply. For a further discussion of the federal income status
of variable annuity contracts, see "Federal Tax Matters."
22
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following tables set forth certain information pertaining to the net
assets of the Separate Account, as represented by the accumulation unit values
and number of accumulation units for the period from the commencement of
business through December 31, 1997. This condensed financial information is
derived from the financial statements of the Separate Account and should be read
in conjunction with the financial statements, related notes and other financial
information contained in the Statement of Additional Information
<TABLE>
<CAPTION>
Accumulation Unit Value
-----------------------------------------------------
Subaccount Commencement Year Ending Year Ending Year Ending
Date* (12/31/95) (12/31/96) (12/31/97)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CitiSelect VIP Folio 200 1.00 - - 1.06
CitiSelect VIP Folio 300 1.00 - - 1.07
CitiSelect VIP Folio 400 1.00 - - 1.08
CitiSelect VIP Folio 500 1.00 - - 1.09
CitiFunds Small Cap Growth VIP 1.00 - - 1.11
Portfolio (formerly Landmark Small
Cap Equity VIP Fund)
Fidelity VIP Growth Portfolio 1.00 1.31 1.48 1.80
Fidelity VIP High Income 1.00 - - 1.14
Portfolio
Fidelity VIP Equity Income 1.00 - - 1.22
Portfolio
Fidelity VIP Overseas Portfolio 1.00 - - 1.09
Fidelity VIP II Contrafund 1.00 - - 1.21
Portfolio
Fidelity VIP II Index 500 1.00 - - 1.24
Portfolio
AIM V.I. Capital Appreciation Fund 1.00 1.29 1.49 1.67
AIM V.I. Government Securities 1.00 - - 1.06
Fund
AIM V.I. Growth Fund 1.00 - - 1.21
AIM V.I. International Equity 1.00 - - 1.05
Fund
AIM V.I. Value Fund 1.00 - - 1.19
AIM V.I. Growth and Income Fund 1.00 - - 1.18
MFS World Governments Series 1.00 1.10 1.12 1.10
MFS Money Market Series 1.00 1.03 1.06 1.09
MFS Bond Series 1.00 - - 1.08
MFS Total Return Series 1.00 - - 1.16
MFS Research Series 1.00 - - 1.15
MFS Emerging Growth Series 1.00 - - 1.17
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Number of Accumulation Units Outstanding
------------------------------------------------------------
Year Ending Year Ending Year Ending
Subaccount (12/31/95) (12/31/96) (12/31/97)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CitiSelect VIP Folio 200 - - 5,186,850
CitiSelect VIP Folio 300 - - 9,994,557
CitiSelect VIP Folio 400 - - 7,624,470
CitiSelect VIP Folio 500 - - 2,332,285
CitiFunds Small Cap Growth VIP - - 811,490
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
Fidelity VIP Growth Portfolio 1,237,930 2,902,936 6,485,960
Fidelity VIP High Income - - 4,679,724
Portfolio
Fidelity VIP Equity Income - - 11,769,502
Portfolio
Fidelity VIP Overseas Portfolio - - 4,444,906
Fidelity VIP II Contrafund - - 7,182,541
Portfolio
Fidelity VIP II Index 500 - - 17,510,630
Portfolio
AIM V.I. Capital Appreciation Fund 1,345,513 3,464,766 9,405,192
AIM V.I. Government Securities - - 2,587,138
Fund
AIM V.I. Growth Fund - - 1,609,176
AIM V.I. International Equity - - 8,040,029
Fund
AIM V.I. Value Fund - - 6,012,919
AIM V.I. Growth and Income Fund - - 5,216,176
MFS World Governments Series 241,914 467,158 1,814,432
MFS Money Market Series 115,908 491,668 4,552,838
MFS Bond Series - - 1,523,046
MFS Total Return Series - - 6,044,594
MFS Research Series - - 11,348,445
MFS Emerging Growth Series - - 7,769,779
</TABLE>
*The Fidelity VIP Growth Portfolio, AIM V.I. Capital Appreciation Fund, MFS
World Governments Series and MFS Money Market Series subaccounts commenced
operations on February 21, 1995. All other subaccounts commenced operations on
February 3, 1997.
24
<PAGE>
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
First Citicorp Life Insurance Company
First Citicorp Life Insurance Company is a stock life insurance company
organized under the laws of the State of New York in 1978. First Citicorp Life
is wholly owned by Citicorp Life Insurance Company, an Arizona insurer, which in
turn, is wholly owned by Citibank Delaware. Citibank Delaware is a wholly owned
subsidiary of Citicorp Holdings Inc., which in turn, is a wholly owned
subsidiary of Citicorp, one of the world's largest bank holding companies.
First Citicorp Life engages in the reinsurance of credit life insurance
issued by other insurance companies. First Citicorp Life also issues term life
insurance and fixed and variable annuities on a direct basis
As of December 31, 1997, First Citicorp Life Insurance Company had
statutory assets of $515,678,672. First Citicorp Life Insurance Company's
financial statements can be found in the Statement of Additional Information and
should only be considered in the context of its ability to meet any obligations
it may have under the Contract.
Like all financial services providers, First CitiCorp Life utilizes
computer systems that may be affected by Year 2000 transition issues, and relies
on service providers, including the Funds, that also may be affected. We have
developed, and are in the process of implementing, a Year 2000 transition plan.
In addition, we are in the process of confirming that the Funds and other
service providers are also engaged in similar transition plans. The resources
that are being devoted to this effort are substantial. It is difficult to
predict with precision whether the amount of resources ultimately devoted, or
the outcome of these efforts, will have any negative impact on our operations.
However, as of the date of this Prospectus, it is not anticipated that you will
experience negative effects on your investment, or on the services provided in
connection therewith, as a result of Year 2000 transition implementation. We
currently anticipate that our systems will be Year 2000 compliant on or about
January 1, 1999, but there can be no assurance that we will be successful, or
that the interaction with other service providers will not impair services at
that time.
First Citicorp Life Variable Annuity Separate Account
The Separate Account was established by us as a separate account on July
6, 1994. The Separate Account will receive and invest purchase payments made
under the Contracts. In addition, the Separate Account may receive and invest
purchase payments for other variable annuity contracts we may issue in the
future.
Although the assets in the Separate Account are our property, the assets
in the Separate Account attributable to the Contracts are not chargeable with
liabilities arising out of any other business that we may conduct. The assets of
the Separate Account are available to cover our general liabilities only to the
extent that the Separate Account's assets exceed the liabilities arising under
the Contracts and any other contracts supported by the Separate Account. We have
the right to transfer to the General Account any assets of the Separate Account
which are in excess of reserves and other contract liabilities. All obligations
arising under the Contracts are our general corporate obligations.
The Separate Account currently is divided into twenty-three (23)
subaccounts but may, in the future, include additional subaccounts. Each
subaccount invests exclusively in shares of a single corresponding portfolio.
The income, gains and losses, realized or unrealized, from the assets allocated
to each subaccount are credited to or charged against that subaccount without
regard to income, gains or losses from any other subaccount.
25
<PAGE>
The Separate Account has been registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of a separate account under the federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Separate Account by the SEC. The Separate Account
is also subject to the laws of the State of New York which regulate the
operations of insurance companies domiciled in New York.
The Funds
The Separate Account invests in shares of the Variable Annuity Portfolios,
the Fidelity Variable Insurance Products Fund, the Fidelity Variable Insurance
Products Fund II, the AIM Variable Insurance Funds, Inc. and the MFS Variable
Insurance Trust. The Funds are management investment companies of the series
type with one or more investment portfolios. Each Fund is registered with the
SEC as an open-end, management investment company. Such registration does not
involve supervision of the management or investment practices or policies of the
Company or the portfolios by the SEC.
The Funds may, in the future, create additional portfolios that may or may
not be available as investment options under the Contracts. Each portfolio has
its own investment objectives and the income and losses for each portfolio are
determined separately for that portfolio.
The investment objectives and policies of each portfolio are summarized
below. There is no assurance that any portfolio will achieve its stated
objectives. The investment objectives and policies of certain portfolios are
similar to the investment objectives and policies of other portfolios that may
be managed by the same investment adviser or manager. The investment results of
the portfolios, however, may be higher or lower than the results of such other
portfolios. There can be no assurance, and no representation is made, that the
investment results of any of the portfolios will be comparable to the investment
results of any other portfolio, even if the other portfolio has the same
investment adviser or manager. More detailed information, including a
description of risks and expenses, may be found in the prospectuses for the
Funds which must accompany or precede this prospectus and which should be read
carefully and retained for future reference.
Variable Annuity Portfolios. The Variable Annuity Portfolios currently
include five funds, all of which are available as investment options under the
Contracts. The Variable Annuity Portfolios include CitiSelect VIP Folio 200,
CitiSelect VIP Folio 300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500 and
CitiFunds Small Cap Growth VIP Portfolio (formerly Landmark Small Cap Equity VIP
Fund). Each CitiSelect VIP Folio is a total return fund that allocates its
investments among three primary classes of assets--equity, fixed income and
money market securities. Each Portfolio's asset mix is designed to offer a
different level of potential return within a corresponding level of risk.
CitiSelect VIP Folio 200. This portfolio seeks as high a total return over
time as is consistent with a primary emphasis on a combination of fixed
income and money market
26
<PAGE>
securities and a secondary emphasis on equity securities. Under normal
circumstances, 25%-45% of the portfolio's assets will be invested in
equity securities, 35%-55% of the portfolio's assets will be invested in
fixed income securities, and 10%-30% of the portfolio's assets will be
invested in money market securities.
CitiSelect VIP Folio 300. This portfolio seeks as high a total return over
time as is consistent with a balanced emphasis on equity and fixed income
securities. Under normal circumstances, 40%-60% of the portfolio's assets
will be invested in equity securities, 35%-55% of the portfolio's assets
will be invested in fixed income securities, and 1%-10% of the portfolio's
assets will be invested in money market securities.
CitiSelect VIP Folio 400. This portfolio seeks as high a total return over
time as is consistent with a primary emphasis on equity securities, and a
secondary emphasis on fixed income securities. Under normal circumstances,
55%-85% of the portfolio's assets will be invested in equity securities,
15%-53% of the portfolio's assets will be invested in fixed income
securities, and 1%-10% of the portfolio's assets will be invested in money
market securities.
CitiSelect VIP Folio 500. This portfolio seeks as high a return over time
as is consistent with a dominant emphasis on equity securities and a small
allocation to fixed income securities. Under normal circumstances, 70%-95%
of the portfolio's assets will be invested in equity securities, 5%-20% of
the portfolio's assets will be invested in fixed income securities, and
1%-10% of the portfolio's assets will be invested in money market
securities.
CitiFunds Small Cap Growth VIP Portfolio (formerly Landmark Small Cap
Equity VIP Fund). This fund seeks long-term capital growth by investing in
a diversified portfolio of equity securities of U.S. companies with market
capitalizations below the top 1,000 stocks of the equity market. Under
normal circumstances, at least 65% of the fund's total assets will be
invested in such companies. Dividend income, if any, is incidental to this
investment objective.
Citibank, N.A. serves as Investment Manager to these portfolios and
manages their assets in accordance with general policies and guidelines
established by the Trustees of the Variable Annuity Portfolios.
With respect to the CitiSelect Portfolios, Citibank, N.A. expects that, in
general, each Fund's assets will be allocated among the equity, fixed income and
money market class as provided above. However, cash flows of a Fund or changes
in market valuations could
27
<PAGE>
produce different results. Citibank, N.A. will review each Fund's asset
allocation quarterly and expects, in general, to rebalance the Fund's
investments, if necessary, at that time. Rebalancing may be accomplished over a
period of time and may be limited by tax and regulatory requirements.
Fidelity Variable Insurance Products Fund. The Fidelity Variable Insurance
Products Fund currently has five portfolios, four of which, the Growth
Portfolio, the High Income Portfolio, the Equity Income Portfolio, and the
Overseas Portfolio are available as investment options under the Contracts.
Growth Portfolio. This portfolio seeks to achieve capital appreciation.
The portfolio normally purchases common stocks, although its investments
are not restricted to any one type of security. Capital appreciation may
also be found in other types of securities, including bonds and preferred
stocks.
High Income Portfolio*. This portfolio seeks to achieve high current
income by investing, under normal circumstances, at least 65% of its
assets in income producing debt securities, preferred stocks and
convertible securities. The High Income Portfolio typically invests in
longer term, lower quality fixed income securities but may invest in
common stocks, other equity securities and debt securities not currently
paying interest but which are expected to do so in the future. In choosing
investments, the High Income Portfolio also considers growth of capital.
Equity Income Portfolio. This portfolio seeks reasonable income by
investing, under normal circumstances, at least 65% of its assets in
income producing equity securities. The remainder of the Equity Income
Portfolio's assets will tend to be invested in debt obligations, many of
which are expected to be convertible into common stock. In choosing
investments, the portfolio also considers the potential for capital
appreciation.
Overseas Portfolio. This portfolio seeks long term growth of capital by
investing, under normal circumstances, at least 65% of its assets in
securities of issuers from at least three different countries, whose
principal activities are outside of North America (the U.S., Canada,
Mexico and Central America). The majority of the portfolio's assets will
be invested in equity securities. However, the portfolio may also invest
in debt securities of any quality.
Fidelity Management & Research Company serves as investment adviser to
these portfolios and manages their assets in accordance with general policies
and guidelines established by the trustees of the Fidelity Variable Insurance
Products Fund.
28
<PAGE>
Fidelity Variable Insurance Products Fund II. The Fidelity Variable
Insurance Products Fund II currently has five portfolios, two of which, the
Contrafund Portfolio and the Index 500 Portfolio are available as investment
options under the Contracts.
Contrafund Portfolio. Under normal circumstances, this portfolio seeks
capital appreciation by investing mainly in common stocks and securities
convertible into common stock believed to be undervalued by an overly
pessimistic public appraisal but has the flexibility to invest in any type
of security that may produce capital appreciation. The portfolio's
investment strategy may lead to investment in small and mid-sized
companies.
Index 500 Portfolio. This portfolio seeks to match the total return of the
S&P 500 by investing, under normal circumstances, at least 80% of its
assets (65% if portfolio assets are below $20 million) in equity
securities of companies that compose the S&P 500, while keeping expenses
low.
Fidelity Management & Research Company serves as investment adviser to
these portfolios and manages their assets in accordance with general policies
and guidelines established by the trustees of the Fidelity Variable Insurance
Products Fund II.
AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc.
currently has nine portfolios, six of which, the AIM V.I. Capital Appreciation
Fund, the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund, the AIM
V.I. International Equity Fund, the AIM V.I. Value Fund and the AIM V.I. Growth
and Income Fund are available as investment options under the Contracts.
AIM V.I. Capital Appreciation Fund. This portfolio seeks capital
appreciation through investments in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
AIM V.I. Government Securities Fund. This portfolio seeks to achieve a
high level of current income consistent with reasonable concern for safety
of principal by investing in debt securities issued, guaranteed or
otherwise backed by the United States Government.
AIM V.I. Growth Fund. This portfolio seeks growth of capital principally
through investment in common stocks of seasoned and bettered capitalized
companies considered by AIM Advisors, Inc. ("AIM") to have strong earnings
momentum.
AIM V.I. International Equity Fund. This portfolio seeks to provide
long-term growth of capital by investing in a diversified portfolio of
international equity securities, the
29
<PAGE>
issuers of which are considered by AIM to have strong earnings momentum.
AIM V.I. Value Fund. This portfolio seeks to achieve long-term growth of
capital by investing primarily in equity securities judged by AIM to be
undervalued relative to the current or projected earnings of the companies
issuing the securities, or relative to current market value of assets
owned by the companies issuing the securities or relative to the equity
market generally. Income is a secondary objective.
AIM V.I. Growth and Income Fund. This portfolio seeks growth of capital,
with current income as a secondary objective. The fund seeks to achieve
its objective by generally investing at least 65% of its net assets in
stocks of companies believed by AIM to have the potential for above
average growth in revenues and earnings.
AIM serves as investment adviser to these portfolios and manages their
assets in accordance with general policies and guidelines established by the
trustees of the AIM V.I. Capital Appreciation Fund.
MFS Variable Insurance Trust. MFS Variable Insurance Trust currently has
twelve portfolios, six of which, the MFS World Governments Series, the MFS Money
Market Series, the MFS Bond Series, the MFS Total Return Series, the MFS
Research Series and the MFS Emerging Growth Series are available as investment
options under the Contracts.
MFS World Governments Series. This portfolio seeks preservation and growth
of capital, together with moderate current income. Objectives are achieved
through an internationally diversified portfolio consisting primarily of
debt securities (normally at least 80%) and to a lesser extent equity
securities.
MFS Money Market Series. This portfolio seeks as high a level of current
income as is considered consistent with the preservation of capital and
liquidity. Objectives are achieved by investing primarily (normally at
least 80%) in U.S. Government Securities, obligations of banks, commercial
paper and short-term corporate obligations. An investment in the Money
Market Series is neither insured nor guaranteed by the U.S. Government,
and there can be no assurance that the Fund will be able to maintain a
stable net asset value of $1 per share.
MFS Bond Series*. This portfolio seeks primarily to provide as high a
level of current income as is believed consistent with prudent investment
risk and secondarily to protect capital. Under normal conditions, at least
65% of the
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portfolio's total assets will be invested in convertible and
non-convertible debt securities and preferred stocks, U.S. Government
securities, commercial paper, repurchase agreements and cash or cash
equivalents (such as certificates of deposit, and banker's acceptances.).
MFS Total Return Series*. This portfolio's primary investment objective is
to provide above average income (compared to a portfolio invested entirely
in equity securities) consistent with the prudent employment of capital,
and secondarily, to provide a reasonable opportunity for growth of capital
and income. Under normal market conditions, at least 25% of the
portfolio's assets will be invested in fixed income securities and at
least 40% and no more than 75% of its assets will be invested in equity
securities.
MFS Research Series*. This portfolio seeks to provide long term growth of
capital and future income by investing a substantial portion of its total
assets in the common stocks or securities convertible into common stocks
of companies believed to possess better than average prospects for long
term growth. A smaller proportion of the MFS Research Series' assets may
be invested in bonds, short term obligations, preferred stocks or common
stocks whose principal characteristic is income production rather than
growth.
MFS Emerging Growth Series. This portfolio seeks primarily to provide long
term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the primary investment objective of
long term growth of capital. Under normal circumstances, at least 80% of
the portfolio's total assets will be invested in common stocks of
companies that Massachusetts Financial Service Company ("MFS") believes
are early in their life cycle but which have the potential to become major
enterprises.
MFS serves as investment adviser to these portfolios and manages their
assets in accordance with general policies and guidelines established by the
trustees of the MFS Variable Insurance Trust.
Certain of the unaffiliated investment advisers reimburse First Citicorp
Life for administrative costs incurred in connection with administering the
funds as variable funding options. These reimbursements are paid out of the
advisers' investment advisory fees as a percentage of assets under management.
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*The portfolios' investment strategy may provide the opportunity for higher than
average yields by investing in securities with higher than average risk, such as
lower and unrated debt and comparable equity instruments. Please consult each
portfolio's
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Fund prospectus accompanying this Prospectus for more information about the risk
associated with such investments.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a portfolio that are held in
the Separate Account or that the Separate Account may purchase. If the shares of
a portfolio are no longer available for investment or if, in our judgment,
further investment in any portfolio should become inappropriate, we may redeem
the shares, if any, of that portfolio and substitute shares of another
portfolio. We will not substitute any shares attributable to a Contract's
interest in a subaccount without notice and prior approval of the SEC and state
insurance authorities, to the extent required by the 1940 Act or other
applicable law.
We also reserve the right to establish additional subaccounts of the
Separate Account, each of which would invest in shares of a new corresponding
portfolio having a specified investment objective. We may, in our sole
discretion, establish new subaccounts or eliminate or combine one or more
subaccounts if marketing needs, tax considerations or investment conditions
warrant. Any new subaccounts may be made available to existing Contract Owners
on a basis to be determined by us. Subject to obtaining any approvals or
consents required by applicable law, the assets of one or more subaccounts may
be transferred to any other subaccount if, in our sole discretion, marketing,
tax, or investment conditions warrant.
In the event of any such substitution or change, we may (by appropriate
endorsement, if necessary) change the Contract to reflect the substitution or
change. If we consider it to be in the best interest of Owners and Annuitants,
and subject to any approvals that may be required under applicable law, the
Separate Account may be operated as a management investment company under the
1940 Act, it may be deregistered under that Act if registration is no longer
required, it may be combined with other separate accounts, or its assets may be
transferred to another separate account. In addition, we may, when permitted by
law, restrict or eliminate any voting privileges of Owners or other persons who
have such privileges under the Contracts.
DESCRIPTION OF THE CONTRACT
Issuance of a Contract
In order to purchase a Contract, application must be made to us through
our licensed representative who is also a registered representative of Citicorp
Investment Services, Inc., a registered broker-dealer which has a selling
agreement with CFBDS, Inc.
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Contracts may be sold to or in connection with retirement plans that do not
qualify for special tax treatment as well as retirement plans that qualify for
special tax treatment under the Code. The maximum age for Owners on the Contract
Date is 90.
Purchase Payments
The minimum amount that we will accept as an initial purchase payment is
$5,000 for Non-Qualified Contracts, $2,000 for Qualified Contracts. Subsequent
purchase payments may be paid at any time during the Annuitant's lifetime and
before the Annuity Income Date.
We reserve the right not to accept purchase payments in excess of $1
million per Contract Year. We also reserve the right not to accept payments of
less than $500 for Non-Qualified Contracts or less than $100 for Qualified
Contracts.
Under our automatic purchase payment plan, you can select a monthly
payment schedule pursuant to which purchase payments will be automatically
deducted from a bank account or other source. We reserve the right not to accept
such monthly payments if less than $500 for Non-Qualified Contracts or less than
$100 for Qualified Contracts.
Free-Look Period
The Contract provides for an initial "free-look" period. You have the
right to return the Contract within 10 days of receiving it (30 days if
purchased as a result of mail or telephone solicitation). When we receive the
returned Contract at our home office or when the sales representative who sold
the Contract receives it before the end of this period, we will cancel the
Contract and refund to you an amount equal the sum of (i) and (ii) as of the
date the returned Contract is received plus any premium taxes deducted where:
(i) is the difference between the premiums paid, including any contract fees or
charges, and the amount, if any, allocated to the Separate Account; and (ii) is
the cash value of the contract attributable to the amounts so allocated. This
amount may be more or less than the aggregate amount of purchase payments made
up to that time. The free-look period begins on the date following your receipt
of the Contract. We will consider the Contract received five days after it is
mailed to your last known address.
Allocation of Purchase Payments
At the time of application, you select the allocation of the initial net
purchase payment among the subaccounts and the Fixed Account. Any allocation
must be for at least $100 and be a whole percentage of a purchase payment.
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If the application for a Contract is properly completed and is accompanied
by all the information necessary to process it, including payment of the initial
purchase payment, the initial purchase payment will be allocated, as designated
by you, to one or more of the subaccounts or to the Fixed Account within two
valuation days of receipt of such purchase payment by us at our home office. If
the application is not properly completed, we reserve the right to retain the
purchase payment for up to five valuation days while we attempt to complete the
application. If the application is not complete at the end of the 5-day period,
we will inform the applicant of the reason for the delay and the initial
purchase payment will be returned immediately, unless the applicant specifically
consents to our retaining the purchase payment until the application is
complete. Once the application is complete, the initial purchase payment will be
allocated as designated by you within two valuation days.
Notwithstanding the foregoing, in jurisdictions where we must refund the
greater of aggregate purchase payments or Contract Value in the event you
exercise the free-look right, any portion of the initial purchase payment to be
allocated to a subaccount will be allocated to the Money Market Subaccount for
the free-look period following the Contract Date. At the end of that period, the
amount in the Money Market Subaccount will be allocated to the subaccounts as
designated by you based on the proportion that the allocation percentage for
each such subaccount bears to the sum of the allocation percentages set forth in
the purchase payment allocation schedule then in effect.
Any subsequent purchase payments will be allocated as of the end of the
valuation period in which the subsequent purchase payment is received by us and
will be allocated in accordance with the purchase payment allocation schedule in
effect at the time the purchase payment is received. However, you may direct
individual payments to a specific subaccount or to the Fixed Account (or any
combination thereof) without changing the existing allocation schedule. The
allocation schedule may be changed by you at any time by written notice.
