<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1997
File No. 33-89574
File No. 811-8976
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. 2 X
------ ----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ____
Amendment No. 3 X
----- ----
SOUTHLAND SEPARATE ACCOUNT A1
(Exact Name of Registrant)
SOUTHLAND LIFE INSURANCE COMPANY
(Exact Name of Depositor)
5780 Powers Ferry Road
Atlanta, GA 30327-4390
Depositor's Telephone Number: (770) 980-5663
B. Scott Burton, Esquire
5780 Powers Ferry Road
Atlanta, GA 30327-4390
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 2004-2404
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
____ immediately upon filing pursuant to paragraph (b)
X on May 1, 1997, pursuant to paragraph (b)
- ----
____ 60 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of Rule 486
PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS
ELECTED TO REGISTER AN INDEFINITE AMOUNT OF SECURITIES. ON FEBRUARY 28, 1997,
THE REGISTRANT FILED ITS RULE 24F-2 NOTICE FOR THE REGISTRANT'S MOST RECENT
FISCAL YEAR.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rules 481(a) and 495(a)
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
<TABLE>
<CAPTION>
PART A
ITEM OF FORM N-4 PROSPECTUS CAPTION
<S> <C>
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis Fee Tables; Summary
4. Condensed Financial Information Condensed Financial Information
5. General
(a) Depositor Southland Life Insurance Company
(b) Registrant The Variable Account
(c) Portfolio Company The Portfolios
(d) Fund Prospectus The Portfolios
(e) Voting Rights Voting Privileges
(f) Administrators N/A
6. Deductions and Expenses
(a) General Charges and Fees; Summary
(b) Sales Load Charges and Fees; Summary
(c) Special Purchase Plan Group or Sponsored Arrangements
(d) Commissions Distribution of the Contracts
(e) Expenses - Registrant Charges and Fees; Summary
(f) Fund Expenses Charges and Fees
(g) Organizational Expenses N/A
7. Contracts
(a) Persons with Rights Summary; Changes to the Variable
Account; Facts About the Contracts;
Other Information; Selecting an Annuity
Payment Option; Voting Rights; Death Benefits
(b)(i) Allocation of Purchase Payments Summary; Your Right to Cancel the Contract;
Crediting and Allocation of Purchase Payments
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(ii) Transfers Summary; Your Right to Transfer; Annuity Payments
(iii) Exchanges N/A
(c) Changes Changes to the Variable Account; Facts About the
Contracts
(d) Inquiries Cover Page; Summary
8. Annuity Period Summary; Selecting and Annuity Payment Option
9. Death Benefit Death Benefits
10. Purchases and Contract Value
(a) Purchases Summary; Purchase Payments; Your Right
to Cancel the Contract; Crediting and Allocation
of Purchase Payments; Your Right to Transfer;
Selecting an Annuity Option
(b) Valuation Definitions; Facts About the Contracts;
Selecting an Annuity Payment Option
(c) Daily Calculation Definitions; Facts About the Contracts;
Selecting an Annuity Payment Option
(d) Underwriter Distribution of the Contracts
11. Redemptions
(a) - By Owners Summary; Surrenders; Annuity Payments;
Annuity Payment Options; Federal Tax Matters
- By Annuitant N/A
(b) Texas ORP N/A
(c) Check Delay When We Make Payments
(d) Lapse N/A
(e) Free Look Summary; Your Right to Cancel the Contract
12. Taxes Summary; Federal Tax Considerations
13. Legal Proceedings Legal Proceedings
14. Table of Contents for the Statement Statement of Additional Information
of Additional Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B
ITEM OF N-4 PART B CAPTION
<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History Southland Life Insurance Company
18. Services
(a) Fees and Expenses of Registrant Charges and Fees (prospectus)
(b) Management Contracts N/A
(c) Custodian Safekeeping of Variable Account Assets
Independent Public Accountant Experts
(d) Assets of Registrant The Variable Account (prospectus)
(e) Affiliated Persons Southland Life Insurance Company;
Southland Life Insurance Company (prospectus)
(f) Principal Underwriter Distribution of the Contracts (prospectus)
19. Purchase of Securities Being Offered Distribution of the Contracts (prospectus)
20. Underwriters Distribution of the Contracts (prospectus)
21. Calculation of Performance Data Performance Information; Appendix A -
Performance Information (prospectus)
22. Annuity Payments Variable Annuity Payments; Annuity
Payments (prospectus); Selecting an
Annuity Payment Option (prospectus)
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART C
ITEM OF N-4 PART C CAPTION
<S> <C>
24. Financial Statements and Exhibits Financial Statements and Exhibits
(a) Financial Statements (a) Financial Statements
(b) Exhibits (b) Exhibits
25. Directors and Officers of the Depositor Directors and Officers of Southland Life
Insurance Company
26. Persons Controlled By or Under Persons Controlled By or Under
Common Control with the Common Control with the Depositor
Depositor or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriter
30. Location of Accounts and Records Location of Books and Records
31. Management Services Management Services
32. Undertakings Undertakings and Representations
Signature Page Signatures
</TABLE>
<PAGE>
PART A
PROSPECTUS
<PAGE>
THE FUTURE DIMENSIONS VARIABLE ANNUITY
A FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
issued by
SOUTHLAND LIFE INSURANCE COMPANY
AND
SOUTHLAND SEPARATE ACCOUNT A1
This prospectus describes a flexible premium deferred fixed and variable annuity
contract (the "Contract") offered by Southland Life Insurance Company
("Southland," "we" or "us"). The Contract is designed to aid in long-term
financial planning and provides for accumulation of capital on a tax-deferred
basis for retirement or other long-term purposes. The Contract may be sold to
or in connection with retirement plans, including plans that qualify for special
federal tax treatment under the Internal Revenue Code.
The Owner may allocate Purchase Payments and Contract values to one or more of
the Subaccounts of Southland Separate Account A1 (the "Variable Account") or to
the Guaranteed Interest Account, or to both. Twenty-one Subaccounts are
currently available under the Contract. Each of the Subaccounts invests in
shares of a corresponding Portfolio of The Alger American Fund, Variable
Insurance Products Fund, Variable Insurance Products Fund II, Janus Aspen Series
and INVESCO Variable Investment Funds, Inc. The Guaranteed Interest Account
guarantees a minimum fixed rate of interest. The Accumulation Value will vary
daily with the investment results of the Subaccounts and any interest credited
to the Guaranteed Interest Account. We do not guarantee any minimum Cash
Surrender Value for amounts allocated to the Subaccounts.
This prospectus sets forth the information concerning the Contract and the
Variable Account that investors should know before investing. A prospectus for
the Portfolios being considered must accompany this prospectus and should be
read in conjunction with this prospectus. The prospectuses provide information
regarding investment activities and objectives of the Portfolios. A Statement
of Additional Information, dated May 1, 1997 about the Variable Account has been
filed with the Securities and Exchange Commission and is available without
charge by calling or writing our Customer Service Center. The Statement of
Additional Information is incorporated herein by reference.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS NOT VALID
UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE PORTFOLIOS BEING
CONSIDERED.