Changing the purchase payment allocation schedule will not change the allocation
of existing Contract Value among the subaccounts or the Fixed Account.
The Contract Values allocated to a subaccount will vary with that
subaccount's investment experience, and you bear the entire investment risk. You
should periodically review your purchase payment allocation schedule in light of
market conditions and your overall financial objectives.
Variable Contract Value
The Variable Contract Value will reflect the investment experience of the
selected subaccounts, any purchase payments paid, any surrenders or partial
withdrawals, any transfers, and any
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charges assessed in connection with the Contract. There is no guaranteed minimum
Variable Contract Value, and, because a Contract's Variable Contract Value on
any future date depends upon a number of variables, it cannot be predetermined.
Calculation of Variable Contract Value. The Variable Contract Value is
determined at the end of each valuation period prior to the Annuity Income Date.
The value will be the aggregate of the values attributable to the Contract in
each of the subaccounts, determined for each subaccount by multiplying that
subaccount's accumulation unit value for the relevant valuation period by the
number of accumulation units of that subaccount allocated to the Contract.
Determination of Number of Accumulation Units. Prior to the Annuity Income
Date, any amounts allocated or transferred to the subaccounts will be converted
into subaccount accumulation units. The number of accumulation units to be
credited to a Contract is determined by dividing the dollar amount being
allocated or transferred to a subaccount by the accumulation unit value for that
subaccount at the end of the valuation period during which the amount is
allocated or transferred. The number of accumulation units in any subaccount
will be increased at the end of the valuation period by any purchase payments
allocated to the subaccount during the current valuation period and by any
amounts transferred to the subaccount from another subaccount or from the Fixed
Account during the current valuation period.
Any amounts transferred, surrendered or deducted from a subaccount will be
processed by cancelling or liquidating accumulation units. The number of
accumulation units to be cancelled is determined by dividing the dollar amount
being removed from a subaccount by the accumulation unit value for that
subaccount at the end of the valuation period during which the amount was
removed. The number of accumulation units in any subaccount will be decreased at
the end of the valuation period by: (a) any amounts transferred (and any
applicable transfer fee) from that subaccount to another subaccount or to the
Fixed Account; (b) any amounts withdrawn or surrendered during that valuation
period; (c) any surrender charge, Annual Contract Fee or premium tax assessed
upon a partial withdrawal or surrender; and (d) the Annual Contract Fee, if
assessed during that valuation period.
Determination of Accumulation Unit Value. The accumulation unit value for
each subaccount's first Valuation Period was set at $1.00. The accumulation unit
value for a subaccount is calculated for each subsequent Valuation Period by
multiplying that subaccount's accumulation unit value on the preceding Valuation
Day by the net investment factor for that sub-account for the Valuation Period
then ended.
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The net investment factor for each subaccount for any Valuation Period is
calculated by dividing (1) by (2) and subtracting (3) from the result, where:
(1) Is the net asset value per share of the corresponding portfolio at the
end of the Valuation Period plus the per share amount of any declared
and unpaid dividends or capital gains accruing to that portfolio plus
(or minus) a per share credit (or charge) for any taxes resulting from
the investment operations of the subaccount;
(2) Is the portfolio's net asset value per share at the beginning of the
Valuation Period; and
(3) Is a factor representing the daily mortality and expense risk charge
and the administration charge deducted from the subaccount.
Transfer Privileges
General. Before the Annuity Income Date you may transfer all or part of
the amount in a subaccount or the Fixed Account to another subaccount or the
Fixed Account.
We reserve the right to defer transfers from the Fixed Account for up to 6
months following the date of the request.
If the value remaining in any Account after a transfer is less than $100,
we have the right to transfer the entire amount instead of the requested amount.
In the absence of any other directions, such transfer will be allocated in the
same proportion as the transfer request resulting in this action.
Subject to the foregoing, there currently is no limit on the number of
transfers that can be made among or between subaccounts or to or from the Fixed
Account.
Transfers may be made based upon instructions given by written request or
by telephone. We will only honor telephone transfer requests if we have a
currently valid telephone transfer authorization form on file signed by you. A
telephone transfer authorization form received by us at our home office is valid
until it is rescinded or revoked in writing by you or until a subsequently dated
form signed by you is received at our home office. You may provide a telephone
transfer authorization with the application or pursuant to a written request
after the Contract Date.
We employ reasonable procedures to confirm that instructions communicated
by telephone are genuine and if we follow such procedures we will not be liable
for any losses due to unauthorized or fraudulent instructions. We, however, may
be liable for such
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losses if we do not follow those reasonable procedures. The procedures we follow
for telephone transfers include confirming the correct name, contract number and
social security number code for each telephone transfer.
We reserve the right to modify, restrict, suspend or eliminate the
transfer privileges (including the telephone transfer facility) at any time, for
any class of Contracts, for any reason. In particular, we reserve the right to
not honor transfers requested by a third party holding a power of attorney from
an Owner where that third party requests simultaneous transfers on behalf of the
Owners of two or more Contracts.
Transfer Fee. Currently, a $25 fee is assessed on the 19th and each
subsequent transfer during a Contract Year. We reserve the right, however, to
charge $25 for the 13th and each subsequent transfer during a Contract Year.
(See "Charges and Deductions".)
Dollar-Cost Averaging. If elected at the time of the application and at
any time thereafter by written request, you may systematically or automatically
transfer (on a monthly basis) specified dollar amounts from the Money Market
Subaccount or the Fixed Account, but not from both Accounts at the same time, to
other subaccounts. This is known as the dollar-cost averaging method of
investment. The fixed dollar amount will purchase more accumulation units of a
subaccount when their value is lower and fewer units when their value is higher.
Over time, the cost per unit averages out to be less than if all purchases of
units had been made at the highest value and greater than if all purchases had
been made at the lowest value. The dollar-cost averaging method of investment
reduces the risk of making purchases only when the price of accumulation units
is high. It does not assure a profit or protect against a loss in declining
markets.
The minimum transfer amount to a subaccount for dollar-cost averaging is
$100 per month (or the equivalent). Each transfer from the Money Market
Subaccount must be equal to or less than 1/6 of the Money Market Subaccount
value at the time the automatic transfers begin. The maximum per transfer amount
for transfer from the Fixed Account is also 1/6 of the Fixed Account value at
the time the automatic transfers begin. Once elected, dollar-cost averaging
remains in effect for a Contract until the Contract Value in the Money Market
Subaccount or the Fixed Account is inadequate to execute the requested transfers
or until you cancel the election by providing us with at least 6 days prior
written notice. You may exercise your right to cancel the election at any time.
There is no additional charge for using dollar-cost averaging.
However, automatic transfers will be treated as any other transfer in
determining the number of transfers in any Contract Year. We reserve the right
to discontinue offering the dollar-cost averaging facility at any time and for
any reason. A dollar-cost averaging
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program in effect at the time of such discontinuance will continue unless
terminated by the Contract Owner.
Surrenders and Partial Withdrawals
Surrender. At any time before the Annuity Income Date, you may surrender
the Contract for its surrender value. The surrender value will be determined as
of the end of the Valuation Period during which written notice requesting
surrender is received at our home office. The surrender value will be paid in a
lump sum. A surrender may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
Partial Withdrawals. At any time before the Annuity Income Date, you may
make partial withdrawals of the surrender value. Partial withdrawal requests
must be in writing and specify from which Account(s) the withdrawal is to be
made. The amount withdrawn must equal at least $500 except for systematic
withdrawals. When a withdrawal is made, you will receive the amount requested to
be withdrawn less any applicable surrender charge. If a partial withdrawal
request would reduce the Contract Value to less than $2,000, we may pay the full
Contract Value and terminate the Contract. We will withdraw the amount requested
from the Contract Value as of the end of the Valuation Period during which
written notice requesting the partial withdrawal is received. (See "Surrender
Charge.")
A partial withdrawal may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
We currently do not impose a processing charge for withdrawals, however,
we reserve the right to assess a processing charge equal to the lesser of $25.00
or 2% of the amount withdrawn for the 13th and each subsequent withdrawal during
a Contract Year. The processing charge will be in addition to any applicable
surrender charge. This charge will be deducted from the Account from which the
withdrawal is made and will reduce the Account value available for withdrawal
accordingly. If a withdrawal is made from more than one Account at the same
time, the processing charge would be deducted pro-rata from the remaining
Contract Value in such Account(s).
Surrender and Partial Withdrawal Restrictions. Your right to make
surrenders and partial withdrawals is subject to any restrictions imposed by
applicable law or employee benefit plan. We may defer payments from the Fixed
Account for up to six months.
Restrictions on Distributions from Certain Types of Contracts. There are
certain restrictions on surrenders of and partial withdrawals from Contracts
used as funding vehicles for Code Section 403(b) retirement programs. Section
403(b)(11) of the Code
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restricts the distribution under Section 403(b) annuity contracts of: (i)
elective contributions made in years beginning after December 31, 1988; (ii)
earnings on those contributions; and (iii) earnings in such years on amounts
held as of the last year beginning before January 1, 1989. Distributions of
those amounts may only occur upon the death of the employee, attainment of age
59 1/2, separation from service, disability, or financial hardship. In addition,
income attributable to elective contributions may not be distributed in the case
of hardship.
Systematic Withdrawals. You may elect in writing at the time of the
application or any time after the first Contract Anniversary to receive periodic
partial withdrawals under our systematic withdrawal plan. Under the systematic
withdrawal plan, we will make partial withdrawals on a monthly, quarterly,
semi-annual or annual basis from designated Accounts as specified by you.
Withdrawals from an Account must be at least $50 each.
The withdrawals may be requested on the following basis: (1) as a
specified dollar amount; and (2) as a specified whole percent of Contract Value.
Participation in the systematic withdrawal plan will terminate on the
earliest of the following events: (1) the value in an Account from which partial
withdrawals are being made becomes zero; (2) a termination date specified by you
is reached; or (3) you request that your participation in the plan cease.
Withdrawals under the systematic withdrawal plan are subject to a surrender
charge. (See "Surrender Charge").
Systematic withdrawals may have adverse federal income tax consequences
and you should, therefore, consult with your tax adviser before electing to
participate in the plan. We reserve the right to discontinue offering the
systematic withdrawal plan at any time. A systematic withdrawal plan in effect
at the time of such discontinuance will continue unless terminated by the
Contract owner.
Death Benefit Before the Annuity Income Date
Death of the Owner. Upon receipt of due proof of your death (or in the
case of Joint Owners, the death of the first Joint Owner to die) while the
Contract is in force and before the Annuity Income Date, we will pay the
Beneficiary the Death Benefit. In the case of Joint Owners, the surviving Joint
Owner will be the primary beneficiary. You may specify the manner in which the
Death Benefit is to be paid. If you do not specify how the Death Benefit is to
be paid, the Beneficiary may elect the manner in which the Death Benefit is to
be distributed.
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In either case, the Death Benefit under a Non-Qualified Contract must be
distributed in full within 5 years after the deceased Owner's death unless:
1. The benefit is paid as a life annuity or an annuity with a period
certain not exceeding the Beneficiary's life expectancy with payments
beginning within one year of the deceased Owner's death; or
2. The Beneficiary is the surviving spouse of the deceased Owner, in which
case he or she may continue this Contract as the Owner.
If the Beneficiary is not a natural person, the benefit must be
distributed within 5 years of your death. Similar rules apply to Qualified
Contracts.
Death Benefit. If you die prior to age 75, the Death Benefit will be the
greatest of:
1. The Contract Value on the date we receive due proof of your death;
2. The Contract Value on the most recent 5th Contract Anniversary
immediately preceding the date of death, increased by the dollar amount
of any purchase payments and reduced by the dollar amount of any
withdrawals made since that Contract Anniversary; or
3. 100% of all purchase payments made less the dollar amount of any
purchase payment withdrawals since the date this Contract was issued.
If you die on or after your 75th birthday, the Death Benefit will equal
the greater of:
1. The Contract Value on the date we receive due proof of your death;
2. The Death Benefit on your 75th birthday, less the dollar amount of any
subsequent withdrawals; or
3. 100% of all purchase payments made less the dollar amount of any
purchase payment withdrawals since the date this Contract was issued.
If the Death Benefit is paid immediately in one lump sum, the Contract
will end on the date of payment. If the Death Benefit is not taken immediately
in one lump sum, the Death Benefit will become the new Contract Value. Any
resulting increase in the Contract Value will be allocated to each Account in
proportion to
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the distribution of the Contract Value on the date we receive due proof of your
death.
If you die (or in the case of Joint Owners, the first Owner to die) prior
to the Annuity Income Date and there are two or more Beneficiaries, each
Beneficiary will receive an equal share of the Death Benefit unless you specify
otherwise in writing. If a named Beneficiary dies before you, the interest of
that Beneficiary will end on his or her death. If no Beneficiary is named or no
Beneficiary survives you, the commuted value of the Death Benefit will be paid
to your estate.
Death of the Annuitant Prior to the Annuity Income Date: If the Annuitant
dies prior to the Annuity Income Date, you may designate a new Annuitant. If no
new Annuitant is named within 30 days after the death of the Annuitant, you will
become the Annuitant under the Contract. If you are the Annuitant, upon receipt
of due proof of your death, we will pay the Beneficiary the Death Benefit, as
described above.
Annuity Payments on the Annuity Income Date
The Annuity Income Date may be elected by you at the time of the
application or any time thereafter. You may change the Annuity Income Date at
any time provided you give us 30 days prior written notice. If no Annuity Income
Date is elected, it will be the first day of the calendar month following the
Annuitant's 65th birthday or ten years after the Contract Date, if later. The
Annuity Income Date may not be later than the first day of the month following
the Annuitant's 85th birthday. Qualified Contracts may require an earlier
Annuity Income Date. (See "Federal Tax Matters.")
On the Annuity Income Date, the Contract Value, less any applicable prior
undeducted premium taxes, will be applied under the life income annuity payment
option with ten years guaranteed, unless you elect to have the proceeds paid
under another payment option or to receive the surrender value in a lump sum.
(See "Annuity Payment Options.") Unless you instruct us otherwise, amounts in
the Fixed Account will be used to provide a fixed-annuity payment option and
amounts in the Separate Account will be used to provide a variable annuity
payment option.
Any time prior to the Annuity Income Date, you may designate or change the
payee (Annuitant) to receive payments under the applicable annuity payment
option.
Payments
Any surrender, partial withdrawal, or death benefit will usually be paid
within seven days of receipt of a written request, any information or
documentation reasonably necessary to process the request, and (in the case of a
Death Benefit) receipt and filing of due proof of death. However, payments may
be postponed if:
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1. the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or trading on the exchange is
restricted as determined by the SEC; or
2. the SEC permits by an order the postponement for the protection of
Contract Owners; or
3. the SEC determines that an emergency exists that would make the
disposal of securities held in the subaccount or the determination
of the value of the subaccount's net assets not reasonably
practicable.
If a recent check or draft has been submitted, we have the right to delay
payment until we have assured ourselves that the check or draft has been
honored.
We have the right to defer payment of any surrender or partial withdrawal
or transfer from the Fixed Account for up to six months from the date of receipt
of written notice for such a surrender or transfer. If payment is not made
within 10 days after receipt of documentation necessary to complete the
transaction, interest will be added to the amount paid from the date of receipt
of documentation at the minimum rate required by law or the Current Fixed
Account Interest Rate, if greater.
Modification
Upon notice to you, or the Annuitant, we may modify the Contract if:
1. necessary to permit the Contract or the Separate Account to comply
with any applicable law or regulation issued by a government
agency; or
2. necessary to reflect a change in the operation of the Separate
Account or a subaccount; or
3. necessary to add, delete or modify an Account; or
4. necessary to add, modify or delete subaccounts or portfolios.
In the event of most such modifications, we will make appropriate
endorsement to the Contract.
Owner
You are the Owner of the Contract. You are also the Annuitant unless a
different Annuitant is named. Any Joint Owner must be your spouse unless we
agree otherwise. For Qualified Contracts, the Owner must be the Annuitant and
Joint Owners are not permitted.
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Before the Annuity Income Date you have all the rights under the Contract,
subject to the rights of any assignee of record. This includes the right to:
1. Transfer values between Accounts and designate or change the allocation of
purchase payments to each Account;
2. Name and/or change the Beneficiaries, Owner or Annuitant;
3. Surrender the Contract in whole or in part for cash;
4. Assign the Contract Value, in whole or in part;
5. Designate and change the Annuity Income Date; and
6. Elect or change the Annuity Payment Option.
All elections, authorizations and change requests must be made to us in
writing. Upon receipt by us, any change will be effective as of the date it was
signed by you, except that any values or amounts payable under the Contract will
be determined as of the Valuation Day on or next following the date of receipt.
Payment made or action taken by us prior to the time written notice is received
will discharge our liability under this Contract to the extent of such action or
payment. The consent of any irrevocable Beneficiary is required to exercise any
right. If Joint Owners are named, both must consent to any change.
Reports to Owners
At least annually, we will mail to each Owner, at such Owner's last known
address of record, a report setting forth the Contract Value, subaccount values,
and Fixed Account Value, as well as your current purchase payment allocation
directions. We will also provide you with shareholder reports of the Funds as
well as other notices, reports or documents as required by law.
Inquiries
Inquiries regarding a Contract may be made by writing to us at our home
office.
THE FIXED ACCOUNT
You may allocate some or all of the purchase payments and transfer some or
all of the Contract Value to the Fixed Account, which is part of our General
Account and pays interest at declared rates guaranteed for one year. Our General
Account supports our insurance and annuity obligations. Since the Fixed Account
is part of the General Account, we assume the risk of investment gain or
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loss on this amount. All assets in the General Account are subject to our
general liabilities from business operations.
The Fixed Account has not been, and is not required to be, registered with
the SEC under the Securities Act of 1933, and neither the Fixed Account nor our
General Account has been registered as an investment company under the 1940 Act.
Therefore, neither our General Account, the Fixed Account, nor any interests
therein are generally subject to regulation under the 1933 Act or the 1940 Act.
The disclosures relating to the Fixed Account which are included in this
prospectus are for your information and have not been reviewed by the SEC.
However, such disclosures may be subject to certain generally applicable
provisions of federal securities laws relating to the accuracy and completeness
of statements made in prospectuses.
Fixed Account Value
The Fixed Account Value is credited with interest, as described below. The
Fixed Account Value reflects interest credited, the allocation of purchase
payments, transfers of Contract Value from the Fixed Account, surrenders and
partial withdrawals from the Fixed Account and charges assessed in connection
with the Contract. The Fixed Account Value is guaranteed to accumulate at a
minimum effective annual interest rate of 3%.
Beginning on the date we issue the Contract, we will credit any portion of
the initial purchase payment allocated to the Fixed Account with a specified
interest rate, known as the Initial Fixed Account Interest Rate. We may declare
different initial interest rates for each subsequent purchase payment or
transfer into the Fixed Account. We will guarantee the initial rate credited for
one year from the date the purchase payment is received or transfer is
effective. Thereafter, the interest rate earned will be the applicable Current
Fixed Account Interest Rate as we may declare.
The Current Fixed Account Interest Rate is a rate we establish from time
to time for all amounts under the Contract that have been allocated to the Fixed
Account for more than one year. We may change the Current Fixed Account Interest
Rate from time to time at our sole discretion but not more often than once every
twelve months. The Initial Fixed Account Interest Rate and the Current Fixed
Account Interest Rate will vary but will always be equal to or greater than an
effective annual rate of 3%. We have no specific formula for determining the
Initial Fixed Account Interest Rate or the Current Fixed Account Interest Rate.
The Fixed Account Value will not share in the investment performance of our
General Account or any portion thereof.
At your written request, all or a portion of the Fixed Account Value may
be transferred to any subaccount. If the value remaining in the Fixed Account
after a transfer is less than $100, we have the right to transfer the entire
amount instead of the requested amount. We also reserve the right to defer
transfers from the Fixed Account for up to 6 months following the date of the
request.
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CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
General. No charge for sales expenses is deducted from purchase payments
at the time purchase payments are paid. However, a surrender charge may be
deducted upon surrender or partial withdrawal of purchase payments. A surrender
charge also may be deducted from amounts applied to annuity options not
providing a life annuity or a life annuity with a period certain of at least
five years. Surrender charges are not deducted upon payment of a death benefit
or from withdrawals or surrender of earnings under the Contract. (See "Annuity
Payments on the Annuity Income Date".)
Charge for Partial Withdrawal or Surrender. A charge is imposed on partial
withdrawals and surrenders equal to a specified percentage of the purchase
payments withdrawn. The surrender charge is calculated by multiplying the
applicable percentages specified in the table below by the purchase payments
withdrawn. The number of years since the date of a purchase payment being
withdrawn will determine the surrender charge percentage that will apply to that
purchase payment. The surrender charge is calculated using the assumption that
all earnings are withdrawn first and then all purchase payments are withdrawn on
a first-in-first-out basis.
<TABLE>
<CAPTION>
Number of Years Since Charge as Percentage
Date of Purchase Payment of Purchase Payment Withdrawn
------------------------ -----------------------------
<S> <C> <C>
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5+ 0%
</TABLE>
Any applicable surrender charge is deducted from the amount withdrawn.
Amounts Not Subject to Surrender Charge. During each Contract Year, up to
10% of all purchase payments not previously withdrawn, less any prior withdrawal
of purchase payments, may be withdrawn without the imposition of a surrender
charge. Purchase payments surrendered or withdrawn in excess of this 10% will be
assessed a surrender charge. This right is not cumulative from Contract Year to
Contract Year.
Annual Contract Fee
On the last day of each Contract Year prior to the Annuity Income Date, we
deduct from the Contract Value an Annual Contract Fee of $30 to reimburse us for
administrative expenses relating to the
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Contract. The fee will be charged by reducing the value of all active Accounts
on a pro-rata basis. With respect to each subaccount, we deduct this fee by
cancelling accumulation units. The number of accumulation units deducted from
each subaccount will be determined by dividing the pro-rata portion of the fee
applicable to that subaccount by the accumulation unit value of that subaccount
on the date the fee is assessed. The Annual Contract Fee also is deducted upon
surrender of a Contract if other than on the last day of each Contract Year. We
do not deduct the Annual Contract Fee under Contracts with a Contract Value of
$25,000 or more on the date of deduction. In addition, we do not deduct the
Annual Contract Fee under Contracts for which purchase payments of at least
$2,500 ($2,000 for Qualified Contracts), exclusive of the initial purchase
payment, are received during the Contract Year.
Asset-Based Administration Charge
We deduct a daily administration charge to compensate us for certain
expenses we incur in administration of the Contract and the Separate Account.
The charge is deducted from the assets of the Separate Account at an annual rate
not to exceed 0.15%.
Transfer Processing Fee
We reserve the right to charge $25 for the 13th and each subsequent
transfer during a Contract Year. Currently, no fee is assessed until the 19th
transfer during a Contract Year. For the purpose of assessing such a transfer
fee, each transfer from any Account, including monthly transfers under the
dollar-cost averaging facility, would be considered to be one transfer,
regardless of the number of subaccounts into which value is transferred. The
transfer fee would be deducted from the Account from which the transfer is made
and will reduce the Account Value available for transfer accordingly. If a
transfer is made from more than one Account at the same time, separate transfer
fees would be deducted from the remaining Contract Value in each Account.
Mortality and Expense Risk Charge
To compensate us for assuming mortality and expense risks, we deduct a
daily mortality and expense risk charge from the assets of the Separate Account.
This charge will not exceed 1.25% annually (approximately 0.50% for mortality
risk and 0.75% for expense risk), which is equivalent to a daily rate of
0.0034246%. Currently, the annual mortality and expense risk charge is 0.84%
(approximately 0.34% for mortality risk and 0.50% for expense risk), which is
equivalent to a daily rate of 0.0023128%.
The mortality risk we assume is that Annuitants may live for a longer
period of time than estimated when the guarantees in the
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Contract were established. Because of these guarantees, each payee is assured
that longevity will not have an adverse effect on the annuity payments received.
The mortality risk that we assume also includes a guarantee to pay a Death
Benefit if an Owner dies before the Annuity Income Date. The expense risk that
we assume is the risk that the administrative fees and transfer fees (if
imposed) may be insufficient to cover actual future expenses. We may use any
mortality and expense risk profits to finance contract distribution expenses.