AN INVESTMENT IN A CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK NOR IS THE CONTRACT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
CONTRACT INVOLVES CERTAIN RISKS, INCLUDING THE RISK OF LOSS OF PURCHASE PAYMENTS
(PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C>
ISSUED BY: DISTRIBUTED BY: CUSTOMER SERVICE CENTER:
Southland Life Insurance Company ING America Equities, Inc. Southland Customer Service Center
P.O. Box 173789 5780 Powers Ferry Road P.O. Box 173789
Denver, CO 80217-3789 Atlanta, GA 30327-4390 Denver, CO 80217-3789
1-800-224-3035
----------------------------------
For Overnight Delivery:
8515 East Orchard Road - 9T2
Englewood, CO 80111
</TABLE>
DATE OF PROSPECTUS: MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS.................................................................. -1-
FEE TABLE.................................................................... -4-
SUMMARY...................................................................... -8-
GENERAL DESCRIPTION..................................................... -8-
PURCHASE PAYMENTS....................................................... -9-
ENHANCED DEATH BENEFIT.................................................. -9-
YOUR RIGHT TO CANCEL THE CONTRACT....................................... -9-
WITHDRAWALS............................................................. -9-
SURRENDERING YOUR CONTRACT.............................................. -10-
CHARGES AND FEES........................................................ -10-
CONDENSED FINANCIAL INFORMATION.............................................. -11-
FACTS ABOUT SOUTHLAND AND THE VARIABLE ACCOUNT............................... -12-
THE VARIABLE ACCOUNT.................................................... -12-
THE PORTFOLIOS.......................................................... -13-
CHANGES WITHIN THE VARIABLE ACCOUNT..................................... -15-
FACTS ABOUT THE CONTRACT..................................................... -16-
YOUR RIGHT TO CANCEL THE CONTRACT....................................... -16-
PURCHASE PAYMENTS....................................................... -16-
CREDITING AND ALLOCATION OF PURCHASE PAYMENTS........................... -17-
GROUP OR SPONSORED ARRANGEMENTS......................................... -17-
YOUR ACCUMULATION VALUE................................................. -18-
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE.......................... -18-
SUBACCOUNT ACCUMULATION VALUE........................................... -18-
YOUR RIGHT TO TRANSFER.................................................. -20-
DOLLAR COST AVERAGING FACILITY.......................................... -21-
AUTOMATIC REBALANCING................................................... -22-
WITHDRAWALS............................................................. -22-
SURRENDERS.............................................................. -24-
DEATH BENEFITS.......................................................... -24-
ENHANCED DEATH BENEFIT.................................................. -25-
WHEN WE MAKE PAYMENTS................................................... -25-
TELEPHONE PRIVILEGES......................................................... -26-
THE GUARANTEED INTEREST ACCOUNT.............................................. -26-
ADDITIONAL CONTRACT INFORMATION.............................................. -27-
THE OWNER............................................................... -27-
THE ANNUITANT........................................................... -27-
THE BENEFICIARY......................................................... -27-
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT............................... -27-
OTHER CONTRACT PROVISIONS............................................... -28-
AUTHORITY TO CHANGE CONTRACT TERMS...................................... -28-
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
CONTRACT CHARGES AND FEES.................................................... -28-
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE............................ -28-
CHARGES DEDUCTED FROM THE SUBACCOUNTS................................... -30-
PORTFOLIO EXPENSES...................................................... -31-
SELECTING AN ANNUITY PAYMENT OPTION.......................................... -31-
GENERAL PROVISIONS...................................................... -31-
ANNUITY PAYMENTS........................................................ -32-
ANNUITY PAYMENT OPTIONS................................................. -33-
OTHER INFORMATION............................................................ -34-
REPORTS TO OWNERS....................................................... -34-
DISTRIBUTION OF THE CONTRACTS........................................... -35-
CUSTOMER SERVICE CENTER................................................. -35-
VOTING PRIVILEGES....................................................... -35-
LEGAL PROCEEDINGS....................................................... -36-
FEDERAL TAX CONSIDERATIONS................................................... -36-
INTRODUCTION............................................................ -36-
TAX STATUS OF THE CONTRACT.............................................. -37-
TAXATION OF ANNUITIES................................................... -38-
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT....................... -40-
WITHHOLDING............................................................. -40-
MULTIPLE CONTRACTS...................................................... -40-
TAXATION OF QUALIFIED PLANS............................................. -40-
POSSIBLE CHARGE FOR SOUTHLAND'S TAXES................................... -41-
OTHER TAX CONSEQUENCES.................................................. -41-
STATEMENT OF ADDITIONAL INFORMATION.......................................... -42-
APPENDIX A - PERFORMANCE INFORMATION.........................................-A-1-
PERFORMANCE DATA FOR SUBACCOUNTS........................................-A-1-
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
iii
<PAGE>
DEFINITIONS
As used in this prospectus, the following terms have the indicated meanings.
There are other capitalized terms which are explained or defined in other parts
of this prospectus.
ACCUMULATION UNIT - A unit of measure used to calculate Variable Account
Accumulation Value.
ACCUMULATION VALUE - The total value under a Contract. It is the sum of the
Variable Account Accumulation Value and the Guaranteed Interest Account
Accumulation Value.
AGE - The age on the birthday prior to any date for which age is determined.
ANNUITANT - The person or persons whose life (or lives) determines the Annuity
Payments payable under the Contract and who receives payments during the Annuity
Period. The maximum number of joint Annuitants is two and provisions referring
to the death of an Annuitant mean the death of the last surviving Annuitant.
ANNUITY DATE - The date as of which, if the Annuitant is still living, the
Accumulation Value (less previously undeducted taxes) is applied under an
Annuity Payment Option and Annuity Payments begin.
ANNUITY PAYMENT - One of a number of periodic payments made by Southland to the
Annuitant under a Contract.
ANNUITY PAYMENT OPTION - An Annuity Payment Option specifies the form that
Annuity Payments take or the type of payments. Various Annuity Payment Options
are offered under the Contract.
ANNUITY PERIOD - The period starting on the Annuity Date when Annuity Payments
are made.
ANNUITY UNIT - A unit of measure used to calculate variable Annuity Payments.
BENCHMARK RATE OF RETURN - An annual rate of return used by the Company to
determine the amount of variable Annuity Payments by assuming (among other
things) that Subaccounts supporting variable Annuity Payments will have a net
annual investment return over the anticipated Annuity Period equal to that rate
of return.
BENEFICIARY - The person(s) designated by the Owner to receive the Death Benefit
upon the death of the Owner prior to the Annuity Date.
CASH SURRENDER VALUE - The Accumulation Value, less any applicable surrender
charges, premium taxes not previously deducted, and the annual administrative
charge.
CODE - The Internal Revenue Code of 1986, as amended.
CONTRACT - The contract offered by this prospectus, including the application
and any riders or endorsements.
CONTRACT ANNIVERSARY - The same date in each Contract Year as the Contract Date.
CONTRACT DATE - The date that the Contract is issued. It is set forth on the
schedule page of your Contract and is used to determine Contract Years and
Contract Anniversaries.
CONTRACT YEAR - A twelve-month period beginning on the Contract Date or on a
Contract Anniversary.
-1-
<PAGE>
CUSTOMER SERVICE CENTER - Southland's offices at Southland Customer Service
Center, P.O. Box 173789, Denver, CO 80217-3789. For overnight delivery, the
address is 8515 East Orchard Road - 9T2, Englewood, CO 80111.
DEATH BENEFIT - The amount payable to the Beneficiary upon the death of the
Owner prior to the Annuity Date.
DEMAND WITHDRAWAL - A withdrawal of Cash Surrender Value made at the Owner's
request.
DUE PROOF OF DEATH - Proof of death satisfactory to Southland. Such proof may
consist of the following if acceptable to Southland: (a) a certified copy of the
death record; (b) a certified copy of a court decree reciting a finding of
death; (c) any other proof satisfactory to Southland.
FREE-LOOK PERIOD - The period during which you may return the Contract and
receive a refund.
GENERAL ACCOUNT - The assets of Southland other than those allocated to the
Variable Account or any other separate account of Southland.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE - The value under a Contract in
the Guaranteed Interest Account.
GUARANTEED INTEREST ACCOUNT - An allocation option under the Contract supported
by Southland's General Account. It is not part of nor dependent upon the
investment performance of the Variable Account.
IRA CONTRACT - A Contract issued as an Individual Retirement Annuity in
connection with sections 408(a) and (b) of the Code.
NON-QUALIFIED CONTRACT - A Non-Qualified Contract is a Contract that is not a
"Qualified Contract."
OWNER - The person(s) who owns the Contract and who is entitled to exercise all
rights and privileges provided in the Contract.
PORTFOLIO - An investment portfolio (sometimes called a series or a fund) of an
open-end management investment company listed in the prospectus or any other
open-end management investment company or unit investment trust in which a
Subaccount invests.
PURCHASE PAYMENT - A payment or payments made by the Owner to purchase the
benefits provided by the Contract.
QUALIFIED CONTRACT - A Contract that is issued in connection with retirement
plans that qualify for special federal income tax treatment under Sections
401(a), 403(b), or 408 of the Code.
SEC - The U. S. Securities and Exchange Commission.
SUBACCOUNT - A subdivision of the Variable Account, the assets of which are
invested in a corresponding Portfolio.
SUBACCOUNT ACCUMULATION VALUE - The Variable Accumulation Value under a Contract
in a particular Subaccount.
SURRENDER - The termination of the Contract by payment of the Cash Surrender
Value.
VALUATION DAY - For each Subaccount, each day on which the New York Stock
Exchange and Southland's Customer Service Center are both open for business
except for a day that a Subaccount's corresponding Portfolio does not value its
shares.
-2-
<PAGE>
VALUATION PERIOD - A period that starts at 4:00 p.m. eastern time on one
Valuation Day and ends at 4:00 p.m. eastern time on the next succeeding
Valuation Day.
VARIABLE ACCOUNT - Southland Separate Account A1.
VARIABLE ACCOUNT ACCUMULATION VALUE - The value under a Contract in the Variable
Account. It is the sum of the Subaccount Accumulation Values.
VIP AND VIP II - Variable Insurance Products Fund and Variable Insurance
Products Fund II, respectively.
WRITTEN NOTICE - A written notice or request in a form satisfactory to Southland
which is signed by the Owner and received at the Customer Service Center.
-3-
<PAGE>
FEE TABLE
The following 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
the anticipated expenses of the Variable Account and reflect the actual expenses
for each Portfolio for the year ended December 31, 1996. Premium taxes may be
applicable depending upon the laws of various jurisdictions. For a more complete
description of the various costs and expenses, see "CONTRACT CHARGES AND FEES"
and the prospectuses for each Portfolio.
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchase...................................................... 0%
Maximum Surrender Charge (contingent deferred sales charge)
as a percentage of Purchase Payments........................................... 7%
Withdrawal Transaction Charge/1/.................................................... $25
Excess Transfer Charge
(does not apply to the first 12 transfers in a Contract Year)....................... $25
ANNUAL ADMINISTRATIVE CHARGE PRIOR TO ANNUITY DATE
If aggregate Purchase Payments made less aggregate
withdrawals (including related charges)
are less than $100,000 $30
If aggregate Purchase Payments made less aggregate
withdrawals (including related charges)
are $100,000 or more None
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Mortality and Expense Risk Charge
Basic.......................................................................... 1.25%
Enhanced Death Benefit (does not apply during the.............................. 0.12%
-----
Annuity Period)
Total Mortality and Expense Risk Charge........................................ 1.37%
Asset-Based Administrative Charge................................................... 0.15%
-----
Total Variable Account Expenses..................................................... 1.52%
</TABLE>
_____________________________
/1/ The withdrawal transaction charge is the lesser of 2% of the amount
withdrawn or $25 and is assessed on each Demand Withdrawal after the first in
any Contract Year. (See "Withdrawal Transaction Charge," page 29.)
-4-
<PAGE>
ANNUAL PORTFOLIO EXPENSES
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Management Other Total Annual
(Advisory) Fees Expenses Expenses
(after (after
reimbursements) reimbursements)
<S> <C> <C> <C>
The Alger American Fund
Alger American Growth Portfolio 0.75% 0.04% 0.79%
Alger American Leveraged AllCap Portfolio 0.85% 0.24% 1.09%
Alger American MidCap Growth Portfolio 0.80% 0.04% 0.84%
Alger American Small Capitalization Portfolio 0.85% 0.03% 0.88%
Variable Insurance Products Fund and Variable Insurance Products Fund II
VIP Equity-Income Portfolio 0.51% 0.07% 0.58%/1/
VIP Growth Portfolio 0.61% 0.08% 0.69%/1/
VIP High Income Portfolio 0.59% 0.12% 0.71%
VIP Money Market Portfolio 0.21% 0.09% 0.30%
VIP Overseas Portfolio 0.76% 0.17% 0.93%/1/
VIP II Asset Manager Portfolio 0.64% 0.10% 0.74%/1/
VIP II Contrafund Portfolio 0.61% 0.13% 0.74%/1/
VIP II Index 500 Portfolio 0.13% 0.15% 0.28%/1/
VIP II Investment Grade Bond Portfolio 0.45% 0.13% 0.58%
</TABLE>
___________________________
/1/ A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into arrangements
with their custodian and transfer agent whereby interest earned on uninvested
cash balances was used to reduce custodian and transfer agent expenses.
Including these reductions, the total operating expenses presented in the table
would have been .56% for Equity-Income Portfolio, .67% for Growth Portfolio,
.92% for Overseas Portfolio, .73% for Asset Manager Portfolio and .71% for
Contrafund Portfolio.
/2/ The adviser has agreed to reimburse a portion of the Portfolio's expenses.
Absent reimbursement, Management Fees, Other Expenses and Total Annual Expenses
would have been .28%, .15% and .43% respectively, on an annualized basis.
-5-
<PAGE>
ANNUAL PORTFOLIO EXPENSES (CONTINUED)
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Management Other Total Annual
(Advisory) Fees Expenses Expenses
(after (after
reimbursements) reimbursements)
<S> <C> <C> <C>
Janus Aspen Series/3/
Aggressive Growth Portfolio 0.72% 0.04% 0.76%
Balanced Portfolio 0.79% 0.15% 0.94%
Growth Portfolio 0.65% 0.04% 0.69%
International Growth Portfolio 0.05% 1.21% 1.26%
Short-Term Bond Portfolio 0.47% 0.19% 0.66%
Worldwide Growth Portfolio 0.66% 0.14% 0.80%
INVESCO Variable Investment Funds, Inc.
Industrial Income Portfolio 0.75% 0.20% 0.95%/4/5/
Utilities Portfolio 0.60% 0.56% 1.16% /4/5/
</TABLE>
_______________________
/3/ The fees and expenses are based on gross expenses of the shares before
expense offset arrangements. The information for each Portfolio is net of fee
waivers or reductions from Janus Capital. Without such waivers or reductions,
Management Fees, Other Expenses and Total Annual Expenses respectively were:
0.79%, 0.04% and 0.83% for Aggressive Growth Portfolio; 0.92%, 0.15% and 1.07%
for Balanced Portfolio; 0.79%, 0.04% and 0.83% for Growth Portfolio; 1.00%,
1.21% and 2.21% for International Growth Portfolio; 0.65%, 0.19% and 0.84% for
Short-Term Bond Portfolio; and 0.77%, 0.14% and 0.91% for Worldwide Growth
Portfolio.
/4/ The Portfolios' actual Total Operating Expenses were lower than the figures
shown because the Portfolios' custodian fees were reduced under an expense
offset arrangement. The figures shown above do not reflect these
reductions.
/5/ Certain Portfolio expenses are being absorbed by INVESCO Funds Group, Inc.
In the absence of such absorbed expenses, the Total Annual Expenses of the
Industrial Income Portfolio and the Utilities Portfolio would have been 1.19%
and 5.36%, respectively.