Fund Expenses
Because the Separate Account purchases shares or units of the Variable
Annuity Portfolios, the Fidelity Variable Insurance Products Fund, the Fidelity
Variable Insurance Products Fund II, the AIM Variable Insurance Funds, Inc. and
the MFS Variable Insurance Trust, the net assets of each subaccount of the
Separate Account will reflect the investment advisory fees and other operating
expenses incurred by the corresponding portfolio of the relevant Fund. See the
accompanying current Prospectuses for the Funds.
Premium Taxes
A state and other governmental entities may levy a premium tax, currently
ranging up to 3.5%, on annuity contracts issued by insurance companies. Premium
tax rates are subject to change from time to time by legislative and other
governmental action. In addition, other government units within a state may levy
such taxes.
The timing of tax levies varies from one taxing authority to another. If
premium taxes are applicable to a Contract, we will deduct such premium taxes
against Contract Value in a manner determined by us in compliance with
applicable state law. Premium taxes deducted from Contract Value currently are
assessed either: (1) at the time the Contract is surrendered; (2) on the Annuity
Income Date; or (3) at such other date as the taxes are assessed.
Other Taxes
Currently, no charge is made against the Separate Account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the Separate Account or the Contracts. We may, however, make
such a charge in the future from surrender value, death benefits or annuity
payments, as appropriate. Such taxes may include taxes (levied by any government
entity) which we determine to have resulted from: (1) the establishment or
maintenance of the Separate Account; (2) receipt by us of purchase payments; (3)
issuance of the Contracts; or (4) the payment of annuity payments.
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ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
On the Annuity Income Date, the Contract Value less any premium tax
previously unpaid and less any applicable surrender charge will be applied under
an annuity payment option. (See "Annuity Payments on the Annuity Income Date.")
If an election of an annuity payment option is not on file at our home office on
the Annuity Income Date, the proceeds will be paid as a life income annuity with
payments for ten years guaranteed. The value of each subaccount will be applied
to provide a variable annuity and the value of the Fixed Account shall be
applied to provide a fixed dollar annuity. An annuity payment option may be
elected, revoked, or changed by you at any time before the Annuity Income Date
upon 30 days prior written notice. You may elect to apply any portion of the
Contract Value less any premium tax previously unpaid to provide either variable
annuity payments or fixed annuity payments or a combination of both. The annuity
payment options available are described below. In addition, you may elect any
other method of payment that is mutually agreeable to you and us.
We reserve the right to refuse the election of an annuity payment option
other than paying the Contract Value, less any applicable surrender charge and
premium tax previously unpaid, in a lump sum if the total amount applied to an
annuity payment option would be less than $2,000. If the amount of any annuity
payment for each affected Account would be or becomes less than $50.00, we may
reduce the frequency of payments to an interval that would result in payments of
at least $50.00
Fixed Annuity Payments
Fixed annuity payments are periodic payments from us to the designated
payee, the amount of which is fixed and guaranteed by us. The amount of each
payment depends only on the form and duration of the annuity payment option
chosen, the age of the Annuitant, the sex of the Annuitant (if applicable), the
amount applied to purchase the annuity payments and the applicable annuity
purchase rates in the Contract. The annuity purchase rates in the Contract are
based on a minimum guaranteed interest rate of 3.0%. We may, in our sole
discretion, make annuity payments in an amount based on a higher interest rate.
Legal Developments Regarding Unisex Actuarial Tables
In 1983, the United States Supreme Court held in Arizona Governing
Committee v. Norris that optional annuity benefits provided under an employee's
deferred compensation plan could not, under Title VII of the Civil Rights Act of
1964, vary between men and women on the basis of sex. In addition, legislative,
regulatory, or decisional authority of some states may prohibit use
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of sex-distinct mortality tables under certain circumstances. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the impact of these authorities on any employment-related insurance or
benefits program before purchasing the Contract.
Variable Annuity Payments
The dollar amount of the first monthly variable annuity payment is
determined by dividing the Value of the Accounts to be applied to a variable
annuity on the Annuity Income Date by 1,000 and multiplying the result by the
appropriate factor in the annuity tables provided in the Contract. The
appropriate factor is based on annual net investment return of 3.0%. The amount
of each payment will depend on the age of the Annuitant(s) at the time the first
payment is due, and the sex of the Annuitant(s), if applicable, unless otherwise
required by law.
The net investment performance of a subaccount is translated into a
variation in the amount of variable annuity payments through the use of annuity
units. The amount of the first variable annuity payment associated with each
subaccount is applied to purchase subaccount annuity units at the annuity unit
value for the subaccount on the Annuity Income Date. The number of annuity units
of each subaccount attributable to a Contract then remains fixed. Each
subaccount has a separate subaccount annuity unit value that changes with each
valuation period in substantially the same manner as do accumulation units of
the subaccount.
The dollar value of each variable annuity payment after the first is equal
to the sum of the amounts determined by multiplying the number of subaccount
annuity units under a Contract for a particular subaccount by the annuity unit
value for the subaccount for the valuation period which ends no earlier than the
fifth Valuation Day preceding the date of each such payment. If the net
investment return of the subaccount for a payment period is equal to the
pro-rated portion of the 3.0% annual assumed investment rate, the variable
annuity payment attributable to that subaccount for that period will equal the
payment for the prior period. To the extent that such net investment return
exceeds an annualized rate of 3.0% for a payment period, the payment for that
period will be greater than the payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 3.0%, the
payment for that period will be less than the payment for the prior period.
Once every three months, after the Annuity Income Date, the Annuitant may
elect, in writing, to transfer among the selected subaccount(s) on which
variable annuity payments are based. If such a transfer is elected, the number
of annuity units will change and be determined by "a" times "b," less any
applicable fees, divided by "c" where:
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"a" is the number of annuity units being transferred;
"b" is the subaccount annuity unit value from which the transfer is made; and
"c" is the annuity unit value of the subaccount to which the transfer is made.
Thereafter, the number of annuity units will remain fixed until
transferred. After the Annuity Income Date, no transfers may be made between the
subaccounts and the Fixed Account.
Description of Annuity Payment Options
Option 1: Income for a Fixed Period. We will make annuity payments to a
payee each month for a fixed number of years. The number of years must be at
least 5 and no more than 30. If the Annuitant dies before the end of the
designated period, payments will continue to be made to the person(s) named
by the Annuitant to receive such guaranteed payments for the remainder of
the fixed period. If no such person is named or none survive the Annuitant,
the remainder of the guaranteed payments will be paid to the Annuitant's
estate. This option is available only as a fixed dollar annuity and only if
the Contract has been in force for 5 years, unless we agree otherwise.
Option 2: Life Annuity. We will make annuity payments to a payee each month
as long as the Annuitant is alive. When the Annuitant dies, all payments
will cease.
Option 3: Life Annuity with Period Certain. We will make annuity payments to
a payee each month as long as the Annuitant is alive. If the Annuitant dies
prior to the end of the guaranteed period, payments will continue to be made
to the person(s) named by the Annuitant to receive such guaranteed payments
for the remainder of the fixed period. If no such person is named or none
survive the Annuitant, the remainder of the guaranteed payments will be paid
to the Annuitant's estate.
Option 4: Joint and Survivor Annuity. We will make annuity payments to a
payee each month for the joint lifetime of the Annuitant and another person.
At the death of either, payments will continue to be made to the payee. When
the survivor dies, all payments will cease.
The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the Annuitant's age and sex
(if applicable). Age will be determined from the last birthday at the due date
of the first payment.
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Note Carefully: Under annuity payment options 2 and 4 it would be possible
for only one annuity payment to be made if the Annuitant(s) were to die
before the due date of the second annuity payment; only two annuity payments
if the Annuitant(s) were to die before the due date of the third annuity
payment; and so forth.
Alternate Payment Option. In lieu of one of the above options, the
Contract Value, less any applicable surrender charge and premium taxes
previously unpaid, or Death Benefit, as applicable, may be applied to any other
payment option made available by us or requested and agreed to by us. However,
such method must provide for the payment of any benefits remaining due at the
Annuitant's death (or Contract owner's death after the Annuity Income Date) to
be paid at least as rapidly as the method in effect at the date of death.
YIELDS AND TOTAL RETURNS
From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the subaccounts of the Separate Account.
These figures are based on historical earnings and do not indicate or project
future performance. We also may, from time to time, advertise or include in
sales literature subaccount performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance appears in the Statement of Additional
Information.
Effective yields and total returns for the subaccounts are based on the
investment performance of the corresponding portfolio. The performance of a
portfolio in part reflects its expenses. See the prospectuses for the
portfolios.
The yield of the Money Market Subaccount refers to the annualized income
generated by an investment in the subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the subaccount is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a subaccount (except the Money Market Subaccount) refers to
the annualized income generated by an investment in the subaccount over a
specified 30-day or one-month period. The yield is calculated by assuming that
the income generated by the investment during that 30-day or one-month period is
generated each
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period over a 12-month period and is shown as a percentage of the investment.
The total return of a subaccount refers to return quotations assuming an
investment under a Contract has been held in the subaccount for various periods
of time. When a subaccount has been in operation for one, five, and ten years,
respectively, the total return for these periods will be provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the subaccount from the beginning date of the
measuring period to the end of that period. This version of average annual total
return reflects all historical investment results, less all charges and
deductions applied against the subaccount (including any surrender charge that
would apply if an Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
In addition to the version described above, total return performance
information computed on non-standard bases may be used in advertisements or
sales literature. Average annual total return information may be presented,
computed on the same basis as described above, except deductions will not
include the surrender charge. In addition, we may from time to time disclose
cumulative total return for Contracts funded by the subaccounts. Non-standard
performance data will only be disclosed if standard performance data for the
required periods is also disclosed.
In addition, we may present historic performance data for the portfolios
since their inception reduced by some or all of the fees and charges under the
Contract. Such adjusted historic performance includes data that precedes the
inception date of the subaccounts. This data is designed to show the performance
that would have resulted if the Contract had been in existence during that time.
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
In advertising and sales literature, the performance of each subaccount may be
compared with the performance of other variable annuity issuers in general or to
the performance of particular types of variable annuities investing in mutual
funds, or investment portfolios of mutual funds with investment objectives
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similar to the subaccount. Lipper Analytical Services, Inc. ("Lipper"), Variable
Annuity Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar")
are independent services which monitor and rank the performance of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance
issuers as well as variable annuity issuers. VARDS rankings compare only
variable annuity issuers. The performance analyses prepared by Lipper, VARDS and
Morningstar each rank such issuers on the basis of total return, assuming
reinvestment of distributions, but do not take sales charges, redemption fees,
or certain expense deductions at the separate account level into consideration.
In addition, VARDS prepares risk rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to which
funds provide the highest total return within various categories of funds
defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for the expense of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
We may also report other information including the effect of tax-deferred
compounding on a subaccount's investment returns, or returns in general, which
may be illustrated by tables, graphs, or charts. All income and capital gains
derived from subaccount investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the subaccount investment
experience is positive.
FEDERAL TAX MATTERS
The Following Discussion is General and
Is Not Intended as Tax Advice
Introduction
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by us. Any person concerned about
these tax implications should consult a competent tax advisor before initiating
any transaction. This discussion is based upon our understanding of the present
federal income tax laws, as they are currently interpreted by the Internal
Revenue Service ("IRS"). No
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representation is made as to the likelihood of the continuation of the present
federal income tax laws or of the current interpretation by the IRS. Moreover,
no attempt has been made to consider any applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and
used in connection with plans qualifying for favorable tax treatment. The
Qualified Contract is designed for use by individuals whose purchase payments
are comprised solely of proceeds from and/or contributions under retirement
plans which are intended to qualify as plans entitled to special income tax
treatment under Sections 403(b), 408 or 408A of the Code. The ultimate effect of
federal income taxes on the amounts held under a Contract, or annuity payments,
and on the economic benefit to you, the Annuitant, or the Beneficiary depends on
the type of retirement plan, on the tax and employment status of the individual
concerned, and on the Company's tax status. In addition, certain requirements
must be satisfied in purchasing a Qualified Contract with proceeds from a
tax-qualified plan and receiving distributions from a Qualified Contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
Qualified Contracts should seek competent legal and tax advice regarding the
suitability of a Contract for their situation, the applicable requirements, and
the tax treatment of the rights and benefits of a Contract. The following
discussion assumes that Qualified Contracts are purchased with proceeds from
and/or contributions under retirement plans that qualify for the intended
special federal income tax treatment.
Tax Status of the Contract
Diversification Requirements. Section 817(h) of the Code provides that
separate account investment underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Separate
Account, through each underlying portfolio, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various subaccounts may be
invested. Although we do not have direct control over the portfolios in which
the Separate Account invests, we believe that each portfolio in which the
Separate Account owns shares will meet the diversification requirements, and
therefore, the Contract will be treated as an annuity contract under the Code.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate
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account assets if the contract owner possesses incident of ownership in those
assets, such as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance will
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets.
These differences could result in an owner being treated as the owner of the
assets of the Separate Account. In addition, we do not know what standards will
be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. We therefore reserve the right to
modify the Contract as necessary to attempt to prevent the contract owner from
being considered the owner of any portion of the assets of the Separate Account.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any owner dies on or after the
Annuity Income Date but prior to the time the entire interest in the contract
has been distributed, the remaining portion of such interest will be distributed
at least as rapidly as under the method of distribution being used as of the
date of that owner's death; and (b) if any owner dies prior to the Annuity
Income Date, the entire interest in the Contract will be distributed within five
years after the date of the owner's death. These requirements will be considered
satisfied as to any portion of the owner's interest which is payable to or for
the benefit of a "designated beneficiary" and which is distributed over the life
of such beneficiary or over a period not extending beyond the life expectancy of
that beneficiary, provided that such distributions begin within one year of that
owner's death. The owner's "designated beneficiary" is the individual designated
by the owner as a beneficiary and to whom ownership of the contract passes by
reason of death of the owner. However, if the owner's "designated beneficiary"
is the surviving spouse of the deceased owner, the Contract may be continued
with the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are intended to
comply with the requirements of Section 72(s) of the Code, although no
regulations interpreting these requirements have yet
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been issued. The Company intends to review such provisions and modify them if
necessary to assure that they comply with the requirements of Code Section 72(s)
when clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
The following discussion assumes that the Contracts will qualify as
annuity contracts for federal income tax purposes.
Taxation of Annuities
In General. Section 72 of the Code governs taxation of annuities in
general. We believe that an owner who is a natural person is not taxed on
increases in the value of a Contract until distribution occurs by withdrawing
all or part of the Contract Value (e.g., partial withdrawals and surrenders) or
as annuity payments under the payment option elected. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the Contract
Value (and in the case of a Qualified Contract, any portion of an interest in
the qualified plan) generally will be treated as a distribution. The taxable
portion of a distribution (in the form of a single sum payment or payment
option) is taxable as ordinary income.
The owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the contract value over the
"investment in the contract" during the taxable year. There are some exceptions
to this rule, and a prospective owner that is not a natural person may wish to
discuss these with a competent tax advisor.
The following discussion generally applies to Contracts owned by natural
persons.
Partial Withdrawals. In the case of a partial withdrawal from a Qualified
Contract, under Section 72(e) of the Code, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the portion,
if any, of any purchase payments paid by or on behalf of the individual under a
Contract which was not excluded from the individual's gross income. For
Contracts issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from Qualified Contracts.
In the case of a partial withdrawal (including systematic withdrawals)
from a Non-Qualified Contract, under Section 72(e), any amounts received are
generally first treated as taxable income to the extent that the contract value
immediately before the
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partial withdrawal exceeds the "investment in the contract" at that time. Any
additional amount withdrawn is not taxable.
In the case of a full surrender under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."
Exchanges. Section 1035 of the Code generally provides that no gain or
loss shall be recognized on the exchange of one annuity contract for another. If
the surrendered contract was issued prior to August 14, 1982, the tax rules
formerly provided that the surrender was taxable only to the extent the amount
received exceeds the owner's investment in the contract will continue to apply
to amounts allocable to investments in that contract prior to August 14, 1982.
In contrast, contracts issued after January 19, 1985 in a Code Section 1035
exchange are treated as new contracts for purposes of the penalty and
distribution-at-death rules. Special rules and procedures apply to Section 1035
transactions. Prospective owners wishing to take advantage of Section 1035
should consult their tax adviser.
Annuity Payments. Although tax consequences may vary depending on the
payment option elected under an annuity contract, under Code Section 72(b),
generally (prior to recovery of the investment in the contract) gross income
does not include that part of any amount received as an annuity under an annuity
contract that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity starting date. For variable
annuity payments, the taxable portion is generally determined by an equation
that establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the "investment in the contract" by the
total number of expected periodic payments. However, the entire distribution
will be taxable once the recipient has recovered the dollar amount of his or her
"investment in the contract." For fixed annuity payments, in general, there is
no tax on the portion of each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value of the annuity
payments for the term of the payments; however, the remainder of each annuity
payment is taxable until the recovery of the investment in the contract, and
thereafter the full amount of each annuity payment is taxable. If death occurs
before full recovery of the investment in the contract, the unrecovered amount
may be deducted on the Annuitant's final tax return.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of the death of an owner. Generally, such amounts are
includible in the income of the recipient as follows: (i) if distributed in a
lump sum, they are taxed in the same manner as a full surrender of the contract
or (ii) if distributed under a payment option, they are taxed in the same way as
annuity payments. For these purposes, the investment in the Contract is not
affected
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by the owner's death. That is, the investment in the Contract remains the amount
of any purchase payments paid which were not excluded from gross income.
Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant
to a Non-Qualified Contract, there may be imposed a federal penalty tax equal to
10% of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
1. made on or after the taxpayer reaches age 59 1/2;
2. made on or after the death of the holder (or if the holder is not
an individual, the death of the primary annuitant);
3. attributable to the taxpayer's becoming disabled;
4. a part of a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life expectancy)
of the taxpayer or the joint lives (or joint life expectancies) of
the taxpayer and his or her designated beneficiary;
5. made under certain annuities issued in connection with structured
settlement agreements; and
6. made under an annuity contract that is purchased with a single
purchase payment when the Annuity Income Date is no later than a
year from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the
annuity payment period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. Legislation has been proposed in 1998 that,
if enacted, would adversely modify the federal taxation of certain insurance and
annuity contracts. For example, one proposal would tax transfers among
investment options and tax exchanges involving variable contracts. A second
proposal would reduce the "investment in the contract" under cash value life
insurance and certain annuity contracts by certain amounts, thereby increasing
the amount of income for purposes of computing gain. Although the likelihood of
there being any changes is uncertain, there is always the possibility that the
tax treatment of the Contracts could change by legislation or other means.
Moreover, it is also possible that any change could be retroactive (that is,
effective prior to the date of the change). You should consult a tax adviser
with respect to legislative developments and their effect on the Contract.
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Transfers, Assignments or Exchanges of a Contract
A transfer of ownership of a Contract, the designation of an annuitant,
payee or other beneficiary who is not also the owner, the selection of certain
Annuity Income Dates or the exchange of a Contract may result in certain tax
consequences to the owner that are not discussed herein. An owner contemplating
any such transfer, assignment, or exchange of a Contract should contact a
competent tax advisor with respect to the potential tax effects of such a
transaction.
Withholding
Distribitions from Contracts generally are subject to withholding for the
Owner's federal income tax liability. The withholding rate varies according to
the type of distributions and the Owner's tax satus. The Owner will be provided
the opportunity to elect not to have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a) plans and section
403(b) tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
Multiple Contracts
All non-qualified deferred annuity contracts entered into after October
21, 1988 that are issued by us (or our affiliates) to the same owner during any
calendar year are treated as one annuity Contract for purposes of determining
the amount includible in gross income under Section 72(e). The effects of this
rule are not yet completely clear; however, it could affect the time when income
is taxable and the amount that might be subject to the 10% penalty tax described
above. In addition, the Treasury Department has specific authority to issue
regulations that prevent the avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. There may also be other situations
in which the Treasury may conclude that it would be appropriate to aggregate two
or more annuity contracts purchased by the same owner. Accordingly, you should
consult a competent tax advisor before purchasing more than one annuity contract
in any calendar year.
Taxation of Qualified Plans
The Contracts are designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution
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rules; and in other specified circumstances. Therefore, no attempt is made to
provide more than general information about the use of the Contracts with the
various types of qualified retirement plans. Contract Owners, the Annuitants,
and Beneficiaries are cautioned that the rights of any person to any benefits
under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but we shall not be bound by the terms and conditions of such
plans to the extent such terms contradict the Contract, unless we consent. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into our Contract administration procedures. Owners, participants
and beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Brief descriptions follow of the various types of qualified
retirement plans in connection with a Contract. We will amend the Contract as
necessary to conform it to the requirements of the Code.
Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA". These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible, and on the
time when distributions may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into an IRA. Sales of the Contract for use with IRAs may be subject to special
requirements of the Internal Revenue Service.
Simplified Employee Pension (SEP) IRAs. Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In addition to all of the general
Code rules governing IRAs, such plans are subject to certain Code requirements
regarding participation and amounts of contributions.
Roth IRAs. Effective January 1, 1998, section 408A of the Code permits
certain eligible individuals to contribute to a Roth IRA. Contributions to a
Roth IRA, which are subject to certain limitations, are not deductible and must
be made in cash or as a rollover or transfer from another Roth IRA or other IRA.
A rollover from or conversion of an IRA to a Roth IRA may be subject to tax and
other special rules may apply. You should consult a tax adviser before combining
any converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA.
Tax Sheltered Annuities. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the purchase payments paid, within certain limits, on a Contract
that will provide an annuity for the employee's retirement. These purchase
payments may be subject to FICA (social security) tax.
Restrictions Under Qualified Plans. Other restrictions with respect to the
election, commencement or distribution of benefits may apply under Qualified
Contracts or under the terms of the plan in respect of which Qualified Contracts
are issued.
For qualified plans under Section 403(b), the Code requires that
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the Owner's death.
Possible Charge for the Company's Taxes
At the present time, we make no charge to the subaccounts for any Federal,
state, or local taxes that we incur which may be attributable to such
subaccounts or the Contracts. We, however, reserve the right in the future to
make a charge for any such tax or other economic burden resulting from the
application of the tax
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laws that we determine to be properly attributable to the subaccounts or to the
Contracts.
Other Tax Consequences
As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in the Prospectus. Further, the
Federal income tax consequences discussed herein reflect our understanding of
current law and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each owner or
recipient of the distribution. A competent tax advisor should be consulted for
further information.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be offered to the public on a continuous basis. We do
not anticipate discontinuing the offering of the Contracts, but reserve the
right to do so. Applications for Contracts are solicited by agents who are
licensed by applicable state insurance authorities to sell our variable annuity
contracts and who are also registered representatives of Citicorp Investment
Services, Inc. which entered into a selling agreement with CFBDS, Inc. Citicorp
Investment Services, Inc. is registered with the SEC under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
CFBDS, Inc. acts as the principal underwriter, as defined in the 1940 Act,
of the Contracts for the Separate Account pursuant to an Underwriting Agreement
with us. CFBDS, Inc. is not obligated to sell any specific number of Contracts.
CFBDS, Inc. principal business address is 6 St. James Avenue, Suite 900, Boston,
Massachusetts 02116.
We may pay sales commissions to broker-dealers up to an amount equal to 6%
of the purchase payments paid under a Contract. These broker-dealers are
expected to compensate sales representatives in varying amounts from these
commissions. We also may pay other distribution expenses such as production
incentive bonuses, agent's insurance and pension benefits, and agency expense
allowances. These distribution expenses do not result in any additional charges
under the Contracts that are not described under "Charges and Deductions."
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
the assets of the Separate Account are subject. The Company is not involved in
any litigation that is of material
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importance in relation to its total assets or that relates to the Separate
Account.
VOTING PRIVILEGES
In accordance with our view of current applicable law, we will vote
portfolio shares held in the Separate Account at regular and special shareholder
meetings of the portfolios in accordance with instructions received from persons
having voting interests in the corresponding subaccounts. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or we otherwise determine that we are
allowed to vote the shares in our right, we may elect to do so.
The number of votes that an Owner or Annuitant has the right to instruct
will be calculated separately for each subaccount of the Separate Account, and
may include fractional votes. Prior to the Annuity Income Date, an Owner holds a
voting interest in each subaccount to which the Contract Value is allocated.