-6-
<PAGE>
EXAMPLES
The following examples depict the dollar amount of expenses that would be
incurred under this Contract assuming a $1,000 initial Purchase Payment and a 5%
annual rate of return on assets. The examples provided assume that no transfer
charges or premium taxes have been assessed. The examples also assume that the
annual administrative charge is $30 and that the Accumulation Value per Contract
is $30,000, which translates the administrative charge into an assumed .10% for
purposes of the examples based on a $1,000 investment.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT IF DO NOT SURRENDER YOUR
THE END OF THE APPLICABLE TIME CONTRACT OR IF YOU ANNUITIZE AT THE
PERIOD. END OF THE APPLICABLE TIME PERIOD.
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBACCOUNT 1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------------------------------------------------
Alger American Small Capitalization 95 127 161 277 25 77 131 277
Alger American MidCap Growth 95 125 159 274 25 75 129 274
Alger American Growth 94 124 156 269 24 74 126 269
Alger American Leveraged AllCap 97 133 171 297 27 83 141 297
VIP Growth 93 121 151 259 23 71 121 259
VIP Overseas 95 128 163 282 25 78 133 282
VIP Money Market 89 110 132 221 19 60 102 221
VIP Equity-Income 92 118 146 248 22 68 116 248
VIP High Income 93 122 152 261 23 72 122 261
VIP II Asset Manager 94 122 154 264 24 72 124 264
VIP II Contrafund 94 122 154 264 24 72 124 264
VIP II Index 500 89 109 131 219 19 59 101 219
VIP II Investment Grade Bond 92 118 146 248 22 68 116 248
Janus Aggressive Growth 94 123 155 266 24 73 125 266
Janus Balanced 95 128 163 283 25 78 133 283
Janus Growth 93 121 151 259 23 71 121 259
Janus International Growth 99 137 179 313 29 87 149 313
Janus Short-Term Bond 93 120 150 256 23 70 120 256
Janus Worldwide Growth 94 124 157 270 24 74 127 270
INVESCO Industrial Income 96 129 164 284 26 79 134 284
INVESCO Utilities 98 135 174 304 28 85 144 304
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. 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 LESSER
THAN THIS ASSUMED RATE.
-7-
<PAGE>
SUMMARY
GENERAL DESCRIPTION
This prospectus has been designed to provide you with the necessary information
to make a decision on purchasing a Future Dimensions Variable Annuity offered by
Southland and funded by the Variable Account as well as by the Guaranteed
Interest Account.
This summary is intended to provide a brief overview of the more significant
aspects of the Contract. Further detail is provided in this prospectus, the
related Statement of Additional Information, the Contract, and the prospectuses
of the Portfolios. The Contract, together with any applications and any Riders
or Endorsements, constitutes the entire agreement between you and us and should
be retained. For further information, contact the Southland Customer Service
Center.
An allocation of Purchase Payments or Accumulation Value to the Variable Account
under the Contract gives you a choice of numerous Portfolios, all of which are
managed by experienced mutual fund advisers. These Portfolios are generally
available only to serve as the underlying investment for variable annuity and
variable life insurance contracts issued through separate accounts of Southland
as well as other life insurance companies. They are not directly available to
the general public.
This Contract also offers a Guaranteed Interest Account where you may allocate
all or a portion of your Purchase Payments and transfer your Accumulation Value.
The Guaranteed Interest Account is a part of our General Account and guarantees
principal and a minimum interest rate of 3%. This interest will be paid
regardless of the actual investment experience of the General Account; we bear
the full amount of the investment risk for any amounts allocated to the
Guaranteed Interest Account.
We do not promise that your Accumulation Value will increase. Depending on the
investment experience of the Subaccounts and interest credited to the Guaranteed
Interest Account, the Accumulation Value, Cash Surrender Value and Death Benefit
may increase or decrease on any day. You bear the investment risk for funds
invested in the Subaccounts but also enjoy the potential rewards.
You have the opportunity to benefit from growth of the Accumulation Value based
on investment results of the Subaccounts and interest credited to the Guaranteed
Interest Account. The Contract also offers a choice of Annuity Payment Options
to which you may apply the Accumulation Value (less taxes incurred but not
deducted) as of the Annuity Date. These Annuity Payment Options are also
available to the Beneficiary to apply the Death Benefit. You have the option to
change the Annuity Date within certain limits.
We will issue a Contract if the Owner and Annuitant are not older than Age 85,
and we will accept additional Purchase Payments prior to the Annuity Date until
the Owner reaches the Age of 86. For an IRA Contract or other Qualified Contract
you generally may not make Purchase Payments after March 31 of the year
following the year in which you reach Age 70 1/2. Southland recommends
consulting your tax adviser concerning this matter. (See "FEDERAL TAX
CONSIDERATIONS," page 36.)
The ultimate effect of federal income taxes on the amounts held under a
Contract, on Annuity Payments and on the economic benefits to the Owner,
Annuitant or Beneficiary depends on Southland's tax status and upon the tax
status of the parties concerned. In general, an Owner is not taxed on increases
in value under an annuity contract until some form of distribution is made under
it. There may be tax penalties if you make a withdrawal or Surrender the
Contract before reaching Age 59 1/2. (See "FEDERAL TAX CONSIDERATIONS," page
36.)
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<PAGE>
PURCHASE PAYMENTS
The minimum initial Purchase Payment is $5,000 ($1,000 for an IRA Contract). The
minimum subsequent Purchase Payment we will accept is $500 ($250 for an IRA
Contract or $90 if you have set up your IRA to make Purchase Payments on a
monthly basis.) We may refuse to accept a Purchase Payment if it would cause the
sum of all Purchase Payments received under the Contract to exceed $1,500,000.
The initial Purchase Payment is allocated to each Subaccount or the Guaranteed
Interest Account, or both, as specified on the application, unless the Contract
is issued in a state that requires the return of Purchase Payments during the
Free Look Period. In those states, your initial Purchase Payment allocated to a
Subaccount will be allocated to the VIP Money Market Subaccount for a period of
15 days (or a longer period if the Free Look Period in your state is longer than
10 days) from the date that the Contract is mailed from the Customer Service
Center. At the expiration of this period, such portion of the Purchase Payment,
as adjusted to reflect the investment performance of the VIP Money Market
Subaccount during this period, is then allocated to the Subaccounts as specified
in the application. (See "YOUR RIGHT TO CANCEL THE CONTRACT," page 16.)
All Purchase Payment percentage allocations must be in whole numbers. We
allocate any Purchase Payments received after the Free Look Period among the
Subaccounts and the Guaranteed Interest Account according to the allocation
instructions in your application or in your most recent Written Notice. You may,
by telephone, designate a different allocation with respect to any Purchase
Payment, if a currently valid telephone authorization form is on file with us.
(See "CREDITING AND ALLOCATION OF PURCHASE PAYMENTS," page 17.)
You may choose to have a specified dollar amount transferred from the VIP Money
Market Subaccount or the Janus Short-Term Bond Subaccount to any other
Subaccounts on a monthly basis prior to the Annuity Date. (See "DOLLAR COST
AVERAGING FACILITY," page 21.)
You may transfer your Accumulation Value between and among the Subaccounts and
the Guaranteed Interest Account any time after the end of the Free Look Period.
Prior to the Annuity Date, there is no charge for the first 12 transfers per
Contract Year. A $25 charge will be assessed for each transfer in excess of 12
during a Contract Year. If you elect a variable Annuity Payment Option, you may
make up to four Annuity Unit exchanges per Contract Year during the Annuity
Period, and no transfer charge will be assessed.
ENHANCED DEATH BENEFIT
The Contract provides an Enhanced Death Benefit to the Beneficiary if the Owner
dies prior to the Annuity Date. For more details, (see "ENHANCED DEATH BENEFIT,"
page 25.)
YOUR RIGHT TO CANCEL THE CONTRACT
At any time during the Free Look Period, you may cancel your Contract and
receive a refund equal to your Accumulation Value plus charges deducted.
However, if required by state law, we will return the Purchase Payments made.
The Free Look Period is a ten day period of time beginning when the Contract is
delivered to you. Some states may require that we provide a longer Free Look
Period.
WITHDRAWALS
After the Free Look Period and prior to the Annuity Date, you may, subject to
certain restrictions, withdraw part of the Cash Surrender Value each year under
any of three options: the Demand Withdrawal option, the Systematic Withdrawal
Program or the IRA Income Program. (See "WITHDRAWALS," page 22.) A withdrawal
may have adverse federal income tax consequences including the possibility of
being subject to a penalty tax.
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<PAGE>
SURRENDERING YOUR CONTRACT
You may Surrender the Contract at any time prior to the Annuity Date and receive
its Cash Surrender Value. No Annuity Options are available upon Surrender. No
Surrender may be made on or after the Annuity Date. Surrenders may be subject to
a surrender charge and may have adverse federal income tax consequences. A
penalty tax may also be assessed upon Surrender. (See "CHARGES DEDUCTED FROM
THE ACCUMULATION VALUE," page 28 and "TAXATION OF ANNUITIES," page 38.)
CHARGES AND FEES
We deduct the following charges and fees:
If a Purchase Payment is withdrawn or surrendered within five full Contract
Years since the Contract Anniversary following the Purchase Payment, a surrender
charge is assessed. For example, if a Purchase Payment is made as of the first
day of a Contract Year, a surrender charge will apply against this Purchase
Payment for six full years. No surrender charge is assessed upon the withdrawal
or Surrender of Accumulation Value in excess of aggregate Purchase Payments
(less prior withdrawals) or on Purchase Payments made more than five full
Contract Years since the Contract Anniversary following the Purchase Payment.
For purposes of determining the amount of Purchase Payments withdrawn and the
surrender charge, Accumulation Value in excess of Purchase Payments (less prior
withdrawals) is considered withdrawn before Purchase Payments and Purchase
Payments are considered withdrawn on a first-in-first-out basis. The surrender
charge is 7% of the Purchase Payment if withdrawn in the Contract Year during
which the Purchase Payment was made and reduces each year for the next five
Contract Years and is 0% in the sixth Contract Year following the Contract Year
in which the Purchase Payment was made. (See "CHARGES DEDUCTED FROM THE
ACCUMULATION VALUE," page 28.)
If you take more than one Demand Withdrawal in a Contract Year, we impose a
withdrawal transaction charge equal to the lesser of $25 or 2% of the amount
withdrawn. (See "Demand Withdrawal Option," page 22 and "Withdrawal
Transaction Charge, page 29.)
We charge the Variable Account with a daily asset-based charge equivalent to an
annual rate of 0.15% to cover a portion of our Contract administration costs.
(See "Asset-based Administrative Charge," page 31.)
Prior to the Annuity Date, we charge the Variable Account with a daily asset-
based charge equivalent to an annual rate of 1.37% to compensate us for assuming
certain mortality and expense risks. This charge is reduced to 1.25% during the
Annuity Period. (See "Mortality and Expense Risk Charge," page 30.)
Prior to the Annuity Date, we deduct an annual administrative charge of $30 per
Contract Year if your aggregate Purchase Payments made less aggregate
withdrawals (and less any withdrawal transaction charges and surrender charges
arising from such withdrawals) are less than $100,000. If your aggregate
Purchase Payments made less aggregate withdrawals (and less any withdrawal
transaction charges and surrender charges arising from such withdrawals) equal
$100,000 or more, the charge is zero. (See "Annual Administrative Charge," page
30.)
Prior to the Annuity Date, a $25 charge will be assessed for each transfer in
excess of 12 during a Contract Year. (See "Excess Transfer Charge," page 30.)
Some jurisdictions impose a tax on Purchase Payments at the time a Purchase
Payment is paid. In those jurisdictions, our current practice is to pay the tax
on Purchase Payments for you and then deduct the charge for these taxes from
your Accumulation Value upon Surrender, payment of the Death Benefit or upon the
Annuity Date. These taxes range from 0% to 3.5% of Purchase Payments. In
jurisdictions where such state and local taxes are incurred as of the Annuity
Date, a charge for such taxes is deducted from the Accumulation Value as of that
date. (See" Taxes on Purchase Payments," page 30.)
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<PAGE>
There are fees and expenses incurred by the Portfolios. The investment
experience of the Portfolios and the fees and expenses from the Portfolios
underlying the Subaccounts you select will affect your Variable Accumulation
Value and variable Annuity Payments. Please read the prospectus for each of the
Portfolios you are considering for details.
CONDENSED FINANCIAL INFORMATION
The audited financial statements of Southland and the Variable Account (as well
as the auditors' reports thereon) are in the Statement of Additional
Information.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------------------------------
SUBACCOUNT Accumulation Accumulation Number of Calendar
Unit Value at Unit Value at Accumulation Year
Beginning of End of Period Units at End of
Period/(1)/ Period
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE ALGER AMERICAN FUND
- --------------------------------------------------------------------------------------------------------
Alger American Small Capitalization 10.00 9.91 648.89 1996
- --------------------------------------------------------------------------------------------------------
Alger American MidCap Growth 10.00 10.27 3,470.95 1996
- --------------------------------------------------------------------------------------------------------
Alger American Growth 10.00 10.63 680.29 1996
- --------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap 10.00 10.51 471.80 1996
- --------------------------------------------------------------------------------------------------------
VIP AND VIP II FUNDS
- --------------------------------------------------------------------------------------------------------
VIP II Asset Manager 10.00 10.95 0 1996
- --------------------------------------------------------------------------------------------------------
VIP II Contrafund 10.00 11.40 461.87 1996
- --------------------------------------------------------------------------------------------------------
VIP Equity-Income 10.00 10.70 2,078.52 1996
- --------------------------------------------------------------------------------------------------------
VIP Growth 10.00 10.68 1,678.94 1996
- --------------------------------------------------------------------------------------------------------
VIP High Income 10.00 10.85 603.22 1996
- --------------------------------------------------------------------------------------------------------
VIP II Index 500 10.00 11.37 432.39 1996
- --------------------------------------------------------------------------------------------------------
VIP II Investment Grade Bond 10.00 10.40 1,201.26 1996
- --------------------------------------------------------------------------------------------------------
VIP Money Market 10.00 10.28 9,327.36 1996
- --------------------------------------------------------------------------------------------------------
VIP Overseas 10.00 10.77 0 1996
- --------------------------------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------------------------------
SUBACCOUNT Accumulation Accumulation Number of Calendar
Unit Value at Unit Value at Accumulation Year
Beginning of End of Period Units at End of
Period/(1)/ Period
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------------------------------
Aggressive Growth 10.00 9.70 2,561.68 1996
- --------------------------------------------------------------------------------------------------------
Balanced 10.00 11.01 5,301.79 1996
- --------------------------------------------------------------------------------------------------------
Growth 10.00 10.70 3,290.04 1996
- --------------------------------------------------------------------------------------------------------
International Growth 10.00 12.13 336.05 1996
- --------------------------------------------------------------------------------------------------------
Short-Term Bond 10.00 10.31 2,967.17 1996
- --------------------------------------------------------------------------------------------------------
Worldwide Growth 10.00 11.67 895.32 1996
- --------------------------------------------------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUNDS, INC.