After the Annuity Income Date, the Annuitant has a voting interest in each
subaccount from which variable annuity payments are made.
For each Owner, the number of votes attributable to a subaccount will be
determined by dividing the contract value attributable to that Owner's Contract
in that subaccount by the net asset value per share of the portfolio in which
that subaccount invests. For each Annuitant, the number of votes attributable to
a subaccount will be determined by dividing the liability for future variable
annuity payments to be paid from that subaccount by the net asset value per
share of the portfolio in which that subaccount invests. This liability for
future payments is calculated on the basis of the mortality assumptions, the
3.0% assumed investment rate used in determining the number of annuity units of
that subaccount credited to the Annuitant's Contract and annuity unit value of
that subaccount on the date that the number of votes is determined. As variable
annuity payments are made to the Annuitant, the liability for future payments
decreases as does the number of votes.
The number of votes available to an Owner or Annuitant will be determined
as of the date coincident with the date established by the portfolio for
determining shareholders eligible to vote at the relevant meeting of the
portfolio's shareholders. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established
for the portfolio. Each Owner or Annuitant having a voting interest in a
subaccount will receive proxy materials and reports relating to any meeting of
shareholders of the portfolio in which that subaccount invests.
Portfolio shares as to which no timely instructions are received and
shares held by us in a subaccount as to which no Owner or
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Annuitant has a beneficial interest will be voted in proportion to the voting
instructions which are received with respect to all Contracts participating in
that subaccount. Voting instructions to abstain on any item to be voted upon
will be applied to reduce the total number of votes eligible to be cast on a
matter.
COMPANY HOLIDAYS
We are closed on the following holidays: New Years Day, Civil Rights Day
(Martin Luther King Day), President's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, Day After Thanksgiving, the day before Christmas and
Christmas Day. Holidays which fall on a Saturday will be recognized on the
previous Friday. Holidays which fall on a Sunday will be recognized on the
following Monday.
FINANCIAL STATEMENTS
The audited Statutory Financial Statements of the Company as of December
31, 1997 and 1996 and for the years ended December 31, 1997, 1996, and 1995 as
well as the Independent Auditors' Report appear in the Statement of Additional
Information bearing the same date as this Prospectus. The Statement of
Additional Information also contains financial statements for the Separate
Account as of December 31, 1997.
YOUR RIGHT TO LOOK TO A DELAWARE BANK OR TRUST COMPANY FOR PAYMENT ON ANY
INSURANCE POLICY IS LIMITED BY LAW. INSURANCE POLICIES ISSUED BY THE
SUBSIDIARIES OR DIVISIONS OF DELAWARE BANKS OR TRUST COMPANIES ARE NOT DIRECT
LIABILITIES OF SUCH BANKS OR TRUST COMPANIES. ONLY THE ASSETS OF THE INSURANCE
DIVISION OR SUBSIDIARY ISSUING A POLICY ARE APPLICABLE TO THE PAYMENT AND
SATISFACTION OF SUCH POLICY OR CLAIMS MADE THEREUNDER.
INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK OR
TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS
The Contract
Incontestability
Misstatement of Age or Sex
Participation
Assignment
DISTRIBUTION OF THE CONTRACTS
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Subaccount Yields
Other Subaccount Yields
Average Annual Total Returns
Subaccount Performance Data
Adjusted Historic Portfolio Performance Data
Effect of the Annual Contract Fee on Performance Data
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
Amount of Variable Annuity Payments
Annuity Unit Value
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
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If you would like a free copy of the Statement of Additional Information for
this prospectus, please fill out this form and mail it to First Citicorp Life
Insurance Company, 800 Silver Lake Boulevard, P.O. Box 7031, Dover, Delaware
19903.
Please send a copy of the Statement of Additional Information pertaining to
the First Citicorp Life Insurance Company Variable Annuity and the First
Citicorp Life Variable Annuity Separate Account to:
(Please Print or Type)
Name:
----------------------------------------------------------------------
Mailing Address:
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<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
1
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- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
First Citicorp Life Insurance Company
666 Fifth Avenue
3rd Floor
New York, NY 10103
(800) 497-4857
FIRST CITICORP LIFE VARIABLE
ANNUITY SEPARATE ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
May 1, 1998
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STATEMENT OF ADDITIONAL INFORMATION
First Citicorp Life Insurance Company
666 Fifth Avenue
3rd Floor
New York, NY 10103
(800) 497-4857
FIRST CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
This Statement of Additional Information contains information in addition
to the information described in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") offered by First Citicorp Life
Insurance Company ("we", "our" and "us"). This Statement of Additional
Information is not a prospectus, and it should be read only in conjunction with
the prospectuses for the Contract, the Variable Annuity Portfolios, the Fidelity
Variable Insurance Products Fund, the Fidelity Variable Insurance Products Fund
II, the AIM Variable Insurance Funds, Inc. and the MFS Variable Insurance Trust.
The Prospectus for the Contract is dated the same as this Statement of
Additional Information. You may obtain a copy of the prospectuses by writing or
calling us at our address or phone number shown above.
May 1, 1998
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS
The Contract
Incontestability
Misstatement of Age or Sex
Participation
Assignment
DISTRIBUTION OF THE CONTRACTS
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Subaccount Yields
Other Subaccount Yields
Average Annual Total Returns
Subaccount Performance Data
Adjusted Historic Portfolio Performance Data
Effect of the Annual Contract Fee on Performance Data
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
Amount of Variable Annuity Payments
Annuity Unit Value
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
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ADDITIONAL CONTRACT PROVISIONS
The Contract
The application, endorsements and all other attached papers are part of
the Contract. The statements made in the application are deemed representations
and not warranties. We will not use any statement in defense of a claim or to
void the Contract unless it is contained in the application.
Incontestability
We will not contest the Contract.
Misstatement of Age or Sex
If the age or sex (if applicable) of the payee has been misstated, the
amount which will be paid is that which the proceeds would have purchased at the
correct age and sex (if applicable). Any underpayments, plus interest credited
thereto at an annual rate of 3.0%, will be included with the next benefit
payment. Any overpayments, credited thereto at an annual rate of 3.0%, will be
deducted from future benefit payments until the overpayments are repaid in full.
Participation
The Contract does not participate in our divisible surplus.
Assignment
Upon written notice to us, you may assign your rights under this Contract.
We assume no responsibility for the validity of any such assignment. Assignments
will not apply to any payments or actions taken prior to the time it is recorded
by us.
DISTRIBUTION OF THE CONTRACTS
CFBDS, Inc. acts as the principal underwriter and distributor of the
Contract, pursuant to an Underwriting Agreement with us. Applications for the
Contracts are solicited by agents who are licensed by applicable state insurance
authorities to sell our variable annuity contracts and who are also licensed
representatives of Citicorp Insurance Services, Inc. which entered into a
selling agreement with CFBDS, Inc.
CFBDS, Inc. is an indirect wholly owned subsidiary of Citicorp and an
affiliate of First Citicorp Life Insurance Company. For fiscal years 1997, 1996
and 1995, no underwriting commissions were paid to, or retained by, CFBDS, Inc.
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CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, we may disclose yields, total returns, and other
performance data pertaining to the Contracts for a subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC. Because of the fees and
charges assessed under the Contract, the yield for each subaccount will be lower
than the yield for the investment portfolio supporting that subaccount. The
calculation of yields, total returns and other performance data do not reflect
the effect of any premium tax that may be applicable. Most states and political
subdivisions do not assess premium taxes, however, where state premium taxes are
assessed, we will deduct the amount of the tax due from each payment at rates
ranging from a minimum of 0.5% to a maximum of 3.5% of such payment at the time
annuity payments begin. Premium taxes levied by political subdivisions,
generally at rates of less than 1.00%, will likewise be deducted in the same
manner.
Money Market Subaccount Yields
From time to time, advertisements and sales literature may quote the
current annualized yield of the Money Market Subaccount for a seven-day period
in a manner which does not take into consideration any realized or unrealized
gains or losses on shares of the MFS Money Market Series or on that portfolio's
securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation, as well as income other than investment income)
at the end of the seven-day period in the value of a hypothetical account under
a Contract having a balance of 1 unit of the Money Market Subaccount at the
beginning of the period, dividing such net change in subaccount value by the
value of the hypothetical account at the beginning of the period to determine
the base period return, and annualizing this quotient on a 365-day basis. The
net change in subaccount value reflects: 1) net income from the portfolio
attributable to the hypothetical account; and 2) charges and deductions imposed
under the Contract which are attributable to the hypothetical account. The
charges and deductions include the per unit charges for the hypothetical account
for: 1) the annual contract fee; 2) the mortality and expense risk charge; and
(3) the asset-based administration charge. For purposes of calculating current
yields for a Contract, an average per unit contract fee is used based on the $30
annual contract fee deducted at the end of each Contract
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Year. Current Yield is calculated according to the following formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the MFS Money Market Series
(exclusive of realized gains or losses on the sale of
securities and unrealized appreciation and depreciation, as
well as income other than investment income) for the
seven-day period attributable to a hypothetical account
having a balance of 1 subaccount unit.
ES = per unit expenses attributable to the hypothetical account
for the seven-day period.
UV = the unit value for the first day of the seven-day period.
The seven-day Effective Yield is calculated by compounding the
unannualized base period return according to the following formula:
Effective Yield = (1 + ((NCS-ES)/UV)) 365/7 - 1
Where:
NCS = the net change in the value of the MFS Money Market Series
(exclusive of realized gains or losses on the sale of
securities and unrealized appreciation and depreciation, as
well as income other than investment income) for the
seven-day period attributable to a hypothetical account
having a balance of 1 subaccount unit.
ES = per unit expenses attributable to the hypothetical account
for the seven-day period.
UV = the unit value for the first day of the seven-day period.
Based on the method of calculation described above, the Current Yield and
Effective Yield on amounts held in the MFS Money Market Subaccount for the
seven-day period ending December 31, 1997 were:
Current Yield - 3.14%
Effective Yield - 3.19%
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The current and effective yields on amounts held in this subaccount
normally fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the MFS Money Market Series, the types and quality of portfolio securities
held by the MFS Money Market Series and the MFS Money Market Series' operating
expenses. Yields on amounts held in the Money Market Subaccount may also be
presented for periods other than a seven-day period.
Yield calculations do not take into account the surrender charge under the
Contract equal to a maximum of 7% of the amount of purchase payments withdrawn
for certain withdrawals. During each Contract Year, up to 10% of all purchase
payments, less any prior withdrawal of purchase payments, may be withdrawn
without the imposition of a surrender charge.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the
current annualized yield of the Bond Subaccount for a Contract for 30-day or
one-month periods. The annualized yield generated by the Bond Subaccount refers
to income generated by the subaccount during a 30-day or one-month period and is
assumed to be generated each 30-day or one month period over a 12-month period.
The yield is computed by: 1) dividing the net investment income of the
portfolio attributable to the subaccount units less subaccount expenses for the
period; by 2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by 3)
compounding that yield for a six-month period; and by 4) multiplying that result
by 2. Expenses attributable to the subaccount include the annual contract fee,
the asset-based administration charge and the mortality and expense risk charge.
The yield calculation assumes a contract fee of $30 per year per Contract
deducted at the end of each Contract Year for Contracts with less than $25,000
of Contract Value. For purposes of calculating the 30-day or one-month yield, an
average contract fee based on the average Contract Value in the Separate Account
is used to determine the amount of the charge attributable to the subaccount for
the 30-day or one-month period. The 30-day or one-month yield is calculated
according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV)) + 1)6 - 1)
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Where:
NI = net income of the portfolio for the 30-day or one-month
period attributable to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month
period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the
30-day or one-month period.
Based on the method of calculation described above, for the thirty-day
period ending December 31, 1997, the yield for the Bond Subaccount was:
Yield = 8.40%
The yield on the amounts held in the Bond Subaccount normally fluctuates
over time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. The Bond
Subaccount's actual yield is affected by the types and quality of securities
held by the MFS Bond Series and that portfolio's operating expenses.
Yield calculations do not take into account the surrender charge under the
Contract equal to a maximum of 7% of the amount of purchase payments withdrawn
for certain withdrawals. During each Contract Year, up to 10% of all purchase
payments, less any prior withdrawal of purchase payments, may be withdrawn
without the imposition of a surrender charge.
Average Annual Total Returns
From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the subaccounts for various
periods of time.
When a subaccount has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Average annual total returns for other periods of time may, from time
to time, also be disclosed.
Average annual total returns represent the average annual compounded rates
of return that would equate an initial investment of $1,000 under a Contract to
the redemption value of that investment as of the last day of each of the
periods. The
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ending date for each period for which total return quotations are provided will
be for the most recent calendar quarter-end practicable, considering the type of
the communication and the media through which it is communicated.
Average annual total returns are calculated using subaccount unit values
which we calculate on each Valuation Day based on the performance of the
subaccount's underlying portfolio, the deductions for the mortality and expense
risk charge, the deductions for the asset-based administration charge and the
Annual Contract Fee. The calculation assumes that the contract fee is $30 per
year per Contract deducted at the end of each Contract Year for Contracts with
less than $25,000 of Contract Value. For purposes of calculating average annual
total return, an average per-dollar per-day contract fee attributable to the
hypothetical account for the period is used. The calculation also assumes
surrender of the Contract at the end of the period for the return quotation.
Total returns will therefore reflect a deduction of the surrender charge for any
period less than five years since the date of the purchase payment being
withdrawn. The total return is calculated according to the following formula:
TR = ((ERV/P)1/N) - 1
Where:
TR = the average annual total return net of subaccount recurring
charges.
ERV = the ending redeemable value (net of any applicable
surrender charge) of the hypothetical account at the end of
the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
10
<PAGE>
Based on the method of calculation described above, the Standardized
Average Annual Total Returns for the Subaccounts for the periods ending December
31, 1997 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Subaccount Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the
For the period
Subaccount (date of inception of subaccount) one-year from
period inception
ending to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C>
CitiSelect(R) VIP Folio 200 (2/03/97) -0.86% -0.86%
CitiSelect(R) VIP Folio 300 (2/03/97) 0.17% 0.17%
CitiSelect(R) VIP Folio 400 (2/03/97) 1.20% 1.20%
CitiSelect(R) VIP Folio 500 (2/03/97) 2.24% 2.24%
CitiFundsSM Small Cap Growth VIP 4.31% 4.31%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 4.94% 17.62%
Government Securities Fund (2/03/97) -0.86% -0.86%
Growth Fund (2/03/97) 14.72% 14.72%
International Equity Fund (2/03/97) -1.89% -1.89%
Value Fund (2/03/97) 12.63% 12.63%
Growth and Income Fund (2/03/97) 11.59% 11.59%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 13.88% 20.74%
High Income Portfolio (2/03/97) 7.42% 7.42%
Equity Income Portfolio (2/03/97) 15.77% 15.77%
Overseas Fund (2/03/97) 2.24% 2.24%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 14.72% 14.72%
Index 500 Portfolio (2/03/97) 17.87% 17.87%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -8.07% 1.62%
Money Market Series (2/21/95)* -3.76% 1.30%
Bond Series (2/03/97) 1.20% 1.20%
Total Return Series (2/03/97) 9.50% 9.50%
Research Series (2/03/97) 8.46% 8.46%
Emerging Growth Series (2/03/97) 10.55% 10.55%
- --------------------------------------------------------------------------------
</TABLE>
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
11
<PAGE>
We may disclose cumulative total returns in conjunction with the standard
formats described above. The cumulative total returns will be calculated using
the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of subaccount recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
12
<PAGE>
Based on the method of calculation described above, the Cumulative Total
Returns for the Subaccounts for the periods ending December 31, 1997 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Subaccount Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the
For the period
Subaccount (date of inception of subaccount) one-year from
period inception
ending to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C>
CitiSelect VIP Folio 200 (2/03/97) -0.86% -0.86%
CitiSelect VIP Folio 300 (2/03/97) 0.17% 0.17%
CitiSelect VIP Folio 400 (2/03/97) 1.20% 1.20%
CitiSelect VIP Folio 500 (2/03/97) 2.24% 2.24%
CitiFunds Small Cap Growth VIP 4.31% 4.31%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 4.94% 59.06%
Government Securities Fund (2/03/97) -0.86% -0.86%
Growth Fund (2/03/97) 14.72% 14.72%
International Equity Fund (2/03/97) -1.89% -1.89%
Value Fund (2/03/97) 12.63% 12.63%
Growth and Income Fund (2/03/97) 11.59% 11.59%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 13.88% 71.45%
High Income Portfolio (2/03/97) 7.42% 7.42%
Equity Income Portfolio (2/03/97) 15.77% 15.77%
Overseas Fund (2/03/97) 2.24% 2.24%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 14.72% 14.72%
Index 500 Portfolio (2/03/97) 17.87% 17.87%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -8.07% 4.71%
Money Market Series (2/21/95)* -3.76% 3.75%
Bond Series (2/03/97) 1.20% 1.20%
Total Return Series (2/03/97) 9.50% 9.50%
Research Series (2/03/97) 8.46% 8.46%
Emerging Growth Series (2/03/97) 10.55% 10.55%
- --------------------------------------------------------------------------------
</TABLE>
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
13
<PAGE>
From time to time, sales literature or advertisements may also quote
average annual total returns and cumulative total returns that do not reflect
the surrender charge or the Annual Contract Fee. These are calculated in exactly
the same way as the average annual total returns and cumulative total returns
described above, except that the ending redeemable value of the hypothetical
account for the period is replaced with an ending value for the period that does
not take into account any charges on amounts surrendered or withdrawn or the
payment of the annual contract fee.
Based on this non-standardized method of calculation, the Non-Standardized
Average Total Returns and Non-Standardized Cumulative Total Returns for the
Subaccounts for the periods ending December 31, 1997 were:
14
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Subaccount Non-Standardized Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the
For the period
Subaccount (date of inception of subaccount) one-year from
period inception
ending to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C>
CitiSelect VIP Folio 200 (2/03/97) 6.64% 6.64%
CitiSelect VIP Folio 300 (2/03/97) 7.75% 7.75%
CitiSelect VIP Folio 400 (2/03/97) 8.86% 8.86%
CitiSelect VIP Folio 500 (2/03/97) 9.97% 9.97%
CitiFunds Small Cap Growth VIP 12.20% 12.20%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 12.08% 19.64%
Government Securities Fund (2/03/97) 6.64% 6.64%
Growth Fund (2/03/97) 23.39% 23.39%
International Equity Fund (2/03/97) 5.53% 5.53%
Value Fund (2/03/97) 21.15% 21.15%
Growth and Income Fund (2/03/97) 20.02% 20.02%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 21.62% 22.81%
High Income Portfolio (2/03/97) 15.54% 15.54%
Equity Income Portfolio (2/03/97) 24.52% 24.52%
Overseas Fund (2/03/97) 9.97% 9.97%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 23.39% 23.39%
Index 500 Portfolio (2/03/97) 26.77% 26.77%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -1.79% 3.39%
Money Market Series (2/21/95)* 2.83% 3.06%
Bond Series (2/03/97) 8.86% 8.86%
Total Return Series (2/03/97) 17.78% 17.78%
Research Series (2/03/97) 16.66% 16.66%
Emerging Growth Series (2/03/97) 18.90% 18.90%
- --------------------------------------------------------------------------------
</TABLE>
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
15
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Subaccount Non-Standardized Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the
For the period
Subaccount (date of inception of subaccount) one-year from
period inception
ending to
12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C>
CitiSelect VIP Folio 200 (2/03/97) 6.64% 6.64%
CitiSelect VIP Folio 300 (2/03/97) 7.75% 7.75%
CitiSelect VIP Folio 400 (2/03/97) 8.86% 8.86%
CitiSelect VIP Folio 500 (2/03/97) 9.97% 9.97%
CitiFunds Small Cap Growth VIP 12.20% 12.20%
Portfolio (formerly Landmark Small Cap
Equity VIP Fund) (2/03/97)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (2/21/95) 12.08% 67.00%
Government Securities Fund (2/03/97) 6.64% 6.64%
Growth Fund (2/03/97) 23.39% 23.39%
International Equity Fund (2/03/97) 5.53% 5.53%
Value Fund (2/03/97) 21.15% 21.15%
Growth and Income Fund (2/03/97) 20.02% 20.02%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (2/21/95) 21.62% 80.00%
High Income Portfolio (2/03/97) 15.54% 15.54%
Equity Income Portfolio (2/03/97) 24.52% 24.52%
Overseas Fund (2/03/97) 9.97% 9.97%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio (2/03/97) 23.39% 23.39%
Index 500 Portfolio (2/03/97) 26.77% 26.77%
MFS VARIABLE INSURANCE TRUST
World Governments Series (2/21/95) -1.79% 10.00%
Money Market Series (2/21/95)* 2.83% 9.00%
Bond Series (2/03/97) 8.86% 8.86%
Total Return Series (2/03/97) 17.78% 17.78%
Research Series (2/03/97) 16.66% 16.66%
Emerging Growth Series (2/03/97) 18.90% 18.90%
- --------------------------------------------------------------------------------
</TABLE>
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this subaccount than the total return quotation.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
In advertising and sales literature, the performance of each subaccount
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or mutual fund portfolios with investment objectives similar to
each of the subaccounts. Lipper Analytical Services, Inc. ("Lipper") and the
16
<PAGE>
Variable Annuity Research Data Services ("VARDS") are independent services which
monitor and rank the performance of variable annuity issuers in each of the
major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life issuers as well as variable
annuity issuers. VARDS rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS each rank such issuers on the
basis of total return, assuming reinvestment of distributions, but do not take
sales charges, redemption fees, or certain expense deductions at the separate
account level into consideration. In addition, VARDS prepares risk adjusted
rankings, which consider the effects of market risk on total return performance.
This type of ranking provides data as to which funds provide the highest total
return within various categories of funds defined by the degree of risk inherent
in their investment objectives.
Advertising and sales literature may also compare the performance of each
subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deductions" for the expenses of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
Comparison may also report other information including the effect of
tax-deferred compounding on a subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from subaccount investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the underlying
portfolio's investment experience is positive.
Adjusted Historic Portfolio Performance Data
The charts below show historic performance data for the portfolios,
including for periods prior to the inception of the subaccounts, reduced by some
or all of the fees and charges under the Contract. Non-standard performance data
will only be disclosed if standard performance data for the required periods is
also disclosed.
For the purposes of calculating the average annual total returns and
cumulative total returns of the portfolios, we have deducted a daily mortality
and expense risk charge equal to 1.25% of annual assets (except that beginning
March 2, 1998, we deduct the new mortality and expense risk charge of 0.84% of
annual assets), the $30 annual contract fee and the applicable surrender charge.