- --------------------------------------------------------------------------------------------------------
Industrial Income 10.00 11.64 3,548.07 1996
- --------------------------------------------------------------------------------------------------------
Utilities 10.00 11.01 0 1996
- --------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Commencement of business on April 1, 1996
FACTS ABOUT SOUTHLAND AND THE VARIABLE ACCOUNT
Southland Life Insurance Company is a stock life insurance company organized
under the laws of the State of Texas in 1908. Our headquarters are located at
5780 Powers Ferry Road, N. W., Atlanta, Georgia 30327-4390. We are admitted to
do business in the District of Columbia and all states except New York and
Vermont. Southland's total assets exceeded $ 1.9 billion, and shareholder's
equity exceeded $ 370 million on a Generally Accepted Accounting Principles
basis as of December 31, 1996. We offer a complete line of life insurance and
retirement products, including annuities, individual and group life, and pension
products.
Southland is a wholly-owned indirect subsidiary of ING Group ("ING"), one of
the world's five largest diversified financial services organizations. ING is
headquartered in Amsterdam, Netherlands and has consolidated assets exceeding $
277.9 billion as of December 31, 1996.
THE VARIABLE ACCOUNT
All obligations under the Contract are general obligations of Southland. The
Variable Account is a separate investment account used to support our variable
annuity Contracts and for other purposes as permitted by applicable laws and
regulations. The assets of the Variable Account are our property, but are kept
separate from our General Account and our other variable accounts. We may offer
other variable annuity contracts supported by the Variable Account which are not
discussed in this prospectus. The Variable Account may also invest in other
portfolios which are not available to the Contract described in this prospectus.
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<PAGE>
Income, gains and losses, realized or unrealized, from assets in the Variable
Account are credited to or charged against the Variable Account without regard
to other income, gains or losses of Southland. That portion of the assets of the
Variable Account which is equal to the reserves and other Contract liabilities
with respect to the Variable Account is not chargeable with liabilities arising
out of any other business Southland may conduct. It may, however, be subject to
liabilities arising from Subaccounts whose assets are attributable to other
variable annuity contracts offered by the Variable Account. If the assets
exceed the required reserves and other contract liabilities, we may transfer the
excess to our General Account. The assets in the Variable Account will at all
times, equal or exceed the sum of the Accumulation Values of all Contracts
funded by the Variable Account.
The Variable Account was established on February 25, 1994, and it may invest in
mutual funds or other investment portfolios which we determine to be suitable
for the Contract's purposes. The Variable Account meets the definition of a
separate account under federal securities laws. It is registered with the SEC
under the Investment Company Act of 1940 (the "1940 Act") as a unit investment
trust. Such registration does not involve any supervision by the SEC of the
management of the Variable Account or Southland. It is governed by the laws of
Texas, our state of domicile, and may also be governed by laws of other states
in which we do business.
The Variable Account has twenty-one Subaccounts, each of which invests in shares
of a corresponding Portfolio. Therefore, the investment experience of your
Contract depends on the experience of the Subaccounts you select. These
Portfolios are available only to serve as the underlying investment for variable
annuity and variable life insurance contracts issued through separate accounts
of Southland as well as other life insurance companies and as an investment
option under certain qualified retirement plans. They are not available directly
to investors.
THE PORTFOLIOS
Each Subaccount invests in a corresponding Portfolio. See the prospectus for
each of the Portfolios being considered for details.
Shares of these Portfolios are sold to separate accounts of insurance companies,
which may or may not be affiliated with Southland or each other, a practice
known as "shared funding". They may also be sold to separate accounts to serve
as the underlying investment for both variable annuity contracts and variable
life insurance policies, a practice known as "mixed funding". As a result,
there is a possibility that a material conflict may arise between the interests
of Owners of our Contracts, whose Accumulation Values are allocated to the
Variable Account, and of owners of other contracts whose accumulation values are
allocated to one or more other separate accounts investing in any one of the
Portfolios. Shares of some of these Portfolios may also be sold to certain
qualified pension and retirement plans. As a result, there is a possibility
that a material conflict may arise between the interests of Contract Owners
generally or certain classes of Contract Owners, and such retirement plans or
participants in such retirement plans. In the event of any such material
conflicts, Southland will consider what action may be appropriate, including
removing the Portfolio from the Variable Account or replacing the Portfolio with
another portfolio. There are certain risks associated with mixed and shared
funding and with the sale of shares to qualified pension and retirement plans,
as disclosed in each Portfolio's prospectus.
Each of the Portfolios is part of a separate series of an open-end diversified
management investment company which receives investment advice from a registered
investment adviser. The Portfolios as well as their investment objectives are
described below. There is no guarantee that any Portfolio will meet its
investment objectives. Meeting objectives depends on various factors,
including, in certain cases, how well the portfolio manager anticipates changing
economic and market conditions.
Please refer to the prospectus for each of the Portfolios you are considering
for more information. A description of the objectives and investments of each
Portfolio follows:
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<PAGE>
THE ALGER AMERICAN FUND
- -----------------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO - seeks long-term capital
appreciation by investing at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities,
have total market capitalization within the range of companies included in
the Russell 2000 Growth Index or the S&P Small Cap 600 Index, updated
quarterly.
ALGER AMERICAN GROWTH PORTFOLIO - seeks long-term capital appreciation by
investing at least 65% of its total assets in the securities of companies
with total market capitalization of $1 billion or greater.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO - seeks long-term capital
appreciation by investing at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities,
have total market capitalization within the range of companies included in
the S&P MidCap 400 Index, updated quarterly.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO - seeks long-term capital
appreciation by investing at least 85% of its net assets in equity
securities of companies of any size. The Portfolio may engage in leveraging
(up to 33 1/3% of its assets) and options and futures transactions.
VARIABLE INSURANCE PRODUCTS FUND ("VIP") AND VARIABLE INSURANCE PRODUCTS FUND II
- --------------------------------------------------------------------------------
("VIP II")
- ----------
VIP MONEY MARKET PORTFOLIO - seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Portfolio
will invest only in high quality U.S. dollar-denominated money market
securities of domestic and foreign issuers.
VIP HIGH INCOME PORTFOLIO - seeks high income by investing primarily in
high yielding, lower-rated, fixed-income securities. Growth of capital is
also considered in security selection.
VIP EQUITY-INCOME PORTFOLIO - seeks reasonable income by investing
primarily in income-producing equity securities. In selecting investments,
the Portfolio also considers potential for capital appreciation.
VIP GROWTH PORTFOLIO - seeks capital appreciation by investing primarily in
common stocks, although the Portfolio is not limited to any one type of
security.
VIP OVERSEAS PORTFOLIO - seeks long-term growth of capital, primarily
through investments in foreign securities. The Portfolio provides a means
for investors to diversify their own portfolios by participating in
companies and economies outside of the United States.
VIP II INVESTMENT GRADE BOND PORTFOLIO - seeks to obtain as high a level of
current income as is consistent with the preservation of capital by
investing primarily in a broad range of investment-grade fixed-income
securities.
VIP II ASSET MANAGER PORTFOLIO - seeks high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign
stocks, bonds, and short-term fixed-income instruments.
VIP II INDEX 500 PORTFOLIO - seeks to provide investment results that
correspond to the total return (i.e., the combination of capital changes
and income) of common stocks publicly traded in the United States. In
seeking this objective, the Portfolio attempts to duplicate the composition
and total return of the Standard & Poor's Composite Index of 500 Stocks
while keeping transaction costs and other expenses low. The Portfolio is
designed as a long-term investment option.
-14-
<PAGE>
VIP II CONTRAFUND PORTFOLIO - seeks capital appreciation by investing
mainly in equity securities of companies that are considered undervalued or
out-of-favor by the Portfolio's manager.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
- ---------------------------------------
INDUSTRIAL INCOME PORTFOLIO - seeks the best possible current income while
following sound investment practices. Capital growth potential is an
additional, but secondary consideration in the selection of portfolio
securities. The portfolio normally invests at least 65% of its total assets
in dividend-paying common stocks and up to 10% in equity securities that do
not pay regular dividends. The remaining assets are invested in other
income-producing securities, such as corporate bonds. The Portfolio also
has the flexibility to invest in other types of securities.