17
<PAGE>
Based on the method of calculation described above, the Adjusted Average
Annual Total Returns for the portfolios for the periods ending December 31, 1997
were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Adjusted Portfolio Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the For the For the For the
one-year 5-year 10-year period
Portfolio (date of inception of period period period from
portfolio) ending ending ending inception
12/31/97 12/31/97 12/31/97 to
12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 200 -0.86% N/A N/A -0.86%
(11/25/96)
CitiSelect VIP Folio 300 0.17% N/A N/A 0.17%
(11/25/96)
CitiSelect VIP Folio 400 1.20% N/A N/A 1.20%
(11/25/96)
CitiSelect VIP Folio 500 2.24% N/A N/A 2.24%
(11/25/96)
CitiFunds Small Cap Growth VIP 4.31% N/A N/A 4.31%
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
(11/25/96)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund 4.80% N/A N/A 15.71%
(5/05/93)
Government Securities Fund -0.18% N/A N/A 3.26%
(5/05/93)
Growth Fund (5/05/93) 17.14% N/A N/A 15.42%
International Equity Fund -1.28% N/A N/A 10.33%
(5/05/93)
Value Fund (5/05/93) 14.21% N/A N/A 17.18%
Growth and Income Fund (5/02/94) 16.07% N/A N/A 19.23%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 14.O5% 16.10% 15.48% 13.97%
High Income Portfolio (9/19/85) 8.67% 12.08% 11.17% 10.82%
Equity Income Portfolio (10/9/86) 18.32% 18.22% 15.02% 12.97%
Overseas Fund (1/28/87) 3.01% 12.24% 8.00% 6.63%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 14.62% N/A N/A 25.72%
Index 500 Portfolio (8/27/92) 22.64% 17.94% N/A 18.12%
MFS VARIABLE INSURANCE TRUST
World Governments Series -8.75% N/A N/A 2.27%
(6/14/94)
Money Market Series (1/03/95)* -3.15% N/A N/A 1.52%
Bond Series (10/24/95) 1.64% N/A N/A 3.16%
Total Return Series (1/03/95) 11.98% N/A N/A 16.83%
Research Series (7/26/95) 11.02% N/A N/A 18.20%
Emerging Growth Series (7/24/95) 12.54% N/A N/A 19.26%
- --------------------------------------------------------------------------------
</TABLE>
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
18
<PAGE>
The Adjusted Cumulative Total Returns for the portfolios for the periods
ending December 31, 1997 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Adjusted Portfolio Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the For the For the For the
one-year 5-year 10-year period from
Portfolio (date of inception of period period period inception
portfolio) ending ending ending to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 200 -0.86% N/A N/A -0.86%
(11/25/96)
CitiSelect VIP Folio 300 0.17% N/A N/A 0.17%
(11/25/96)
CitiSelect VIP Folio 400 1.20% N/A N/A 1.20%
(11/25/96)
CitiSelect VIP Folio 500 2.24% N/A N/A 2.24%
(11/25/96)
CitiFunds Small Cap Growth VIP 4.31% N/A N/A 4.31%
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
(11/25/96)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund 4.80% N/A N/A 97.38%
(5/05/93)
Government Securities Fund -0.18% N/A N/A 16.11%
(5/05/93)
Growth Fund (5/05/93) 17.14% N/A N/A 95.09%
International Equity Fund -1.28% N/A N/A 58.14%
(5/05/93)
Value Fund (5/05/93) 14.21% N/A N/A 109.36%
Growth and Income Fund (5/02/94) 16.07% N/A N/A 90.63%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 14.O5% 111.05% 322.21% 334.51%
High Income Portfolio (9/19/85) 8.67% 76.89% 188.65% 253.66%
Equity Income Portfolio (10/9/86) 18.32% 131.02% 305.85% 293.46%
Overseas Fund (1/28/87) 3.01% 78.16% 116.09% 101.68%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 14.62% N/A N/A 98.47%
Index 500 Portfolio (8/27/92) 22.64% 128.26% N/A 143.62%
MFS VARIABLE INSURANCE TRUST
World Governments Series -8.75% N/A N/A 8.30%
(6/14/94)
Money Market Series (1/03/95)* -3.15% N/A N/A 4.62%
Bond Series (10/24/95) 1.64% N/A N/A 7.04%
Total Return Series (1/03/95) 11.98% N/A N/A 59.32%
Research Series (7/26/95) 11.02% N/A N/A 50.26%
Emerging Growth Series (7/24/95) 12.54% N/A N/A 53.73%
- --------------------------------------------------------------------------------
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
</TABLE>
19
<PAGE>
From time to time, sales literature or advertisements may also quote
adjusted average annual total returns and cumulative total returns for the
portfolios that do not reflect the surrender charge or the Annual Contract Fee.
These are calculated in exactly the same way as the adjusted portfolio average
annual total returns and cumulative total returns described above, except that
ending value for the period does not take into account any charges on amounts
surrendered or withdrawn or the payment of the annual contract fee.
Based on this method of calculation, the Adjusted Portfolio Average Total
Returns and Cumulative Total Returns without the deduction of surrender charges
and the Annual Contract Fee for the portfolios for the periods ending December
31, 1997 were:
20
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Adjusted Portfolio Average Annual Total Return Table Without Deduction of
Surrender Charges and Annual Contract Fee
- --------------------------------------------------------------------------------
For the For the For the For the
one-year 5-year 10-year period
Portfolio (date of inception of period period period from
portfolio) ending ending ending inception
12/31/97 12/31/97 12/31/97 to
12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 200 6.64% N/A N/A 6.64%
(11/25/96)
CitiSelect VIP Folio 300 7.75% N/A N/A 7.75%
(11/25/96)
CitiSelect VIP Folio 400 8.86% N/A N/A 8.86%
(11/25/96)
CitiSelect VIP Folio 500 9.97% N/A N/A 9.97%
(11/25/96)
CitiFunds Small Cap Growth VIP 12.20% N/A N/A 12.20%
Portfolio (formerly Landmark
Small Cap Equity VIP Fund)
(11/25/96)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund 11.92% N/A N/A 16.49%
(5/05/93)
Government Securities Fund 6.64% N/A N/A 3.98%
(5/05/93)
Growth Fund (5/05/93) 25.10% N/A N/A 16.20%
International Equity Fund 5.44% N/A N/A 11.09%
(5/05/93)
Value Fund (5/05/93) 21.96% N/A N/A 17.97%
Growth and Income Fund (5/02/94) 23.96% N/A N/A 20.53%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 21.75% 16.36% 15.55% 14.04%
High Income Portfolio (9/19/85) 16.02% 12.33% 11.24% 10.90%
Equity Income Portfolio (10/9/86) 26.32% 18.49% 15.10% 13.04%
Overseas Fund (1/28/87) 10.00% 12.53% 8.10% 6.72%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 22.41% N/A N/A 27.78%
Index 500 Portfolio (8/27/92) 30.96% 18.24% N/A 18.21%
MFS VARIABLE INSURANCE TRUST
World Governments Series -2.51% N/A N/A 3.45%
(6/14/94)
Money Market Series (1/03/95)* 3.48% N/A N/A 3.21%
Bond Series (10/24/95) 8.60% N/A N/A 5.47%
Total Return Series (1/03/95) 19.60% N/A N/A 18.75%
Research Series (7/26/95) 18.58% N/A N/A 20.57%
Emerging Growth Series (7/24/95) 20.20% N/A N/A 21.65%
- --------------------------------------------------------------------------------
</TABLE>
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
21
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Adjusted Portfolio Cumulative Total Return Table Without Deduction of Surrender
Charges and Annual Contract Fee
- --------------------------------------------------------------------------------
For the For the For the For the
Portfolio (date of inception of one-year 5-year 10-year period
portfolio) period period period from
ending ending ending inception
12/31/97 12/31/97 12/31/97 to
12/31/97
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PORTFOLIOS
<S> <C> <C> <C> <C>
CitiSelect VIP Folio 200 6.64% N/A N/A 6.64%
(11/25/96)
CitiSelect VIP Folio 300 7.75% N/A N/A 7.75%
(11/25/96)
CitiSelect VIP Folio 400 8.86% N/A N/A 8.86%
(11/25/96)
CitiSelect VIP Folio 500 9.97% N/A N/A 9.97%
(11/25/96)
CitiFunds Small Cap Growth VIP 12.20% N/A N/A 12.20%
Portfolio (formerly Landmark
Small Cap Equity VIP Fund
(11/25/96)
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund 11.92% N/A N/A 103.67%
(5/05/93)
Government Securities Fund 6.64% N/A N/A 19.95%
(5/05/93)
Growth Fund (5/05/93) 25.10% N/A N/A 101.32%
International Equity Fund 5.44% N/A N/A 63.25%
(5/05/93)
Value Fund (5/05/93) 21.96% N/A N/A 116.01%
Growth and Income Fund (5/02/94) 23.96% N/A N/A 98.38%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 21.75% 113.40% 324.83% 337.60%
High Income Portfolio (9/19/85) 16.02% 78.90% 190.40% 256.64%
Equity Income Portfolio (10/9/86) 26.32% 133.67% 308.56% 296.37%
Overseas Fund (1/28/87) 10.00% 80.50% 118.04% 103.60%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 22.41% N/A N/A 108.36%
Index 500 Portfolio (8/27/92) 30.96% 131.22% N/A 144.65%
MFS VARIABLE INSURANCE TRUST
World Governments Series -2.51% N/A N/A 12.80%
(6/14/94)
Money Market Series (1/03/95)* 3.48% N/A N/A 9.92%
Bond Series (10/24/95) 8.60% N/A N/A 12.36%
Total Return Series (1/03/95) 19.60% N/A N/A 67.30%
Research Series (7/26/95) 18.58% N/A N/A 57.71%
Emerging Growth Series (7/24/95) 20.20% N/A N/A 61.35%
- --------------------------------------------------------------------------------
</TABLE>
*The yield quotations for the MFS Money Market Series quoted above more closely
reflect the current earnings of this portfolio than the total return quotation.
22
<PAGE>
Effect of the Annual Contract Fee on Performance Data
The Contract provides for a $30 Annual Contract Fee to be deducted
annually at the end of each Contract Year from the Accounts based on the
proportion of the Contract Value invested in each such Account. For purposes of
reflecting the contract fee in yield and total return quotations, the annual
charge is converted into a per-dollar per-day charge based on the average
Contract Value of all Contracts on the last day of the period for which
quotations are provided. The per-dollar per-day average charge will then be
adjusted to reflect the basis upon which the particular quotation is calculated.
This fee is waived for Contracts having a Contract Value of at least $25,000 or
if, during the Contract Year, purchase payments of at least $2,500 ($2,000 for
Qualified Contracts), exclusive of the initial purchase payment, are paid.
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable annuity payments which
follows is based on an assumed investment rate of 3.0% per year. The assumed net
investment rate is used merely in order to determine the first monthly payment
per thousand dollars of applied value. This rate does not bear any relationship
to the actual net investment experience of the Separate Account or of any
subaccount.
Amount of Variable Annuity Payments
The amount of the first variable annuity payment is determined by dividing
the Contract Value on the Annuity Income Date by 1,000 and multiplying the
result by the appropriate factor in the annuity tables provided in the Contract.
These tables are based upon the 1983 IAM Tables (promulgated by the Society of
Actuaries). The appropriate factor is based on the annual net investment return
of 3.0%. The amount of each payment will depend on the age of the Annuitant(s)
at the time the first payment is due, and the sex of the Annuitant(s).
The dollar amount of the second and subsequent variable annuity payments
will vary and is determined by multiplying the number of subaccount annuity
units by the subaccount annuity unit value as of a date no earlier than the
fifth Valuation Day preceding the date the payment is due. The number of such
units will remain fixed during the annuity period, assuming you or the
Annuitant, if you are deceased, make no exchanges of annuity units for annuity
units of another subaccount or to provide a
23
<PAGE>
fixed annuity payment. Once every 3 months after annuity payments have
commenced, the Annuitant may elect in writing, to transfer among any
subaccounts. After the Annuity Income Date, no transfers may be made between the
subaccounts and the Fixed Account.
The annuity unit value will increase or decrease from one payment to the
next in proportion to the net investment return of the subaccount or subaccounts
supporting the variable annuity payments, less an adjustment to neutralize the
3.0% assumed net investment rate referred to above. Therefore, the dollar amount
of annuity payments after the first will vary with the amount by which the net
investment return of the appropriate subaccounts is greater or less than 3.0%
per year. For example, for a Contract using only one subaccount to generate
variable annuity payments, if that subaccount has a cumulative net investment
return of 5% over a one year period, the first annuity payment in the next year
will be approximately 2% greater than the payment on the same date in the
preceding year. If such net investment return is 1% over a one year period, the
first annuity payment in the next year will be approximately 2 percentage points
less than the payment on the same date in the preceding year. (See also
"Variable Annuity Payments" in the Prospectus.)
Fixed annuity payments are determined at annuitization by multiplying the
values allocated to the Fixed Account by a rate to be determined by First
Citicorp Life which is no less than the rate specified in the annuity tables in
the Contract. The annuity payment will remain level for the duration of the
annuity.
The annuity payments will be made on the fifteenth day of each month. The
annuity unit value used in calculating the amount of the variable annuity
payments will be based on an annuity unit value determined as of the close of
business on a day no earlier than the fifth Valuation Day preceding the date of
the annuity payment.
Annuity Unit Value
The annuity unit value is calculated at the same time that the value of an
accumulation unit is calculated and is based on the same values for portfolio
shares and other assets and liabilities. (See "Variable Contract Value" in the
Prospectus.) The annuity unit value for each subaccount's first valuation period
was set at $1.00. The annuity unit value for a subaccount is calculated for each
subsequent Valuation Period by multiplying the subaccount annuity unit value on
the preceding day by the product of 1 times 2 where:
24
<PAGE>
(1) is the subaccount's net investment factor on the Valuation Day the
Annuity Unit Value is being calculated; and
(2) is 0.999919 (which is the daily factor that will produce the 3.0%
annual investment rate assumed in the annuity tables), adjusted by
the number of days since the previous Valuation Day.
The following illustration shows, by use of hypothetical example, the
method of determining the annuity unit value.
Illustration of Calculation of Annuity Unit Value
1. Net Investment Factor for period................... 1.003662336
2. Adjustment for 3% Assumed Investment
Rate............................................... 0.999919016
3. 2x1................................................ 1.003581055
4. annuity unit value, beginning of
valuation period................................... 10.743769
5. annuity unit value, end of valuation
period (3x4)....................................... 10.782243
LEGAL MATTERS
All matters relating to New York law pertaining to the Contracts,
including the validity of the Contracts and our authority to issue the
Contracts, have been passed upon by Catherine S. Mulholland, General Counsel of
the Company. Sutherland, Asbill & Brennan LLP of Washington, D.C. has provided
advice on certain matters relating to the federal securities laws.
EXPERTS
The statutory financial statements of First Citicorp Life Insurance
Company as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, and the financial statements for the
Separate Account as of December 31, 1997, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing.
25
<PAGE>
The report of KPMG Peat Marwick LLP covering the financial statements of
First Citicorp Life Insurance Company contains an explanatory paragraph which
states that the financial statements are presented in conformity with accounting
practices prescribed or permitted by the Department of Insurance of the State of
New York. These practices differ in some respects from generally accepted
accounting principles. The financial statements do not include any adjustments
that might result from the differences.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended, with respect to the Contracts discussed in this
Statement of Additional Information. Not all the information set forth in the
registration statement, amendments and exhibits thereto has been included in
this Statement of Additional Information. Statements contained in this Statement
of Additional Information concerning the content of the Contracts and other
legal instruments are intended to be summaries. For a complete statement of the
terms of these documents, reference should be made to the instruments filed with
the SEC.
FINANCIAL STATEMENTS
The audited Statutory Financial Statements of the Company as of December
31, 1997 and 1996 and for the years ended December 31, 1997, 1996, and 1995, as
well as the Independent Auditor's Report which appears in this Statement of
Additional Information should be considered only as bearing on our ability to
meet our obligations under the contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account. This Statement of Additional Information also contains audited
financial statements for the Separate Account as of December 31, 1997.
26
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of
Citicorp Life Insurance Company)
Statutory Financial Statements and Schedule
December 31, 1997, 1996, and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
Independent Auditors' Report
The Board of Directors
First Citicorp Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and capital and surplus of First Citicorp Life Insurance
Company (a wholly owned subsidiary of Citicorp Life Insurance Company) as
of December 31, 1997 and 1996, and the related statutory statements of
operations, capital and surplus, and cash flow for each of the years in
the three-year period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As described more fully in note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed
or permitted by the Insurance Department of the State of New York, which
practices differ from generally accepted accounting principles. The effect
on the financial statements of the variances between the statutory basis
of accounting and generally accepted accounting principles although not
reasonably determinable, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting
principles, the financial position of First Citicorp Life Insurance
Company as of December 31, 1997 and 1996, or the results of its operations
or its cash flows for the years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities, and
capital and surplus of First Citicorp Life Insurance Company as of
December 31, 1997 and 1996, and the results of its operations and its cash
flow for each of the years in the three-year period ended December 31,
1997 on the basis of accounting as described in note 1.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information
included in the accompanying schedule is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ KPMG Peat Marwick
April 17, 1998
1
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets,
Liabilities, and Capital and Surplus
December 31, 1997 and 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Admitted Assets 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and investments:
Bonds $317,669,051 260,486,846
Mortgage loans 1,320,275 1,417,569
Cash on hand and on deposit 5,764,243 1,777,712
Short-term investments 11,158,000 6,192,000
Other invested assets 135,192 --
- ---------------------------------------------------------------------------------------------
Total cash and investments 336,046,761 269,874,127
Net deferred and uncollected premiums 631,875 638,160
Due from reinsurers 300,142 770,081
Accrued investment income 4,292,985 4,247,164
Due from affiliates -- 876,128
Other assets 30,946 580,015
- ---------------------------------------------------------------------------------------------
Total admitted assets excluding separate account assets 341,302,709 276,985,675
Separate account assets 174,375,963 14,734,426
- ---------------------------------------------------------------------------------------------
Total admitted assets $515,678,672 291,720,101
- ---------------------------------------------------------------------------------------------
Liabilities and Capital and Surplus
- ---------------------------------------------------------------------------------------------
Liabilities:
Future policy benefit reserves:
Life insurance 2,724,765 2,103,011
Accident and health insurance 207,740 254,988
Policyholder account balances - annuities 308,132,048 243,014,837
Supplementary contracts without life contingencies 703,058 684,503
Policy and contract claim reserves:
Life insurance 1,409,648 1,933,437
Accident and health insurance 715,535 807,783
Federal income taxes due to parent 3,420,296 2,469,375
Asset valuation reserve 1,153,437 963,882
Interest maintenance reserve 2,917,044 1,641,085
Transfers to separate accounts due or accrued, net (7,066,199) --
Other liabilities 1,773,521 4,433,145
- ---------------------------------------------------------------------------------------------
Total liabilities excluding separate account liabilities 316,090,893 258,306,046
Separate account liabilities 174,375,963 14,261,866
- ---------------------------------------------------------------------------------------------
Total liabilities 490,466,856 272,567,912
- ---------------------------------------------------------------------------------------------
Commitments and contingencies
Capital and surplus:
Capital stock - $5 par value per share; 400,000 shares
authorized, issued, and outstanding 2,000,000 2,000,000
Surplus:
Paid-in 13,000,000 4,000,000
Assigned - separate account -- 472,560
Unassigned 10,211,816 12,679,629
- ---------------------------------------------------------------------------------------------
Total capital and surplus 25,211,816 19,152,189
- ---------------------------------------------------------------------------------------------
Total liabilities and capital and surplus $515,678,672 291,720,101
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements
2
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations:
Life insurance $ 4,403,236 5,302,565 5,062,237
Annuities 242,832,491 103,090,551 97,941,558
Accident and health insurance 3,270,262 4,283,213 5,315,100
Supplementary contracts without life
contingencies 60,000 5,000 22,000
- ------------------------------------------------------------------------------------------------
Total premiums and annuity
considerations 250,565,989 112,681,329 108,340,895
Net investment income 20,772,942 16,263,882 10,684,469
Amortization of interest maintenance
reserve 220,878 88,258 31,453
Net gain (loss) from operations in separate
account (472,560) 272,349 --
Other 1,194,706 141,936 51,735
- ------------------------------------------------------------------------------------------------
Total revenues 272,281,955 129,447,754 119,108,552
- ------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other policy benefits:
Life insurance 3,091,336 3,369,054 3,547,882
Accident and health insurance 999,422 1,287,819 1,494,215
Annuities 5,891,652 2,737,995 1,516,385
Surrenders 36,676,368 23,985,017 12,946,447
Payments on supplementary contracts 87,389 81,759 80,134
Change in future policy benefits:
Annuities 65,117,211 77,635,445 81,671,059
Life insurance 621,754 (165,096) 84,631
Accident and health insurance (47,248) 19,224 6,164
Change in reserves for supplementary
contracts 18,555 982 (3,488)
Other operating costs and expenses:
Commissions 14,200,628 5,711,318 5,381,049
General insurance expenses and
taxes, licenses, and fees 5,260,127 4,224,547 4,546,822
Net transfer to separate accounts 141,267,186 7,786,272 5,734,793
Other (45) 103 13
- ------------------------------------------------------------------------------------------------
Total benefits and expenses 273,184,335 126,674,439 117,006,106
- ------------------------------------------------------------------------------------------------
Income (loss) from operations before federal income
tax expense and net realized capital gains (902,380) 2,773,315 2,102,446
Federal income tax expense 1,848,635 1,178,369 2,123,528
- ------------------------------------------------------------------------------------------------
Income (loss) from operations before net
realized capital gains (2,751,015) 1,594,946 (21,082)
Net realized capital gains, net of IMR
transfers -- -- --
- ------------------------------------------------------------------------------------------------
Net income (loss) $ (2,751,015) 1,594,946 (21,082)
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
3
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Capital and Surplus
Years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital and surplus at
beginning of year $ 19,152,189 17,951,104 18,029,005
Net income (loss) (2,751,015) 1,594,946 (21,082)
Change in nonadmitted assets 197 -- --
Change in asset valuation reserve (189,555) (393,861) (257,030)
Change in surplus in separate accounts -- -- 200,211
Surplus paid in 9,000,000 -- --
- --------------------------------------------------------------------------------
Capital and surplus at end of year $ 25,211,816 19,152,189 17,951,104
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
4
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash from operating activities:
Premiums and annuity considerations $ 250,512,274 112,663,508 108,317,303
Net investment income received 20,506,033 14,899,954 9,672,813
Other income received 1,091,035 140,540 51,735
Life and accident and health claims,
and other benefits paid (47,362,201) (30,787,707) (18,939,748)
Commissions, other expenses, and taxes paid (19,410,754) (10,068,113) (9,783,511)
Federal income taxes paid (1,703,703) (830,590) (870,405)
Other 61,099 6,396 22,000
Net transfers to separate accounts (148,230,813) (7,786,272) (5,734,793)
- --------------------------------------------------------------------------------------------------
Net cash provided by operations 55,462,970 78,237,716 82,735,394
- --------------------------------------------------------------------------------------------------
Cash from investing activities:
Proceeds from investments sold, matured,
or repaid:
Bonds 183,393,541 42,332,340 34,097,195
Mortgage loans 97,294 400,687 165,221
Other (73) 696 184
Cost of investments acquired:
Cost of bonds acquired (238,051,758) (127,231,542) (115,323,283)
Tax on capital losses -- (187,647) --
Other invested assets (135,192) -- --
- --------------------------------------------------------------------------------------------------
Total cash used in investing activities (54,696,188) (84,685,466) (81,060,683)
- --------------------------------------------------------------------------------------------------
Cash from financing activities:
Surplus paid in 9,000,000 -- --
Other cash provided 3,565,220 3,599,699 868,187
Other cash applied (4,379,471) (1,931,939) (2,663,386)
- --------------------------------------------------------------------------------------------------
Total cash provided by (used in) financing activities 8,185,749 1,667,760 (1,795,199)
- --------------------------------------------------------------------------------------------------
Net change in cash on hand and on deposit
and short-term investments 8,952,531 (4,779,990) (120,488)
Cash on hand and on deposit and short- term
investments, beginning of year 7,969,712 12,749,702 12,870,190
- --------------------------------------------------------------------------------------------------
Cash on hand and on deposit and short- term
investments, end of year $ 16,922,243 7,969,712 12,749,702
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
5
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
(1) Basis of Presentation and Summary
of Significant Accounting Policies
First Citicorp Life Insurance Company (the Company) is a wholly owned
subsidiary of Citicorp Life Insurance Company (the Parent), which is a
third-tier wholly owned subsidiary of Citicorp. The Company issues term
life insurance, single and flexible premium deferred annuity policies,
variable deferred annuity policies, and accident and health policies.
The majority of the Company's business is generated through customers
of Citicorp and its subsidiaries. The Company also assumes credit life
insurance policies. The Company is licensed to issue insurance in the
State of New York.
The accompanying statutory financial statements have been prepared in
accordance with insurance accounting practices prescribed or permitted
by the Department of Insurance of the State of New York, which vary in
some respects from generally accepted accounting principles (GAAP) as
discussed more fully in note 10. The preparation of statutory financial
statements requires management to make estimates and assumptions which
affect the reported amounts of assets and liabilities as of the date of
the financial statements. Actual results could differ from these
estimates. The significant statutory accounting policies are as
follows:
Revenues and Expenses
Life premiums are reflected as earned on the policy anniversary date.
Annuity considerations are reported as income when received. Accident
and health premiums are reported as revenue when due and earned on a
pro rata basis over the period covered by the policy. Deferred life
premiums represent modal premiums (other than annual) to be billed in
the year subsequent to the commencement of the policy year. Uncollected
premiums represent premiums due less accident and health premiums over
90 days past due. Expenses, including acquisition costs related to
acquiring new business and interest credited to policyholder account
balances, are charged to operations as incurred. Investment income is
recognized as earned.