UTILITIES PORTFOLIO - seeks capital appreciation and income through
investments primarily in equity securities of corporations principally
engaged in the public utilities business.
JANUS ASPEN SERIES
- ------------------
GROWTH PORTFOLIO - a diversified Portfolio that seeks long-term growth of
capital by investing primarily in common stocks, with an emphasis on
companies with larger market capitalizations.
AGGRESSIVE GROWTH PORTFOLIO - a nondiversified Portfolio that seeks long-
term growth of capital by investing primarily in common stocks, with an
emphasis on securities issued by medium-sized companies.
WORLDWIDE GROWTH PORTFOLIO - a diversified Portfolio that seeks long-term
growth of capital by investing primarily in common stocks of foreign and
domestic issuers.
INTERNATIONAL GROWTH PORTFOLIO - a diversified Portfolio that seeks long-
term growth of capital by investing primarily in common stocks of foreign
issuers.
BALANCED PORTFOLIO - a diversified Portfolio that seeks a long-term growth
of capital, balanced by current income. The Portfolio normally
invests 40-60% of its assets in securities selected primarily for their
growth potential and 40-60% of its assets in securities selected primarily
for their income potential.
SHORT-TERM BOND PORTFOLIO - a diversified Portfolio that seeks a high level
of current income while minimizing interest rate risk by investing in
shorter term fixed-income securities. Its average-weighted maturity is
normally less than three years.
CHANGES WITHIN THE VARIABLE ACCOUNT
We may from time to time make the following changes to the Variable Account:
1. Make additional Subaccounts available to such classes of Contracts as
we may determine. These Subaccounts will invest in Portfolios we find
suitable for the Contract.
2. Eliminate Subaccounts from the Variable Account, combine two or more
Subaccounts or substitute a new Portfolio for the Portfolio in which a
Subaccount invests. A substitution may become necessary if, in our
judgement, a Portfolio is no longer appropriate in light of the
purposes of the Variable Account. A substitution may also become
necessary due to a change in laws or regulations, or a change in a
Portfolio's investment objectives or restrictions, or because the
Portfolio is no longer available for investment, or for some other
reason, such as a declining asset base.
-15-
<PAGE>
3. Transfer assets of the Variable Account, which we determine to be
associated with the class of contracts to which your Contract belongs,
to another variable account.
4. Withdraw the Variable Account from registration under the 1940 Act.
5. Operate the Variable Account as a management investment company under
the 1940 Act or in any other form permitted by law.
6. Cause one or more Subaccounts to invest in new Portfolios.
7. Create new separate accounts or combine separate accounts, including
the Variable Account.
8. Restrict or eliminate any voting rights as to the Variable Account, as
permitted by applicable laws and regulations.
9. Make any changes required by the 1940 Act or the rules or regulations
thereunder or other applicable laws or regulations.
No such changes will be made without any necessary approval of the SEC and
applicable state insurance departments. Contract Owners will be notified of any
changes.
FACTS ABOUT THE CONTRACT
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel the Contract within your Free Look Period, which is the ten day
period after you receive your Contract. Some states may require a longer Free
Look Period. If you decide to cancel, you may mail or deliver the Contract to us
at our Customer Service Center. We will refund the Accumulation Value plus any
charges we deducted. If you have purchased a Contract in a state that requires
the return of Purchase Payments during the Free Look Period and you choose to
exercise your Free Look right, we will return the Purchase Payment instead.
PURCHASE PAYMENTS
You purchase the Contract with an initial Purchase Payment. The minimum initial
Purchase Payment is $5,000 ($1,000 for an IRA). We may reduce the minimum
initial Purchase Payment requirements for certain group or sponsored
arrangements. (See "GROUP OR SPONSORED ARRANGEMENTS," page 17.) We generally
will not accept an initial Purchase Payment in excess of $1,500,000 and we
reserve the right to not accept any Purchase Payment for any reason.
We can accept subsequent Purchase Payments until the Owner reaches the Age of
86, or the Annuity Date, if earlier. The minimum subsequent Purchase Payment we
will accept is $500 ($250 for an IRA or $90 if you have set up your IRA Contract
to make Purchase Payments on a monthly basis). We may reduce the minimum
subsequent Purchase Payment requirements for certain group or sponsored
arrangements. We may refuse to accept a Purchase Payment if it would cause the
sum of all Purchase Payments to exceed $1,500,000 and we reserve the right to
not accept any Purchase Payment for any reason.
For IRA Contracts, the maximum aggregate Purchase Payments in any year for an
individual Contract is $2,000. The maximum amount we will accept for a spousal
IRA is the lesser of $4,000 or 100% of compensation, reduced by the contribution
(if any) made by you for the taxable year to your own IRA. However, no more than
$2,000 can go to either your IRA or your spouse's IRA in any one year.
-16-
<PAGE>
Send Purchase Payments to our Customer Service Center. Checks should be made
payable to Southland Life Insurance Company. We will send you a confirmation
notice upon receipt.
CREDITING AND ALLOCATION OF PURCHASE PAYMENTS
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 the Owner, to one or more of the Subaccounts or to the Guaranteed Interest
Account within two business days of receipt of such Purchase Payment by
Southland at our Customer Service Center. If the application is not properly
completed, Southland reserves the right to retain the Purchase Payment for up to
five business days while it attempts to complete the application. If the
application cannot be made complete within five business days, the applicant
will be informed of the reasons for the delay and the initial Purchase Payment
will be returned immediately unless the applicant specifically consents to our
retaining the initial Purchase Payment until the application is made complete.
The initial Purchase Payment will then be credited within two business days
after our receipt of a properly completed application.
We will credit subsequent Purchase Payments that are accepted by us as of the
Valuation Period of receipt at our Customer Service Center.
The initial Purchase Payment is allocated among the Subaccounts as specified on
the application, unless the Contract is issued in a state that requires the
return of Purchase Payments during the Free Look Period. In those states, your
initial Purchase Payment allocated to the Guaranteed Interest Account will be
allocated to that Account upon receipt; your initial Purchase Payment allocated
to the Subaccounts will be allocated to the VIP Money Market Subaccount for a
period of 15 days from the date that the Contract is mailed from the Customer
Service Center. At the expiration of this period, such portion of the Purchase
Payment, as adjusted to reflect the investment performance of the VIP Money
Market Subaccount during this period, is then allocated to the Subaccounts as
described above. If your Contract has a Free Look Period of 20 or 30 days, the
allocation to the Subaccounts is made at the expiration of a period of 25 or 35
days (as applicable) from the date that the Contract is mailed from the Customer
Service Center.
You may allocate initial and subsequent Purchase Payments among any or all
Subaccounts available as well as to the Guaranteed Interest Account. All
Purchase Payment percentage allocations must be in whole numbers. Subsequent to
your initial Purchase Payment, we allocate any additional Purchase Payments
among the Subaccounts and the Guaranteed Interest Account on the same basis as
the initial Purchase Payment unless we receive a Written Notice with new
instructions. You may, by telephone, designate a different allocation with
respect to any Purchase Payment to be made, if a currently valid telephone
authorization form is on file with us. (See "TELEPHONE PRIVILEGES," page 26.)
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce or eliminate the
surrender charge, the length of time a surrender charge applies, the
administrative charge, the minimum initial Purchase Payment and the minimum
subsequent Purchase Payment requirements, as well as other fees or charges. We
may also increase the number of withdrawals which may be effected without a
surrender charge. Group arrangements include those in which a trustee, an
employer or an association, for example, purchases Contracts covering a group of
individuals on a group basis. Sponsored arrangements include those in which an
employer or association allows us to offer Contracts to its employees or members
on an individual basis. (See "CONTRACT CHARGES AND FEES," page 28.)