Policy Reserves
The liability for future life policy benefits is based on statutory
mortality and interest requirements without consideration of
withdrawals. The mortality table, and interest assumptions, currently
utilized is the 1980 Commissioners Standard Ordinary (CSO) table, with
interest rates ranging from 4.5% to 6% for ordinary and group business,
and from 5.5% to 6% for credit business. For new business, the interest
assumptions are 5.5% for credit business, and from 4.5% to 5.25% for
ordinary and group business. Life reserves are generally calculated on
either the net level or Commissioners Reserve Valuation Method (CRVM)
basis.
For deferred annuities, reserves are computed on the Commissioners
Annuity Reserve Valuation Method (CARVM) using appropriate issue-year
interest rates ranging from 5.5% to 6.5%.
The Company provides a liability for accident and health policies which
represents an estimate of the ultimate costs of unpaid claims incurred
through December 31 of each year. Management believes this liability
will be adequate to cover such costs; however, the ultimate liability
may be more or less than the estimated liability.
Investments
Bonds and short-term investments, which consist primarily of U.S.
Treasury, corporate, and mortgage-backed securities, are valued as
prescribed by the National Association of Insurance Commissioners
(NAIC) and are generally carried at amortized cost as the Company has
the ability and intent to hold
(Continued)
6
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
such items to maturity. Mortgage loans are stated at the unpaid
principal balance and represent first liens on residential properties
located in the United States.
Life insurance companies are required to establish an Asset Valuation
Reserve (AVR) and an Interest Maintenance Reserve (IMR). The AVR
provides for a standardized statutory investment valuation reserve for
bonds, preferred stocks, short-term investments, mortgage loans, common
stocks, real estate, and other invested assets and is recorded as a
direct charge to surplus in accordance with statutory accounting
principles. The IMR is designed to defer net realized capital gains and
losses resulting from changes in the level of interest rates in the
market and to amortize them into income over the remaining life of the
bond or mortgage loan sold. The IMR represents the unamortized portion
not yet taken into income.
Capital Gains and Losses
The cost of investments sold is generally determined on the first-in,
first-out method and includes the effects of any related amortization
of premium or accretion of discount. Realized investment gains and
losses are reported net of income taxes of $805,989, $187,646, and
$-0-, for the years ended December 31, 1997, 1996, and 1995,
respectively, and are included in the determination of net income.
Realized investment gains in 1997, 1996, and 1995 of $1,496,838,
$348,486, and $1,059,958, respectively, were excluded from net income
by a transfer to the IMR, net of federal income taxes.
Separate Account Assets and Liabilities
The assets and liabilities of the separate account represent segregated
funds administered and invested by the Company for purposes of funding
variable annuity contracts for the exclusive benefit of variable
annuity contractholders. The Company receives administrative fees from
the separate accounts and retains varying amounts of withdrawal charges
to cover expenses in the event of early withdrawals by contractholders.
The amount of the asset balance in excess of liabilities included
within surplus represents policy surrender charges which are permitted
to be recorded to surplus under statutory accounting practices. The
assets and liabilities of the separate accounts are carried at fair
value. Beginning in 1996, the Company has reflected the net gain from
the Separate Account operations, which consists of annuity
considerations and investment income less contractholder reserves and
expenses, in the statement of operations. Prior to 1996, the net gain
from operations of the Separate Account was recorded as an adjustment
to surplus.
Nonadmitted Assets
Assets included in the statutory statements of admitted assets,
liabilities, and capital and surplus are at "admitted asset values."
Nonadmitted assets, principally capitalized expenditures for furniture
and equipment, are excluded from the accompanying statutory financial
statements through a charge against unassigned surplus.
Federal Income Taxes
Federal income taxes are charged to operations based on income that is
currently taxable. No charge to operations is made or liability
established for the tax effects of temporary differences between the
financial reporting and tax basis of assets and liabilities.
Fair Market Disclosures
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
(Continued)
7
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
could result from offering for sale at one time the Company's entire
holdings of a particular financial instrument. Although fair value
estimates are calculated using assumptions that management believes are
appropriate, changes in assumptions could significantly affect the
estimates and such estimates should be used with care. The following
methods and assumptions were used to estimate the fair market value of
each class of financial instrument for which it was practicable to
estimate fair value:
Investment Securities
Fixed maturities are based on market prices obtained from a pricing
service which approximates fair value.
Mortgage Loans
First mortgages on real estate are carried at the unpaid principal
balance. As discussed in note 3, the Company bears no credit risk as
all mortgage loans were purchased, with recourse, from an affiliate.
The carrying value of mortgage loans approximates fair value.
Policyholder Account Balances
The liability for policyholder account balances is related to
investment-type annuity contracts for which crediting rates are subject
to adjustment annually, based on interest rates currently being offered
for similar contracts with maturities consistent with those remaining
for the contracts being valued. The carrying value approximates fair
value at December 31, 1997 and 1996.
Cash and Short-term Investments
The carrying amount is a reasonable estimate of fair value.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
represent demand deposits and highly liquid short-term investments,
which include discount notes, commercial paper, and repurchase
agreements with original or remaining maturities of 90 days or less
when purchased.
Reclassifications
Certain reclassifications have been made to the 1996 and 1995
information to conform with the 1997 presentation.
(2) Reinsurance
Insurance is assumed from other companies in areas where the Company
had or has limited authority to write business. Normally, a commission
based on net written premiums is charged by the ceding company under
the terms of the agreement.
(Continued)
8
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
The effect of reinsurance on premiums for the years ended December 31,
1997, 1996, and 1995 is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums and annuity considerations:
Annuities $ 242,832,491 103,090,552 97,941,558
Life 4,568,893 5,462,261 4,733,194
Accident and health 2,337,584 3,265,575 4,086,697
Supplementary contracts without
life contingencies 60,000 5,000 22,000
Premiums assumed - life 274,757 303,348 720,312
Premiums assumed - accident and health 932,678 1,017,638 1,228,403
Premiums ceded - life (440,414) (463,045) (391,269)
- ----------------------------------------------------------------------------------------
Net premiums earned $ 250,565,989 112,681,329 108,340,895
- ----------------------------------------------------------------------------------------
</TABLE>
Reserve credits taken with respect to risks ceded to other companies
amounted to $58,769 and $140,570 at December 31, 1997 and 1996,
respectively. The Company remains contingently liable with respect to
any reinsurance ceded and would become actually liable if the assuming
company was unable to meet its obligations under the reinsurance treaty.
(3) Investments
Major categories of net investment income for the years ended December
31, 1997, 1996, and 1995 consist of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------
<S> <C> <C> <C>
Bonds $20,469,123 16,021,209 10,097,496
Mortgage loans 116,139 125,802 154,856
Short-term investments 861,812 748,574 633,415
Other 63,433 6,167 --
- ------------------------------------------------------------
Total investment revenue 21,510,507 16,901,752 10,885,767
Investment expense 737,565 637,870 201,298
- ------------------------------------------------------------
Net investment income 20,772,942 16,263,882 10,684,469
- ------------------------------------------------------------
</TABLE>
(Continued)
9
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Investments in bonds at December 31, 1997 and 1996 are summarized below.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997
-------------------------------------------------------------------------------
Gross Gross
unrea- unrea- Estimated
Carrying lized lized fair
value gains losses value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
U.S. Treasury securities $ 1,321,390 7,076 - 1,328,466
U.S. government agencies 120,344,843 1,068,886 (95,623) 121,318,106
Industrial and miscellaneous 196,002,818 4,446,135 (375,073) 200,073,880
- ------------------------------------------------------------------------------------------------------------------------------------
Total bonds $ 317,669,051 5,522,097 (470,696) 322,720,452
- ------------------------------------------------------------------------------------------------------------------------------------
1996
-------------------------------------------------------------------------------
Gross Gross
unrea- unrea- Estimated
Carrying lized lized fair
value gains losses value
- ------------------------------------------------------------------------------------------------------------------------------------
Bonds:
U.S. Treasury securities $ 3,721,885 5,617 (20,445) 3,707,057
U.S. government agencies 139,582,971 1,229,223 (629,702) 140,182,492
Industrial and miscellaneous 117,181,990 2,093,893 (824,221) 118,451,662
- ------------------------------------------------------------------------------------------------------------------------------------
Total bonds $ 260,486,846 3,328,733 (1,474,368) 262,341,211
- ------------------------------------------------------------------------------------------------------------------------------------
The carrying and estimated fair values of bonds at December 31, 1997,
by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment
penalties.
- ------------------------------------------------------------------------------------------------------------------------------------
Carrying Estimated
value fair value
- ------------------------------------------------------------------------------------------------------------------------------------
Within 1 year $ 511,296 513,745
After 1 year through 5 years 28,688,372 28,970,683
After 5 years through 10 years 75,395,162 77,406,720
After 10 years 47,428,303 48,256,922
Mortgage-backed and asset-backed securities 165,645,918 167,572,382
- ------------------------------------------------------------------------------------------------------------------------------------
$ 317,669,051 322,720,452
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sale of bonds during 1997, 1996, and 1995 were $154,306,338,
$27,331,526, and $27,874,228, respectively. Gross gains of $2,654,859, $788,724,
and $1,172,141, and gross losses of $417,396, $253,288, and $112,634 were
realized on those sales in 1997, 1996, and 1995, respectively.
(Continued)
10
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Investments in mortgage loans were purchased from Citicorp Mortgage,
Inc. (CMI), an affiliate of the Company, pursuant to a Mortgage Loan
Purchase and Sale Agreement. In the event of default by the borrower,
CMI has agreed to take back the related loans at current book value.
(4) Investments on Deposit
At December 31, 1997 and 1996, investments with a carrying value of
$576,051 and $577,417, respectively, were on deposit with the
Department of Insurance of the State of New York, as required by law,
and $501,525 and $2,899,806, respectively, were on deposit in escrow
accounts under the terms of certain of the Company's reinsurance
agreements.
(5) Federal Income Taxes
The Company files a consolidated federal income tax return with its
ultimate parent, Citicorp, and its other subsidiaries. The Company
participates in a tax-sharing agreement with the Parent whereby it is
liable for federal income taxes on a stand-alone basis.
Federal income tax expense on income from operations varies from
amounts computed by applying the current federal corporate income tax
rate to income before federal income tax expense and net realized
capital gains. The reasons for these differences, and the tax effects
thereof, are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
------------------- --------------------- ------------
Amount Percent Amount Percent Amount Percent
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected"
tax at U.S. corporate
tax rate $ (315,833) 35.00% $ 970,660 35.00% $ 735,856 35.00%
Difference between changes
in statutory reserves as
compared to tax reserves 133,000 (14.74) (312,779) (11.28) 475,767 22.63
Policy acquisition
expenses capitalized,
net of amortization 995,623 (110.33) 296,372 10.69 599,608 28.52
Capital gains tax transferred
to IMR 805,989 (89.32) 187,646 6.77 -- --
Other, net 229,856 (25.47) 36,470 1.31 312,297 14.85
- -----------------------------------------------------------------------------------------------------------------------------------
$ 1,848,635 (204.86)% $ 1,178,369 42.49% $ 2,123,528 101.00%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(6) Related-party Transactions
The Company has entered into various service agreements with the Parent
and other affiliates which cover management, investment, and information
processing services. Expenses incurred under such agreements were
$3,462,644, $3,059,830, and $250,000 in 1997, 1996, and 1995,
respectively.
(Continued)
11
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
The Company occupies certain facilities which are leased by an
affiliate. The Company is allocated a portion of the lease expense by
the affiliate. Allocated rent expense totaled $260,401, $251,232, and
$2,787 in 1997, 1996, and 1995, respectively.
The Company utilizes the services of Citicorp Insurance Services, Inc.
and CMI. Employees of these companies are eligible to participate in
defined benefit plans provided by Citicorp. Charges for these services
are based on the actual salary and benefit costs of employees providing
service to the Company. Included in these charges are costs associated
with Citicorp's benefit plans.
(7) Dividend Restrictions
A New York domestic life insurance company shall not distribute a
dividend to its stockholders unless a notice of its intention and the
amount thereof has been filed with the Superintendent of Insurance not
less than 30 days in advance of such declaration. The Company did not
pay a dividend in 1997, 1996, or 1995.
(8) Risk-based Capital
The insurance departments of various states, including the Company's
domiciliary state of New York, impose risk-based capital (RBC)
requirements on insurance enterprises. The RBC calculation serves as a
benchmark for the regulation of life insurance companies by state
insurance regulators. The requirements apply various weighted factors to
financial balances or activity levels based on their perceived degree of
risk.
The RBC guidelines define specific capital levels where action by the
Company or regulatory intervention is required based on the ratio of a
Company's actual total adjusted capital (sum of capital and surplus and
asset valuation reserve) to control levels determined by the RBC
formula. At December 31, 1997, the Company's total adjusted capital
exceeded all regulatory requirements, thus no action by the Company or
its regulators is required.
(9) Contingencies
The Company is involved in various litigation arising in the ordinary
course of operations. Management is of the opinion, after reviewing
these matters with legal counsel, that the ultimate liability, if any,
resulting from any or all of the above matters would not have a material
adverse effect on the Company's financial position.
(10) Differences Between Generally Accepted Accounting
Principles and Statutory Accounting Practices
Statutory accounting practices differ in some respects from generally
accepted accounting principles. Under generally accepted accounting
principles (GAAP), the following applies:
(a) The liability for future policy benefits is computed using the
rule-of-78s and pro rata methods.
(b) Life premiums are reflected as earned when due. Annuity
considerations and other fund deposits are reflected as
deposits rather than revenue.
(Continued)
12
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
(c) Acquisition costs are capitalized and amortized generally over
the premium paying period for individual life contracts in
relation to the estimated present value of gross profits of
the underlying business for interest-sensitive life and
investment contracts.
(d) Deferred income taxes are provided for the tax effects of
temporary differences between the financial reporting and tax
bases of assets and liabilities.
(e) Nonadmitted assets, less applicable allowance accounts, are
restored to the financial statements.
(f) Asset valuation and interest maintenance reserves are not
provided.
(g) Realized investment gains (losses) resulting from changes in
interest rates are recognized when the related security is
sold.
(h) Debt securities are classified into one of three categories:
held to maturity, trading, or available for sale.
Held-to-maturity securities are carried at amortized cost.
Trading securities are reported at fair value with unrealized
gains and losses included in earnings. Available-for-sale
securities are reported at fair value with unrealized gains
and losses excluded from earnings and reported as a separate
component of stockholders' equity, net of tax.
(i) Reinsurance premiums, commissions, expense reimbursements, and
reserves would be presented on a gross basis consistent with
terms of the reinsurance contracts.
The statutory financial statements do not include any adjustments that
might result from differences between statutory accounting practices
and GAAP.
13
<PAGE>
Schedule
FIRST CITICORP LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Investment income earned:
Government bonds $ 3,082,915
Other bonds (unaffiliated) 17,386,208
Bonds of affiliates --
Preferred stocks (unaffiliated) --
Preferred stocks of affiliates --
Common stocks (unaffiliated) --
Common stocks of affiliates --
Mortgages loans 116,139
Real estate --
Premium notes, policy loans, and liens --
Collateral loans --
Cash on hand and on deposit --
Short-term investments 861,812
Other invested assets --
Derivative instruments --
Aggregate write-in for investment income 63,433
-----------
Gross investment income $21,510,507
===========
Real estate owned - book value less encumbrances $ --
===========
Mortgage loans - book value:
Farm mortgages $ --
Residential mortgages 1,320,275
Commercial mortgages --
-----------
Total mortgage loans $ 1,320,275
===========
Mortgage loans by standing - book value:
Good standing $ 1,320,275
Good standing with restructured terms --
Interest overdue more than three months,
not in foreclosure --
Foreclosure in process --
Other long-term assets - statement value --
Collateral loans --
Bonds and stocks of parents, subsidiaries and
affiliates - book value:
Bonds --
Preferred stocks --
Common stocks --
===========
</TABLE>
14
<PAGE>
Schedule, Cont.
FIRST CITICORP LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement, Continued
Year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Bonds and short-term investments by class and maturity: Bonds by
maturity - statement value:
Due within one year or less $ 32,159,267
Over 1 year through 5 years 97,996,615
Over 5 years through 10 years 100,937,184
Over 10 years through 20 years 70,801,426
Over 20 years 26,932,559
- --------------------------------------------------------------------------------
Total by maturity $328,827,051
- --------------------------------------------------------------------------------
Bonds by class - statement value:
Class 1 $253,341,988
Class 2 75,485,063
Class 3 --
Class 4 --
Class 5 --
Class 6 --
- --------------------------------------------------------------------------------
Total by class 328,827,051
Total bonds publicly traded 308,767,584
- --------------------------------------------------------------------------------
Total bonds privately placed $ 20,059,467
- --------------------------------------------------------------------------------
Preferred stocks - statement value $ --
Common stocks - market value --
Short-term investments - book value 11,158,000
Financial options owned - statement value --
Financial options written and in force - statement value --
Financial futures contracts open - current price --
Cash on deposit 5,764,243
Life insurance in force (in thousands):
Industrial --
Ordinary 307,842
Credit life 417,166
Group life 65,219
Amount of accidental death insurance in force under
ordinary policies --
Life insurance policies with disability provisions in force:
Industrial --
Ordinary --
Credit Life --
Group Life --
- --------------------------------------------------------------------------------
</TABLE>
(Continued)
15
<PAGE>
Schedule, Cont.
FIRST CITICORP LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement, Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Supplementary contracts in force:
Ordinary - not involving life contingencies:
Amount on deposit $ 703,058
Income payable 87,793
Ordinary - involving life contingencies - income
payable --
Group - not involving life contingencies:
Amount of deposit --
Income payable --
Group - involving life contingencies - income payable
Annuities:
Ordinary:
Immediate - amount of income payable 7,021
Deferred - fully paid account balance 491,150,066
Deferred - not fully paid account balance --
Group:
Immediate - amount of income payable --
Fully paid account balance --
Not fully paid account balance
Accident and health insurance - premium in force:
Ordinary --
Group 2,485,790
Credit 123,198
Deposits funds and dividend accumulations:
Deposit funds account balance --
Dividend accumulations account balance --
Claim payments 1997:
Group accident and health year ended
December 31, 1997:
1997 593,398
1996 402,909
1995 48,718
1994 15,015
Other accident and health:
1997 --
1996 --
1995 --
1994 --
Other coverages that use developmental methods
to calculate claims reserves:
1997 9,097
1996 19,766
1995 576
1994 --
</TABLE>
- --------------------------------------------------------------------------------
See accompanying independent auditors' report.
16
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Financial Statements and Schedule
December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
First Citicorp Life Insurance Company and
Policyholders of First Citicorp Life Insurance Company
Variable Annuity Separate Account:
We have audited the accompanying statement of net assets of the AIM V.I. Capital
Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I. Growth Fund, AIM
V.I. Growth and Income Fund, AIM V.I. International Equity Fund, AIM V.I. Value
Fund, CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP Folio
400, CitiSelect VIP Folio 500, Fidelity VIP Equity Income Portfolio, Fidelity
VIP Growth Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP Overseas
Portfolio, Fidelity VIP II Contrafund Portfolio, Fidelity VIP II Index 500
Portfolio, Landmark Small Cap Equity VIP Fund, Landmark VIP Balanced Fund,
Landmark VIP Equity Fund, Landmark VIP International Equity Fund, Landmark VIP
U.S. Government Fund, MFS Bond Series, MFS Emerging Growth Series, MFS Money
Market Series, MFS Research Series, MFS Total Return Series, and MFS World
Governments Series Portfolios of First Citicorp Life Insurance Company Variable
Annuity Separate Account as of December 31, 1997, and the related statement of
operations for the year then ended and the related statements of changes in net
assets for each of the years in the two-year period ended December 31, 1997.
These financial statements are the responsibility of First Citicorp Life
Insurance Company Variable Annuity Separate Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned at December 31, 1997, by correspondence with
the Landmark Variable Insurance Products Fund, A.I.M. Variable Insurance Funds,
Inc., CitiSelect Variable Insurance Products Fund, Fidelity Variable Insurance
Products Fund, and MFS Variable Insurance Trust. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the AIM V.I. Capital
Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I. Growth Fund, AIM
V.I. Growth and Income Fund, AIM V.I. International Equity Fund, AIM V.I. Value
Fund, CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP Folio
400, CitiSelect VIP Folio 500, Fidelity VIP Equity Income Portfolio, Fidelity
VIP Growth Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP Overseas
Portfolio, Fidelity VIP II Contrafund Portfolio, Fidelity VIP II Index 500
Portfolio, Landmark Small Cap Equity VIP Fund, Landmark VIP Balanced Fund,
Landmark VIP Equity Fund, Landmark VIP International Equity Fund, Landmark VIP
U.S. Government Fund, MFS Bond Series, MFS Emerging Growth Series, MFS Money
Market Series,
1
<PAGE>
MFS Research Series, MFS Total Return Series, and MFS World Governments Series
Portfolios of First Citicorp Life Insurance Company Variable Annuity Separate
Account as of December 31, 1997, and the results of their operations for the
year then ended and changes in their net assets for each of the years in the
two-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
January 21, 1998
2
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth and International V.I.
Appreciation Series Growth Income Equity Value
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $15,704,490 2,742,768 1,947,837 6,175,981 8,423,865 7,148,759
Payable to First Citicorp Life
Insurance Company 9,105 1,619 1,111 3,522 5,053 4,108
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $15,695,385 2,741,149 1,946,726 6,172,459 8,418,812 7,144,651
====================================================================================================================================
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 15,695,385 2,741,149 1,946,726 6,172,459 8,418,812 7,144,651
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $15,695,385 2,741,149 1,946,726 6,172,459 8,418,812 7,144,651
====================================================================================================================================
Total units held by contractholders 9,405,192 2,587,138 1,609,176 5,216,176 8,040,029 6,012,919
Accumulated unit value $ 1.67 1.06 1.21 1.18 1.05 1.19
Cost of investments $14,398,646 2,625,047 1,882,076 5,754,413 8,526,302 6,970,683
====================================================================================================================================
Number of shares 722,046 257,054 98,227 327,291 491,761 343,195
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
3
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $5,524,708 10,730,168 8,228,961 2,552,624 14,319,602 11,685,575
Payable to First Citicorp Life
Insurance Company 3,228 6,355 4,916 1,516 8,383 6,939
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $5,521,480 10,723,813 8,224,045 2,551,108 14,311,219 11,678,636
====================================================================================================================================
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 5,521,480 10,723,813 8,224,045 2,551,108 14,311,219 11,678,636
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $5,521,480 10,723,813 8,224,045 2,551,108 14,311,219 11,678,636
====================================================================================================================================
Total units held by contractholders 5,186,850 9,994,557 7,624,470 2,332,285 11,769,502 6,485,960
Accumulated unit value $ 1.06 1.07 1.08 1.09 1.22 1.80
Cost of investments $5,591,480 10,765,809 8,337,141 2,571,875 12,923,878 10,036,760
====================================================================================================================================
Number of shares 538,996 1,033,735 800,483 243,571 589,769 314,975
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
4
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $5,326,406 4,830,426 8,687,834 21,646,707 898,927 --
Payable to First Citicorp Life
Insurance Company 3,188 2,874 5,000 12,848 528 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $5,323,218 4,827,552 8,682,834 21,633,859 898,399 --
====================================================================================================================================
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 5,323,218 4,827,552 8,682,834 21,633,859 898,399 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $5,323,218 4,827,552 8,682,834 21,633,859 898,399 --
====================================================================================================================================
Total units held by contractholders 4,679,724 4,444,906 7,182,541 17,510,630 811,490 --
Accumulated unit value $ 1.14 1.09 1.21 1.24 1.11 --
Cost of investments $4,961,790 4,847,283 7,928,225 19,421,443 826,481 --
====================================================================================================================================
Number of shares 392,224 251,585 435,699 189,236 80,190 --
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
5
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets:
Investments at market value $ -- -- -- 1,642,900 9,065,128 4,985,377
Payable to First Citicorp Life
Insurance Company -- -- -- 972 5,190 3,135
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $ -- -- -- 1,641,928 9,059,938 4,982,242
====================================================================================================================================
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders -- -- -- 1,641,928 9,059,938 4,982,242
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets represented $ -- -- -- 1,641,928 9,059,938 4,982,242
====================================================================================================================================
Total units held by contractholders -- -- -- 1,523,046 7,769,779 4,552,838
Accumulated unit value $ -- -- -- 1.08 1.17 1.09
Cost of investments $ -- -- -- 1,550,537 8,388,361 4,985,377
====================================================================================================================================
Number of shares -- -- -- 148,276 561,656 4,985,377
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
6
<PAGE>
<TABLE>
<CAPTION>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Net Assets
December 31, 1997
================================================================================
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets:
Investments at market value $13,077,740 7,039,879 1,989,303
Payable to First Citicorp Life
Insurance Company 7,626 4,198 1,157
- --------------------------------------------------------------------------------
Total net assets $13,070,114 7,035,681 1,988,146
================================================================================
Total net assets represented by:
Variable annuity cash value
invested in separate account
by contractholders 13,070,114 7,035,681 1,988,146
- --------------------------------------------------------------------------------
Total net assets represented $13,070,114 7,035,681 1,988,146
================================================================================
Total units held by contractholders 11,348,445 6,044,594 1,814,432
Accumulated unit value $ 1.15 1.16 1.10
Cost of investments $12,136,701 6,509,215 1,987,414
================================================================================
Number of shares 828,229 423,324 194,839
================================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth and International V.I.
Appreciation Series Growth Income Equity Value
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $ 14,490 1,221 7,869 2,954 37,003 58,248
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 132,194 16,269 10,072 32,517 56,181 35,770
Daily administrative charges 15,846 1,934 1,201 3,881 6,636 4,260
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 148,040 18,203 11,273 36,398 62,817 40,030
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (133,550) (16,982) (3,404) (33,444) (25,814) 18,218
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments:
Realized gain distribution 186,302 -- 59,371 4,431 130,215 178,829
Realized gain (loss) on sale
of investments 67,813 7,816 10,047 6,523 12,680 4,700
Change in unrealized gain
(loss) on investments 822,678 117,721 65,761 421,568 (102,437) 178,076
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,076,793 125,537 135,179 432,522 40,458 361,605
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 943,243 108,555 131,775 399,078 14,644 379,823
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
8
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $ 250,133 453,313 464,381 129,349 -- 30,382
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 30,294 64,871 52,018 16,046 79,207 102,048
Daily administrative charges 3,606 7,715 6,166 1,905 9,388 12,136
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 33,900 72,586 58,184 17,951 88,595 114,184
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 216,233 380,727 406,197 111,398 (88,595) (83,802)
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments:
Realized gain distribution -- -- -- -- -- 135,997
Realized gain (loss) on sale of
investments 8,545 18,121 9,236 14,937 9,181 105,552
(loss) on investments (66,772) (35,641) (108,180) (19,251) 1,395,724 1,414,987
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (58,227) (17,520) (98,944) (4,314) 1,404,905 1,656,536
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 158,006 363,207 307,253 107,084 1,316,310 1,572,734
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
9
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $ -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 28,577 28,704 48,067 126,500 6,713 5,449
Daily administrative charges 3,382 3,414 5,699 15,009 797 652
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 31,959 32,118 53,766 141,509 7,510 6,101
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (31,959) (32,118) (53,766) (141,509) (7,510) (6,101)
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments:
Realized gain distribution -- -- -- -- -- --
Realized gain (loss) on sale of
investments 6,203 5,358 18,069 9,811 1,270 79,524
Change in unrealized gain
(loss) on investments 364,616 (16,857) 759,609 2,225,264 72,446 (45,262)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 370,819 (11,499) 777,678 2,235,075 73,716 34,262
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 338,860 (43,617) 723,912 2,093,566 66,206 28,161
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
10
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income - dividends $ -- -- -- -- -- 185,663
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 6,721 3,179 1,119 9,968 49,306 48,180
Daily administrative charges 800 381 134 1,180 5,892 5,222
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 7,521 3,560 1,253 11,148 55,198 53,402
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (7,521) (3,560) (1,253) (11,148) (55,198) 132,261
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments:
Realized gain distribution -- -- -- -- -- --
Realized gain (loss) on sale
of investments 189,896 (5,806) (5,558) 2,575 5,351 --
Change in unrealized gain
(loss) on investments (119,553) (11,159) 4,617 92,363 676,767 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 70,343 (16,965) (941) 94,938 682,118 --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 62,822 (20,525) (2,194) 83,790 626,920 132,261
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
11
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
================================================================================
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income - dividends $ -- -- 23,200
- --------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fees 81,333 39,165 16,290
Daily administrative charges 9,639 4,652 2,011
- --------------------------------------------------------------------------------
Total expenses 90,972 43,817 18,301
- --------------------------------------------------------------------------------
Net investment income (loss) (90,972) (43,817) 4,899
- --------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments:
Realized gain distribution -- -- --
Realized gain (loss) on sale
of investments 11,753 12,053 (10,296)
Change in unrealized gain
(loss) on investments 941,039 530,664 (1,434)
- --------------------------------------------------------------------------------
Net gain (loss) on investments 952,792 542,717 (11,730)
- --------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 861,820 498,900 (6,831)
================================================================================
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth and International V.I.
Appreciation Series Growth Income Equity Value
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ (133,550) (16,982) (3,404) (33,444) (25,814) 18,218
Realized gain distribution 186,302 -- 59,371 4,431 130,215 178,829
Realized gain (loss) on sale of
investments 67,813 7,816 10,047 6,523 12,680 4,700
Change in unrealized gain
(loss) on investments 822,678 117,721 65,761 421,568 (102,437) 178,076
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 943,243 108,555 131,775 399,078 14,644 379,823
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 9,940,304 2,260,748 1,802,907 5,581,476 7,370,451 6,488,264
Transfers between funds 216,801 346,176 27,448 203,838 1,110,605 333,647
Transfers to (from) First Citicorp
Life Insurance Company 114,768 42,891 (7,092) 63,080 51,049 25,141
Annual administrative charges (2,142) (58) (3) -- (269) --
Death benefits (11,556) -- -- -- -- (6,946)
Contract withdrawals (672,218) (17,163) (8,309) (75,013) (127,668) (75,278)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital transactions 9,585,957 2,632,594 1,814,951 5,773,381 8,404,168 6,764,828
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 10,529,200 2,741,149 1,946,726 6,172,459 8,418,812 7,144,651
Net assets at beginning of period 5,166,185 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $15,695,385 2,741,149 1,946,726 6,172,459 8,418,812 7,144,651
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
13
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ 216,233 380,727 406,197 111,398 (88,595) (83,802)
Realized gain distribution -- -- -- -- -- 135,997
investments 8,545 18,121 9,236 14,937 9,181 105,552
Change in unrealized gain
(loss) on investments (66,772) (35,641) (108,180) (19,251) 1,395,724 1,414,987
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 158,006 363,207 307,253 107,084 1,316,310 1,572,734
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 5,128,387 10,265,501 7,747,348 2,475,907 11,472,280 4,831,520
Transfers between funds 323,043 86,368 314,908 95,484 1,705,440 1,488,863
Transfers to (from) First Citicorp
Life Insurance Company 3,505 67,203 19,890 37,532 30,107 68,267
Annual administrative charges -- -- -- -- (386) (2,499)
Death benefits (11,719) -- -- -- (2,649) (15,402)
Contract withdrawals (79,742) (58,466) (165,354) (164,899) (209,883) (557,761)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital transactions 5,363,474 10,360,606 7,916,792 2,444,024 12,994,909 5,812,988
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 5,521,480 10,723,813 8,224,045 2,551,108 14,311,219 7,385,722
Net assets at beginning of period -- -- -- -- -- 4,292,914
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $5,521,480 10,723,813 8,224,045 2,551,108 14,311,219 11,678,636
====================================================================================================================================
</TABLE>
See
accompanying notes to financial statements. (Continued)
14
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ (31,959) (32,118) (53,766) (141,509) (7,510) (6,101)
Realized gain distribution -- -- -- -- -- --
Realized gain (loss) on sale of
investments 6,203 5,358 18,069 9,811 1,270 79,524
Change in unrealized gain
(loss) on investments 364,616 (16,857) 759,609 2,225,264 72,446 (45,262)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 338,860 (43,617) 723,912 2,093,566 66,206 28,161
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 4,948,945 4,813,053 7,590,086 19,168,900 725,265 159,121
Transfers between funds 68,933 95,129 369,720 446,614 120,304 (1,538,140)
Transfers to (from) First Citicorp
Life Insurance Company 31,649 1,201 43,801 183,713 (1,024) (2,851)
Annual administrative charges -- -- -- (4) -- (238)
Death benefits -- -- -- (2,705) -- --
Contract withdrawals (65,169) (38,214) (44,685) (256,225) (12,352) (50,141)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital transactions 4,984,358 4,871,169 7,958,922 19,540,293 832,193 (1,432,249)
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 5,323,218 4,827,552 8,682,834 21,633,859 898,399 (1,404,088)
Net assets at beginning of period -- -- -- -- -- 1,404,088
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $5,323,218 4,827,552 8,682,834 21,633,859 898,399 --
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
15
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Changes in Net Assets
For the year ended December 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ (7,521) (3,560) (1,253) (11,148) (55,198) 132,261
Realized gain distribution -- -- -- -- -- --
Realized gain (loss) on sale
of investments 189,896 (5,806) (5,558) 2,575 5,351 --
Change in unrealized gain
(loss) on investments (119,553) (11,159) 4,617 92,363 676,767 --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 62,822 (20,525) (2,194) 83,790 626,920 132,261
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 193,977 63,438 2,400 1,535,323 8,178,715 9,055,694
Transfers between funds (1,848,071) (842,171) (296,004) 24,948 269,433 (4,089,586)
Transfers to (from) Citicorp Life
Insurance Company 846 1,501 (153) 13,198 33,022 (462,915)
Annual administrative charges (145) (101) (3) -- (21) (61)
Death benefits -- -- -- -- -- --
Contract withdrawals (52,070) (66,980) (8,842) (15,331) (48,131) (173,095)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital transactions (1,705,463) (844,313) (302,602) 1,558,138 8,433,018 4,330,037
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (1,642,641) (864,838) (304,796) 1,641,928 9,059,938 4,462,298
Net assets at beginning of period 1,642,641 864,838 304,796 -- -- 519,944
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ -- -- -- 1,641,928 9,059,938 4,982,242
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
16
<PAGE>
<TABLE>
<CAPTION>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Changes in Net Assets
For the year ended December 31, 1997
================================================================================
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ (90,972) (43,817) 4,899
Realized gain distribution -- -- --
Realized gain (loss) on sale
of investments 11,753 12,053 (10,296)
Change in unrealized gain
(loss) on investments 941,039 530,664 (1,434)
- --------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 861,820 498,900 (6,831)
- --------------------------------------------------------------------------------
Capital transactions:
Contract deposits 11,637,450 6,235,456 1,528,236
Transfers between funds 569,597 337,130 59,542
Transfers to (from) Citicorp Life
Insurance Company 107,946 57,332 (4,080)
Annual administrative charges (7) -- (171)
Death benefits -- -- (3,395)
Contract withdrawals (106,692) (93,137) (110,238)
- --------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from capital transactions 12,208,294 6,536,781 1,469,894
- --------------------------------------------------------------------------------
Total increase (decrease) in net assets 13,070,114 7,035,681 1,463,063
Net assets at beginning of period -- -- 525,083
- --------------------------------------------------------------------------------
Net assets at end of period $13,070,114 7,035,681 1,988,146
================================================================================
</TABLE>
17
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Changes in Net Assets
For the year ended December 31, 1996
<TABLE>
<CAPTION>
====================================================================================================================================
A.I.M. V.I. Fidelity Landmark Landmark Landmark
Capital VIP VIP VIP VIP
Appreciation Growth Balanced Equity International
Fund Portfolio Fund Fund Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ (37,886) (34,923) 34,167 14,571 1,929
Realized gain distribution -- 123,383 19,244 26,066 14,556
Realized gain (loss) on sale
of investments 47,770 28,292 14,761 15,916 3,827
Change in unrealized gain
(loss) on investments 417,715 200,003 9,979 69,678 11,523
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 427,599 316,755 78,151 126,231 31,835
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions:
Contract deposits 3,128,453 2,553,418 723,142 814,078 526,463
Transfers between funds 49,024 30,429 (19,445) 26,342 (23,480)
Transfers from First Citicorp
Life Insurance Company 170,820 66,088 7,959 16,494 11,431
Annual administrative charges (1,111) (951) (461) (437) (196)
Contract withdrawals (339,282) (291,647) (96,406) (86,467) (71,248)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from capital transactions 3,007,904 2,357,337 614,789 770,010 442,970
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 3,435,503 2,674,092 692,940 896,241 474,805
Net assets at beginning of period 1,730,682 1,618,822 711,148 746,400 390,033
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $5,166,185 4,292,914 1,404,088 1,642,641 864,838
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements. (Continued)
18
<PAGE>
<TABLE>
<CAPTION>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Statements of Changes in Net Assets
For the year ended December 31, 1997
================================================================================
Landmark MFS
VIP U.S. Money MFS World
Government Market Governments
Fund Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss) $ 15,048 3,158 (4,355)
Realized gain distribution -- -- --
Realized gain (loss) on sale
of investments 472 -- (7,002)
Change in unrealized gain
(loss) on investments (12,125) -- 20,206
- --------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 3,395 3,158 8,849
- --------------------------------------------------------------------------------
Capital transactions:
Contract deposits 110,373 479,146 340,827
Transfers between funds 3,789 (31,005) (35,654)
Transfers from First Citicorp
Life Insurance Company -- -- 907
Annual administrative charges (49) (27) (128)
Contract withdrawals (34,848) (50,186) (54,832)
- --------------------------------------------------------------------------------
Increase in net assets resulting
from capital transactions 79,265 397,928 251,120
- --------------------------------------------------------------------------------
Total increase in net assets 82,660 401,086 259,969
Net assets at beginning of period 222,136 118,858 265,114
- --------------------------------------------------------------------------------
Net assets at end of period $304,796 519,944 525,083
================================================================================
See accompanying notes to financial statements.
</TABLE>
19
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
December 31, 1997
================================================================================
(1) History
First Citicorp Life Insurance Company Variable Annuity Separate Account
(the Account) is a separate investment account maintained under the
provisions of New York Insurance Law by First Citicorp Life Insurance
Company (the Company), a subsidiary of Citicorp Life Insurance Company.
The Account operates as a unit investment trust registered under the
Investment Company Act of 1940, as amended, and supports the operations of
the Company's individual flexible premium deferred variable annuity
contracts (the contracts). The Account invests in portfolios of the
following funds:
o Variable Annuity Portfolios:
o CitiSelect VIP Folio 200*,
o CitiSelect VIP Folio 300*,
o CitiSelect VIP Folio 400*,
o CitiSelect VIP Folio 500, and
o Landmark Small Cap Equity VIP Fund.
o Landmark Variable Insurance Products (VIP) Funds:
o Landmark VIP Balanced Fund,
o Landmark VIP Equity Fund,
o Landmark VIP International Equity Fund, and
o Landmark VIP U.S. Government Fund.
o AIM Variable Insurance Funds, Inc.:
o AIM V.I. Capital Appreciation Fund,
o AIM V.I. Government Series Fund*,
o AIM V.I. Growth Fund*,
o AIM V.I. Growth and Income Fund*,
o AIM V.I. International Equity Fund*, and
o the AIM V.I. Value Fund*.
o Fidelity Variable Insurance Products Funds:
o Fidelity VIP Equity Income Portfolio*,
o Fidelity VIP Growth Portfolio,
o Fidelity VIP High Income Portfolio*,
o Fidelity VIP Overseas Portfolio*,
o Fidelity VIP II Contrafund Portfolio*, and
o Fidelity VIP II Index 500 Portfolio*.
o MFS Variable Insurance Trust:
o MFS Bond Series*,
o MFS Emerging Growth Series*,
o MFS Money Market Series,
o MFS Research Series*,
o MFS Total Return Series*, and
o MFS World Governments Series.
* Available to the Account beginning February 3, 1997.
As of April 30, 1997, several funds were no longer available to the
Account, including Landmark VIP Balanced Fund, Landmark VIP Equity Fund,
Landmark VIP International Equity Fund, and Landmark VIP U.S. Government
Fund.
(Continued)
20
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
================================================================================
The assets of the Account are the property of the Company. The portion of
the Account's assets applicable to the contracts are not chargeable with
liabilities arising out of any other business conducted by the Company.
In addition to the Account, a contract owner may also allocate funds to
the General Account, which is part of the Company's general account.
Amounts allocated to the General Account are credited with a guaranteed
rate of interest for one year. Because of exemptive and exclusionary
provisions, interests in the General Account have not been registered
under the Securities Act of 1933, and the General Account has not been
registered as an investment company under the Investment Company Act of
1940.
(2) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Account in preparation of the financial statements in conformity with
generally accepted accounting principles.
Investment Valuation
The investment in the Fund is stated at market value, which is the net
asset value of each of the respective series as determined by the Fund at
the close of business on the last working day of the period.
Accounting for Investments
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date. The cost of investments sold
is generally determined on the specific identification method.
Federal Income Taxes
The Company is taxed under federal law as a life insurance company. The
Account is part of the Company's total operations and is not taxed
separately. Under existing law, no taxes are payable on investment income
and realized capital gains of the Account.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
(3) Contract Charges
Daily charges for mortality and expense risks assumed by the Company are
assessed through the daily unit value calculation, and are equivalent on
an annual basis to 1.25% of the net assets of the contracts.
An annual contract fee of $30 is assessed against each contract on its
anniversary date by surrendering units. Daily charges for
(Continued)
21
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
================================================================================
administrative expenses are assessed through the daily unit value
calculation, and are equivalent on an annual basis to 0.15% of the net
assets of the contracts.
(Continued)
22
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
================================================================================
The contracts provide that in the event that a contract owner withdraws
all or a portion of the contract value within five contract years, a
deferred sales charge will be assessed. The deferred sales charge is based
on a table of charges of which the maximum charge is currently 7% of the
purchase payments withdrawn. During each contract year, up to 10% of
purchase payments less any prior withdrawal of purchase payments may be
withdrawn without a deferred sales charge.
Premium taxes may be applicable, depending on the laws of various
jurisdictions. Various states and other governmental entities levy a
premium tax on annuity contracts issued by insurance companies.
(4) Purchase of Investments
For the twelve months ended December 31, 1997, investment activity in each
of the respective Funds was as follows:
<TABLE>
<CAPTION>
================================================================================
Cost of Proceeds
Shares of purchases from sales
- --------------------------------------------------------------------------------
<S> <C> <C>
Variable Annuity Portfolios:
CitiSelect VIP Folio 200 $ 5,824,041 241,104
CitiSelect VIP Folio 300 11,039,939 292,252
CitiSelect VIP Folio 400 8,548,459 220,552
CitiSelect VIP Folio 500 2,718,883 161,945
Landmark Small Cap Equity VIP Fund 862,608 37,397
Landmark Variable Insurance Products Funds:
Landmark VIP Balanced Fund 160,232 1,599,344
Landmark VIP Equity Fund 204,312 1,918,183
Landmark VIP International Equity Fund 71,051 921,414
Landmark VIP U.S. Government Fund 2,250 308,275
AIM Variable Insurance Funds, Inc.:
AIM V.I. Capital Appreciation Fund 9,859,732 214,667
AIM V.I. Government Series Fund 2,846,115 228,884
AIM V.I. Growth Fund 1,937,974 65,945
AIM V.I. Growth and Income Fund 5,808,525 60,636
AIM V.I. International Equity Fund 8,646,399 132,776
AIM V.I. Value Fund 7,001,318 35,336
Fidelity Variable Insurance Products Funds:
Fidelity VIP Equity Income Portfolio 12,987,763 73,066
Fidelity VIP Growth Portfolio 6,467,033 597,210
Fidelity VIP High Income Portfolio 5,023,583 67,996
Fidelity VIP Overseas Portfolio 4,897,523 55,598
Fidelity VIP II Contrafund Portfolio 8,040,547 130,392
Fidelity VIP II Index 500 Portfolio 19,512,629 100,997
MFS Variable Insurance Trust:
MFS Bond Series 1,608,024 60,061
MFS Emerging Growth Series 8,424,463 41,454
MFS Money Market Series 9,518,532 5,053,381
MFS Research Series 12,236,722 111,775
MFS Total Return Series 6,629,641 132,479
MFS World Governments Series 1,643,605 169,953
================================================================================
</TABLE>
(Continued)
23
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
<TABLE>
<CAPTION>
====================================================================================================================================
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in accumulation units of contractholders of the Account were as
follows:
====================================================================================================================================
1997
----------------------------------------------------------------------------------------
AIM V.I. AIM V.I. AIM AIM V.I. AIM V.I. AIM
Capital Government V.I. Growth and International V.I.
Appreciation Series Growth Income Equity Value
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 6,180,079 2,216,154 1,594,864 5,032,658 7,001,263 5,767,184
Units withdrawn and
contract charges (420,971) (16,667) (7,139) (64,403) (117,303) (71,384)
Units transferred
between funds 181,318 387,651 21,451 247,921 1,156,069 317,119
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 5,940,426 2,587,138 1,609,176 5,216,176 8,040,029 6,012,919
Units at beginning
of period 3,464,766 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Units at end of period 9,405,192 2,587,138 1,609,176 5,216,176 8,040,029 6,012,919
====================================================================================================================================
</TABLE>
(Continued)
24
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
<TABLE>
<CAPTION>
====================================================================================================================================
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in accumulation units of contractholders of the Account were
as follows:
====================================================================================================================================
1997
---------------------------------------------------------------------------------------
CitiSelect CitiSelect CitiSelect CitiSelect Fidelity Fidelity
VIP VIP VIP VIP VIP Equity VIP
Folio Folio Folio Folio Income Growth
200 300 400 500 Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 4,956,251 9,892,094 7,456,293 2,358,949 10,258,941 2,891,445
Units withdrawn and
contract charges (86,149) (55,567) (153,382) (150,399) (180,920) (340,485)
Units transferred
between funds 316,748 158,030 321,559 123,735 1,691,481 1,032,064
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 5,186,850 9,994,557 7,624,470 2,332,285 11,769,502 3,583,024
Units at beginning
of period -- -- -- -- -- 2,902,936
- ------------------------------------------------------------------------------------------------------------------------------------
Units at end of period 5,186,850 9,994,557 7,624,470 2,332,285 11,769,502 6,485,960
====================================================================================================================================
</TABLE>
(Continued)
25
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
<TABLE>
<CAPTION>
====================================================================================================================================
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in accumulation units of contractholders of the Account were
as follows:
====================================================================================================================================
1997
-----------------------------------------------------------------------------------------
Fidelity Fidelity Fidelity Fidelity Landmark Landmark
VIP High VIP VIP II VIP II Small Cap VIP
Income Overseas Contrafund Index 500 Equity VIP Balanced
Portfolio Portfolio Portfolio Portfolio Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 4,648,170 4,387,493 6,840,803 17,186,938 707,778 131,975
Units withdrawn and
contract charges (59,117) (33,932) (38,044) (221,987) (12,416) (41,456)
Units transferred
between funds 90,671 91,345 379,782 545,679 116,128 (1,268,215)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 4,679,724 4,444,906 7,182,541 17,510,630 811,490 (1,177,696)
Units at beginning
of period -- -- -- -- -- 1,177,696
- ------------------------------------------------------------------------------------------------------------------------------------
Units at end of period 4,679,724 4,444,906 7,182,541 17,510,630 811,490 --
====================================================================================================================================
</TABLE>
(Continued)
26
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
<TABLE>
<CAPTION>
====================================================================================================================================
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in accumulation units of contractholders of the Account were
as follows:
====================================================================================================================================
1997
- ------------------------------------------------------------------------------------------------------------------------------------
Landmark Landmark Landmark MFS MFS
VIP VIP VIP U.S. MFS Emerging Money
Equity International Government Bond Growth Market
Fund Equity Fund Fund Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 145,212 60,644 2,221 1,499,740 7,536,741 8,448,279
Units withdrawn and
contract charges (38,892) (63,754) (8,300) (14,707) (41,047) (159,934)
Units transferred
between funds (1,374,924) (798,247) (278,297) 38,013 274,085 (4,227,175)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (1,268,604) (801,357) (284,376) 1,523,046 7,769,779 4,061,170
Units at beginning
of period 1,268,604 801,357 284,376 -- -- 491,668
- ------------------------------------------------------------------------------------------------------------------------------------
Units at end of period -- -- -- 1,523,046 7,769,779 4,552,838
====================================================================================================================================
</TABLE>
(Continued)
27
<PAGE>
<TABLE>
<CAPTION>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
================================================================================
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
- --------------------------------------------------------------------------------
1997
-----------------------------------------
MFS MFS
MFS Total World
Research Return Governments
Series Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Units purchased 10,821,738 5,763,673 1,400,097
Units withdrawn and
contract charges (93,880) (85,739) (104,233)
Units transferred
between funds 620,587 366,660 51,410
- --------------------------------------------------------------------------------
Net increase 11,348,445 6,044,594 1,347,274
Units at beginning
of period -- -- 467,158
- --------------------------------------------------------------------------------
Units at end of period 11,348,445 6,044,594 1,814,432
================================================================================
</TABLE>
(Continued)
28
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
<TABLE>
<CAPTION>
====================================================================================================================================
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in accumulation units of contractholders of the Account were
as follows:
====================================================================================================================================
1996
--------------------------------------------------------------------------------------
A.I.M. V.I. Fidelity Landmark Landmark Landmark
Capital VIP VIP VIP VIP
Appreciation Growth Balanced Equity International
Fund Portfolio Fund Fund Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units purchased 2,203,112 1,799,603 629,962 654,041 502,007
Units withdrawn and
contract charge (235,872) (202,480) (82,376) (68,251) (67,205)
Units transferred
between funds 152,013 67,883 (9,936) 33,803 (11,390)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 2,119,253 1,665,006 537,650 619,593 423,412
Units at beginning of period 1,345,513 1,237,930 640,046 649,011 377,945
- ------------------------------------------------------------------------------------------------------------------------------------
Units at end of period 3,464,766 2,902,936 1,177,696 1,268,604 801,357
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
29
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
================================================================================
(5) Net Increase in Accumulation Units
For the years ended December 31, 1997 and 1996, transactions in
accumulation units of contractholders of the Account were as follows:
================================================================================
<TABLE>
<CAPTION>
1996
----------------------------------------
Landmark MFS
VIP U.S. Money MFS World
Government Market Governments
Fund Series Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Units purchased 106,935 454,216 307,532
Units withdrawn and
contract charge (33,452) (48,418) (49,947)
Units transferred
between funds 3,645 (30,038) (32,341)
- --------------------------------------------------------------------------------
Net increase 77,128 375,760 225,244
Units at beginning of period 207,248 115,908 241,914
- --------------------------------------------------------------------------------
Units at end of period 284,376 491,668 467,158
================================================================================
</TABLE>
30
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
(1) Certified resolution of the board of directors of First Citicorp
Life Insurance Company (the "Company") establishing First Citicorp
Life Variable Annuity Separate Account (the "Separate Account").*
(2) Not Applicable.
(3) Form of underwriting agreement among the Company, the Separate
Account and CFBDS, Inc.(formerly The Landmark Funds Broker-Dealer
Services, Inc.)*
(4) (a) Contract Form.*
(b) Individual Retirement Annuity Endorsement.*
(c) 403(b) Tax Sheltered Annuity Endorsement.*
(d) Annuity Contract Endorsement: Amendment of Annuity
Income Option Tables.*
(e) Variable Annuity Endorsement: Amendment of Contract
Provisions.
(f) Roth Individual Retirement Annuity Endorsement.
(5) Contract Application.**
(6) (a) Certificate of Incorporation of the Company.*
(b) By-Laws of the Company.*
(7) None.
(8) (a) Participation Agreement Among Variable Insurance Products
Fund, Fidelity Distributors Corporation and First Citicorp
Life Insurance Company*
(b) Participation Agreement Among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and First Citicorp Life
Insurance Company.**
<PAGE>
(c) Participation Agreement Among MFS Variable Insurance Trust,
First Citicorp Life Insurance Company and Massachusetts
Financial Services Company.**
(d) Participation Agreement By and Among AIM Variable Insurance
Funds, Inc. and First Citicorp Life Insurance Company, on
Behalf of Itself and First Citicorp Life Variable Annuity
Separate Account.**
(e) Participation Agreement Among CitiFunds and First Citicorp
Life Insurance Company.**
(f) Participation Agreement Between Variable Annuity Portfolios
and First Citicorp Life Insurance Company.**
(g) Administrative Services Agreement between Citicorp Insurance
Services, Inc. and First Citicorp Life Insurance Company with
Addendums.*
(9) Opinion and Consent of Catherine S. Mulholland, Esq.
(10) (a) Consent of Sutherland, Asbill & Brennan LLP.
(b) Consent of KPMG Peat Marwick LLP.
(11) Not Applicable.
(12) None.
(13) Schedule for Computation of Each Performance Calculation.***
(14) Not Applicable
*Incorporated herein by reference to the registrant's Post-Effective Amendment
No. 2 to the Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on April 29, 1996(File 33-83354)
**Incorporated herein by reference to the registrant's Post-Effective Amendment
No. 3 to the Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on November 8, 1996 (File 33-83354).
***Incorporated herein by reference to the registrant's Post-Effective Amendment
No. 5 to the Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on April 29, 1997 (File 33-83354).
<PAGE>
Item 25. Directors and Officers of the Company.
Directors**
Jack S. Berger Joseph E. Madalon
Frederick W. Bradley, Jr.* Charles H. Masland, IV
Elizabeth C. Craig Frederic W. Thomas, Jr.*
Carl W. Desch* John M. Walbridge*
Alan F. Liebowitz Larry D. Williams
* Outside Director
Officers**
Alan F. Liebowitz President and Chief Executive
Officer
Marc J. Fink Senior Vice President
Daniel F. Forcade Senior Vice President and Treasurer
Joel E. Levine Senior Vice President and Chief
Investment Officer
Joseph E. Madalon Senior Vice President and
Chief Financial Officer
Charles H. Masland, IV Senior Vice President
Catherine S. Mulholland Senior Vice President and
General Counsel
Benjamin G. Spurgeon Senior Vice President and
Chief Actuary
Larry D. Williams Senior Vice President
Elizabeth C. Craig Vice President
Mark C. Lovejoy Vice President and
Chief Underwriter
Eric S. Miller Vice President
Kenneth E. Nelson Vice President
Walter C. Smith Vice President
Ian C. Stuart Vice President
Richard M. Zuckerman Vice President/Associate General
Counsel and Secretary
** 666 Fifth Avenue, 3rd Floor, New York, New York 10103.
<PAGE>
Item 26. Persons Controlled by or Under Common Control With the Depositor
or Registrant
ORGANIZATION CHART
+------------------------+
| CITICORP |
| (Delaware Corporation) |
+------------------------+
| 100%
|
+------------------------+
| CITICORP HOLDINGS, INC.|
| (Delaware Corporation) |
+------------------------+
| 100%
|
+------------------------+
| CITIBANK DELAWARE |
| (Delaware Corporation)|
+------------------------+
|
+--------------------------------+
| 100%
+-----------------------+
| CITICORP LIFE |
| INSURANCE COMPANY |
| (Arizona Corporation) |
+-----------------------+
|
+--------+-----------------------------+
| 100% | 100%
+-----------------------+ +--------------------------+
| FIRST CITICORP LIFE | | CITICORP ASSURANCE |
| INSURANCE | | CO |
| COMPANY | | (Delaware Corporation) |
| (New York Corporation)| +--------------------------+
+-----------------------+
<PAGE>
Item 27. Number of Contract owners
As of December 31, 1997, there were 4,442 contract owners.
Item 28. Indemnification
The Bylaws of First Citicorp Life Insurance Company provide in Article
VIII as follows:
(a) The Corporation shall indemnify any person made a party to an action
or proceeding by or in the right of the Corporation to procure a judgment
in its favor, by reason of the fact that he, his testator or intestate, is
or was a director or officer or employee of the Corporation against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him in connection with the defense of such action or
proceeding, or in connection with an appeal therein, except in relation to
matters as to which such person is adjudged to have breached his duty to
the Corporation; and
(b) The Corporation shall indemnify any person made, or threatened to be
made a party to an action or proceeding other than one by or in the right
of the Corporation to procure a judgement in its favor, whether civil or
criminal, including an action by or in the right of any other corporation
of any type or kind domestic or foreign, which any director or officer or
employee of the Corporation served in any capacity at the request of the
Corporation, by reason of the fact that he, his testator or intestate, was
a director or officer or employee of the Corporation, or served such other
corporation in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees, actually
and necessarily incurred as a result of such action or proceeding, or any
appeal therein, if such person acted in good faith, for a purpose which he
reasonably believed to be in the best interests of the Corporation and, in
criminal actions, or proceedings, in addition, had no reasonable cause to
believe that his conduct was unlawful.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, offi-cers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforce-able. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by
<PAGE>
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemni-fication by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
(a) CFBDS, Inc., the Registrant's Distributor, is also the distributor
for CitiFunds Cash Reserves, CitiFunds Premium Liquid Reserves,
CitiFunds Tax Free Reserves, CitiFunds New York Tax Free Reserves,
CitiFunds California Tax Free Reserves, CitiFunds Connecticut Tax
Free Reserves, CitiFunds New York Tax Free Income Fund, CitiFunds
Balanced Fund, CitiFunds Equity Fund, CitiFunds Short Term U.S.
Government Income Fund, CitiFunds Intermediate Income Fund,
CitiFunds U.S. Treasury Reserves, CitiFunds Premium U.S. Treasury
Reserves, CitiFunds Institutional Liquid Reserves, CitiFunds
Institutional U.S. Treasury Reserves and CitiFunds Institutitonal
Tax Free Reserves. CFBDS, Inc. is also the placement agent for
International Portfolio, Large Cap Value Portfolio, Intermediate
Income Portfolio, Foreign Bond Portfolio, Short Term Portfolio,
Small Cap Value Portfolio, Balanced Portfolio, Cash Reserves
Portfolio, Emerging Asian Markets Equity Portfolio, U.S. Treasury
Reserves Portfolio, Small Cap Growth Portfolio, Tax Free Reserves
Portfolio, International Equity Portfolio, Large Cap Growth
Portfolio, Growth and Income Portfolio and Government Income
Portfolio.
(b) The information required by this item 29 with respect to each
director and officer of CFBDS, Inc. is incorporated by reference to
Schedule A or Form BD filed by CFBDS, Inc pursuant to the Securities
and Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 30. Location Books and Records
All of the accounts, books, records or other documents required to be kept
by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by the Company at 666 Fifth Avenue, New York,
New York.
Item 31. Management Services
Not applicable.
<PAGE>
Item 32. Undertakings and Representations
(a) The registrant undertakes that it will file a post- effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in the
registration statement are never more than 16 months old for as long
as purchase payments under the contracts offered herein are being
accepted.
(b) The registrant undertakes that it will include either (1) as part of
any application to purchase a contract offered by the prospectus, a
space that an applicant can check to request a statement of
additional information, or (2) a post card or similar written
communication affixed to or included in the prospectus that the
applicant can remove and send to the Company for a statement of
additional information.
(c) The registrant undertakes to deliver any statement of additional
information and any financial statements required to be made
available under this Form N-4 promptly upon written or oral request
to the Company at the address or phone number listed in the
prospectus.
(d) The Company represents that in connection with its offering of the
contracts as funding vehicles for retirement plans meeting the
requirements of Section 403(b) of the Internal Revenue Code of 1986,
it is relying on a no-action letter dated November 28, 1988, to the
American Council of Life Insurance (Ref. No. IP-6-88) regarding
Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, and that paragraphs numbered (1) through (4) of that letter
will be complied with.
(e) First Citicorp Life Insurance Company hereby represents that the
fees and charges deducted under the Contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by First Citicorp
Life Insurance Company.
<PAGE>
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the registrant certifies that this amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Amendment to the Registration Statement to be
signed on its behalf, in the City of New York, and the State of New York, on
this 23rd day of April, 1998.
FIRST CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest: /s/Catherine S. Mulholland By: /s/Larry D. Williams
-------------------------- --------------------
Senior Vice President of First
Citicorp Life Insurance Company
BY: FIRST CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/Catherine S. Mulholland By: /s/Larry D. Williams
-------------------------- --------------------
Senior Vice President
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/Larry D. Williams Director, SVP April 23, 1998
- ------------------------------ -------------------------
/s/Charles H. Masland, IV Director, SVP April 23, 1998
- ------------------------------ -------------------------
/s/Daniel F. Forcade Treasurer, SVP April 23, 1998
- ------------------------------ -------------------------
(PAO)
<PAGE>
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the registrant certifies that this amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Amendment to the Registration Statement to be
signed on its behalf, in the City of New York, and the State of New York, on
this 23rd day of April, 1998.
FIRST CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest: /s/Catherine S. Mulholland By: /s/Larry D. Williams
-------------------------- --------------------
Senior Vice President of First
Citicorp Life Insurance Company
BY: FIRST CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/Catherine S. Mulholland By: /s/Larry D. Williams
-------------------------- --------------------
Senior Vice President
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/Alan F. Liebowitz Director, President, CEO April 23, 1998
- ------------------------------ -------------------------
/s/Joseph E. Madalon Director, SVP, CFO April 23, 1998
- ------------------------------ -------------------------
/s/Elizabeth C. Craig Director, VP April 23, 1998
- ------------------------------ -------------------------
/s/Jack S. Berger Director April 23, 1998
- ------------------------------ -------------------------
<PAGE>
EXHIBIT INDEX
4(e). Variable Annuity Endorsement: Amendment of Contract Provisions
4(f). Roth Individual Retirement Annuity Endorsement
9. Opinion and Consent of Catherine S. Mulholland.
10(a). Consent of Sutherland, Asbill & Brennan.
10(b). Consent of KPMG Peat Marwick LLP.
<PAGE>
EXHIBIT 4(e)
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
Home Office: 666 Fifth Avenue, 3rd Floor
New York, NY 10103
VARIABLE ANNUITY ENDORSEMENT
AMENDMENT OF CONTRACT PROVISIONS
The contract to which this endorsement is attached is amended as follows:
The second paragraph of the "Allocation of Premium" provision is deleted and
replaced by the following:
You may change the premium allocation at any time by notifying us in
writing. We may require allocations to any Account to be expressed in
whole percent and be at least $100 of any premium payment.
Sub-paragraph 2. of the "Transfer" provision is deleted in its entirety.
Sub-paragraph 3. of the "Dollar Cost Averaging (Automatic Transfers)"
provision is deleted and replaced by the following:
3. The amount of such transfers from the Fixed Account must be equal to
or less than 1/6 of the Account value when this option is elected.
The last paragraph of the "Net Investment Factor" provision is deleted and
replaced by the following:
"c" is a factor representing the sum of the daily Mortality and Expense
Risk Charge and the daily Administration Charge deducted from the
Sub-Account.
The "Mortality and Expense Risk Charge" provision is deleted in its entirety
and replaced by the following:
The Mortality and Expense Risk Charge is a daily charge made to compensate
us for assuming the mortality and expense risks under this contract. It is
equivalent to not more than 1.25% per annum of the average daily net asset
value held in each Sub-Account.
The following is added to the third paragraph of the "Annual Contract Fee"
provision:
The Annual Contract Fee will be waived in its entirety for any Contract
Year in which premium of at least $2,500 ($2,000 for Qualified Plans as
defined under the I.R.S. Code), exclusive of the initial premium, are
paid.
The "Administration Charge" provision is deleted in its entirety and replaced
by the following:
Our charge for administering this contract is equivalent to not more than
0.15% per annum of the average daily net asset value held in each
Sub-Account. This charge is calculated and deducted on a daily basis.
In all other respects, the contract is unchanged.
/s/Richard M. Zuckerman
Secretary
63-1721(09-97)
<PAGE>
EXHIBIT 4(f)
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY
ROTH INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This page changes certain items in the annuity contract issued to you so that it
will qualify as a "Roth Individual Retirement Annuity" pursuant to Section 408A
of the Internal Revenue Code of 1986, as amended (the Code). The changes to your
annuity contract are as follows:
"Life expectancy" means an individual's predicted life span using the Expected
Return Multiples in Table V in Section 1.72-9 of the Income Tax Regulations.
You are the owner and Annuitant of this contract. The contract will remain in
force until all benefits have been paid to you or your Beneficiary(ies). None of
your rights in this contract may be forfeited. The contract may not be assigned,
pledged or otherwise transferred. It may not be used as security for a loan.
Payment of Annuity Income Benefits: Benefits paid under this contract will be
distributed to you under the Annuity Income Option selected.
Upon Your Death: Upon your death, all contract values must be distributed by:
(1) December 31 of the year containing the fifth anniversary of your death; or
(2) if payable to an individual Beneficiary, the remaining value may be paid in
substantially equal installments over a period not to exceed the life or life
expectancy of the Beneficiary beginning no later than December 31 of the
calendar year following the date of your death.
However, if your spouse is the Beneficiary, he/she may elect either: (1) to
treat the contract as his or her own Roth Individual Retirement Annuity; or (2)
receive equal or substantially equal payments over a period not exceeding his or
her life or life expectancy starting on or before the later of: (a) December 31
of the year in which you would have attained age 70 1/2; or (b) December 31 of
the first full calendar year immediately following the date of your death. Such
election must be made not later than five years after the date of your death. If
your surviving spouse makes any contribution to the contract after your death,
or fails to elect to begin distributions, it will be assumed that he/she has
elected to treat the contract as his or her own Roth Individual Retirement
Annuity.
If distribution is to be made over the life or life expectancy(ies) of the
Beneficiary(ies), the amount distributed each year must be equal to the value
obtained by dividing the contract value to be distributed, as of December 31
preceding distribution, by the life expectancy(ies) of the Beneficiary(ies).
The Beneficiary shall have the sole responsibility for requesting a distribution
that complies with this endorsement and applicable law.
No premium payments will be accepted under this contract after your death unless
the Beneficiary is your surviving spouse.
Calculation of Beneficiary(ies) Life Expectancy: The life expectancy of a
surviving spouse Beneficiary shall be calculated annually unless he/she elects
not to recalculate life expectancy by the time distributions are required to
begin. An election not to recalculate by your spouse shall be irrevocable.
Annual recalculation of life expectancy will reflect estimated years of life
remaining.
The life expectancy of a non-spouse Beneficiary is calculated at the time of the
first payment and thereafter is reduced by the number of whole years elapsed
since that date. The life expectancy of a non-spouse Beneficiary may not be
recalculated.
Page 1
63-1717(02-98)
<PAGE>
Payment to Your Child During His/Her Minority: Any payment to your child will be
considered to have been paid to your spouse if the remainder of the contract
values become payable to your spouse when the child reaches the age of majority.
Premium Payments: Unless this contract is issued as a "spousal IRA" (see below),
annual premium payments cannot exceed the lesser of 100% of your earned income
for the tax year or $2,000, reduced by the aggregate contributions during that
tax year to all other individual retirement plans maintained for your benefit.
This limitation does not apply to premiums which represent any portion of a
transfer or qualifying rollover as defined in Sections 408A(d)(3) and 408A(e) of
the Code, subject to the limitations set forth therein.
The $2,000 limit is gradually reduced to $0 between certain levels of adjusted
gross income ("AGI"). In accordance with Code Section 408A(c)(3), if you are
single, the $2,000 limit is phased out between AGI of $95,000 and $110,000; if
you are married and file a joint federal income tax return, it is phased out
between $150,000 and $160,000; and if you are married and file a separate
federal income tax return, it is phased out between $0 and $10,000. Also, a
rollover or transfer from an Individual Retirement Account or Annuity will not
be permitted if your AGI for the tax year exceeds $100,000 or if you are married
and file a separate federal income tax return. Adjusted Gross Income is defined
in Code Section 408(c)(3) and does not include amounts transferred or rolled
over to Individual Retirement Accounts or Annuities or Roth IRA's.
You have the sole responsibility for determining whether any premium payment
meets applicable income tax requirements. Any refund of premiums (other than
those attributable to excess contributions) will be applied before the close of
the calendar year following the year of the refund toward payment of additional
premiums or the purchase of additional benefit.
All premium payments must be in cash or cash equivalents.
Spousal IRA's: The Code provides for the establishment of a Roth IRA for the
benefit of a taxpayer's spouse with earned income of less than $2,000 a year
("spousal IRA"). The annual contributions to a spousal IRA cannot exceed the
lesser of $2,000 or 100% of the earned income of the working spouse, reduced by
the aggregate contributions during that tax year for all other individual
retirement plans maintained for said spouse. If the combined annual earned
income of the taxpayer and spouse is less than $4,000, the total contributions
to all IRA's for the taxpayer and spouse is limited to the combined earned
income.
Changes and Modifications: Both we and you agree to amend this contract to
comply with changes in the Code and any Department of Labor and Internal Revenue
Regulations. Any other changes to this contract will be made only with the
mutual agreement of us and you and will be subject to the conditions stated in
the contract. A copy of each amendment will be furnished to you for attachment
to the contract.
The Contract: Refer to the contract to which this endorsement is attached for
the definition of terms and additional contract provisions not otherwise amended
hereby.
/s/Richard M. Zuckerman
Secretary
Page 2
63-1717(02-98)
<PAGE>
EXHIBIT 9
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY LETTERHEAD
With reference to Form N-4 Registration Statement filed on behalf of First
Citicorp Life Insurance Company and the First Citicorp Life Variable Annuity
Separate Account with the Securities and Exchange Commission covering flexible
premium variable deferred annuity policies, I have examined such documents and
such law and have made due inquiries as I considered necessary and appropriate,
and on the basis of such examination and inquiries, it is my opinion that:
1. The First Citicorp Life Insurance Company is duly organized and validly
existing under the laws of the State of New York and has been duly
authorized to issue flexible premium variable deferred annuity policies
by the Department of Insurance of the State of New York.
2. The First Citicorp Life Variable Annuity Separate Account is a duly
authorized and existing separate account established pursuant to the
provisions of the Revised Statutes of the state of New York;
3. The flexible premium variable deferred annuity policies, when issued as
contemplated by said Form N-4 Registration Statement, will constitute
legal, validly issued and binding obligations of First Citicorp Life
Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to Post-Effective
Amendment No. 7 to the Form N-4 Registration Statement.
First Citicorp Life Insurance Company
/s/ Catherine S. Mulholland
---------------------------
Catherine S. Mulholland
Sr. Vice President, General Counsel
April 23, 1998
--------------
(Date)
<PAGE>
FIRST CITICORP LIFE INSURANCE COMPANY LETTERHEAD
I hereby consent to the use of my name under the caption "Legal Matters" in the
Statement of Additional Information contained in this Post-Effective Amendment
to the Form N-4 Registration Statement, filed on behalf of First Citicorp Life
Insurance Company and the First Citicorp Life Variable Annuity Separate Account
with the Securities and Exchange Commission.
First Citicorp Life Insurance Company
/s/ Catherine S. Mulholland
---------------------------
Catherine S. Mulholland
Sr. Vice President, General Counsel
April 23, 1998
--------------
(Date)
<PAGE>
EXHIBIT 10(a)
<PAGE>
Sutherland, Asbill & Brennan L L P
Atlanta Austin New York Washington
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
April 23, 1998
VIA EDGARLINK
Board of Directors
First Citicorp Life Insurance Company
666 Fifth Avenue, 3rd Floor
New York, NY 10103
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of
Post-Effective Amendment No. 7 to the registration statement on Form N-4 for
First Citicorp Life Variable Annuity Separate Account (File No. 33-83354). In
giving this consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By:/s/ Stephen E. Roth
----------------------
Stephen E. Roth
<PAGE>
EXHIBIT 10(b)
<PAGE>
Independent Auditors' Consent
The Board of Directors
First Citicorp Life Insurance Company:
We consent to the use of our reports included herein and to the reference of our
firm under the headings "Experts" and "Financial Statements" in the Statement of
Additional Information filed as part of Post Effective Amendment No. 7 to the
registration statement on Form N-4 for First Citicorp Life Variable Annuity
Separate Account (File No. 33-83354).
Our report dated April 17, 1998, covering the financial statements of First
Citicorp Life Insurance Company, contains an explanatory paragraph which states
that the financial statements are presented in conformity with accounting
practices prescribed or permitted by the State of New York Department of
Insurance. These practices differ in some respects from generally accepted
accounting principles. The financial statements do not include any adjustments
that might result from the differences.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
April 27, 1998