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<PAGE>
Our costs for sales and administration, generally vary with the size and
stability of the group, among other factors. We take all these factors into
account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements. We will make any
reductions according to our rules in effect when an application form for a
Contract is approved. We may change these rules from time to time. If made, any
of the foregoing changes will reflect differences in costs or services and will
not be unfairly discriminatory.
YOUR ACCUMULATION VALUE
The Accumulation Value of your Contract is the sum of Variable Account
Accumulation Value and the Guaranteed Interest Account Accumulation Value. The
Variable Account Accumulation Value is the sum of all the Subaccount
Accumulation Values.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE
The Guaranteed Interest Account Accumulation Value as of the Contract Date is
equal to the amount of the initial Purchase Payment allocated to the Guaranteed
Interest Account.
On subsequent Valuation Days, the Guaranteed Interest Account Accumulation Value
is calculated as follows:
1) The Guaranteed Interest Account Accumulation Value as of the end of the
preceding Valuation Period plus any interest earned during the
Valuation Period; plus
2) Any subsequent Purchase Payments allocated to the Guaranteed Interest
Account during the current Valuation Period; plus
3) Any Accumulation Value transferred to the Guaranteed Interest Account
during the current Valuation Period; minus
4) Any Accumulation Value transferred from the Guaranteed Interest Account
during the current Valuation Period; minus
5) Any excess transfer charge allocated to the Guaranteed Interest Account
during the current Valuation Period; minus
6) Any withdrawals (and any withdrawal transaction charges and surrender
charges arising from such withdrawals) allocated to the Guaranteed
Interest Account during the current Valuation Period.
SUBACCOUNT ACCUMULATION VALUE
The Subaccount Accumulation Value for any Subaccount as of the Contract Date is
equal to the amount of the initial Purchase Payment allocated to that
Subaccount.
On subsequent Valuation Days, the amount of the Subaccount Accumulation Value is
calculated as follows:
1) The number of Accumulation Units in that Subaccount as of the end of
the preceding Valuation Period multiplied by that Subaccount's
Accumulation Unit Value for the current Valuation Period; plus
2) Any subsequent Purchase Payments allocated to that Subaccount during
the current Valuation Period; plus
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3) Any Accumulation Value transferred to such Subaccount during the
current Valuation Period; minus
4) Any Accumulation Value transferred from such Subaccount during the
current Valuation Period; minus
5) Any excess transfer charge allocated to such Subaccount during the
current Valuation Period; minus
6) Any withdrawals (and any withdrawal transaction charges and surrender
charges arising from such withdrawals) allocated to that Subaccount
during the current Valuation Period; minus
7) The portion of the annual administrative charge, if any, applicable to
that Subaccount if a Contract Anniversary occurs during the Valuation
Period.
Accumulation Unit Value. Purchase Payments allocated to a Subaccount or amounts
transferred to a Subaccount are converted into Accumulation Units. For any
Subaccount, the number of Accumulation Units credited is determined by dividing
the dollar amount directed to the Subaccount by the value of the Accumulation
Unit for that Subaccount for the Valuation Period on which the Purchase Payment
is received or the transfer is effective. In this manner, an increase in
Subaccount Accumulation Value under a Contract occurs by the addition of
Accumulation Units of that Subaccount.
The Accumulation Unit value for each Subaccount was arbitrarily set initially at
$10 when the Subaccount was established. Thereafter, for any Subaccount, the
Accumulation Unit value for a Valuation Period equals the Accumulation Unit
value for the preceding Valuation Period multiplied by the Accumulation
Experience Factor (described below) for the Valuation Period.
Decreases in Subaccount Accumulation Value under a Contract are effected by the
cancellation of Accumulation Units of a Subaccount. Therefore, Surrenders,
withdrawals, transfers out of a Subaccount, payment of a Death Benefit, the
application of the Accumulation Value to an Annuity Payment Option and the
deduction of the annual administrative charge all result in the cancellation of
an appropriate number of Accumulation Units of one or more Subaccounts.
Accumulation Units are canceled as of the end of the Valuation Period in which
Southland received notice of or instructions regarding the event.
The Accumulation Experience Factor. For each Subaccount, the accumulation
experience factor reflects the investment experience of the Portfolio in which
that Subaccount invests and the charges assessed against that Subaccount for a
Valuation Period. The accumulation experience factor is calculated by dividing
(1) by (2) and subtracting (3) from the result, where:
(1) is the result of:
a. the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the current Valuation
Period; plus
b. the per share amount of any dividend or capital gains
distributions made by the Portfolio held in the Subaccount, if
the "ex-dividend" date occurs during the current Valuation
Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by Southland to have resulted from the operations of
the Subaccount.
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(2) is the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the last prior Valuation Period.
(3) is a daily factor representing the mortality and expense risk charge
and the asset-based administrative charge deducted from the
Subaccount, adjusted for the number of days in the Valuation Period.
YOUR RIGHT TO TRANSFER
Prior to the Annuity Date and after the Free Look Period, you may transfer your
Accumulation Value among the Subaccounts and the Guaranteed Interest Account.
The minimum amount that may be transferred from each Subaccount or the
Guaranteed Interest Account is the lesser of $100 or the Subaccount Accumulation
Value or the Guaranteed Interest Account Accumulation Value. Percentages must
be in whole numbers. Transfers due to the operation of Dollar Cost Averaging and
Automatic Rebalancing are not included in determining the limit on the number of
transfers allowed without a charge. (See "DOLLAR COST AVERAGING FACILITY," page
21 and "AUTOMATIC REBALANCING," page 22.) Each request to transfer is
considered one transfer regardless of how many Subaccounts or the Guaranteed
Interest Account are affected by the transfer. Except for Contracts issued in
certain states, we reserve the right to limit the number of transfers per
Contract Year to 12. The table below summarizes the number of transfers
permitted in any one Contract Year without an excess transfer charge, the total
number of transfers permitted in a Contract Year and the excess transfer charge.
<TABLE>
<CAPTION>
--------------------------------------------------
PRIOR TO ANNUITY DATE ANNUITY PERIOD
- -----------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Free Transfers 12 4
- -----------------------------------------------------------------------------------------
Total Number of Transfers Permitted Unlimited 4
- -----------------------------------------------------------------------------------------
Excess Transfer Charge $25 for each transfer in excess of Not Applicable
12 during any Contract Year
- -----------------------------------------------------------------------------------------
</TABLE>
Transfers may be made based upon instructions given by Written Notice or by
telephone. Southland will only honor telephone transfer requests if it has a
currently valid telephone authorization form on file signed by the Owner. (See
"TELEPHONE PRIVILEGES," page 26.)
Southland reserves 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, Southland reserves 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. Such third-party transfers may
cause increased trading and transaction costs, disruption of planned investment
strategies, forced and unplanned portfolio turnover, lost opportunity costs and
may subject the Portfolios to large asset swings that diminish the Portfolios'
ability to provide maximum investment return to all Owners.
Once during the first 30 days of each Contract Year, you may transfer amounts
from the Guaranteed Interest Account. Transfer requests received within 30 days
prior to the Contract Anniversary will be considered requests to transfer on the
Contract Anniversary. A request to transfer from the Guaranteed Interest Account
that is received on the Contract Anniversary or within the following 30 days
will be processed if it is the first such transfer request received during the
30 day period. Requests for transfers from the Guaranteed Interest Account
received at any other times will not be processed. You may transfer amounts to
the Guaranteed Interest Account at any time.
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The maximum transfer amount from the Guaranteed Interest Account to the
Subaccounts of the Variable Account in any Contract Year is the greater of:
(a) 25% of the Guaranteed Interest Account Accumulation Value immediately
prior to the transfer;
(b) $100; or
(c) the sum of the amounts that were transferred out of and withdrawn from
the Guaranteed Interest Account in the prior Contract Year. (For
purposes of calculating this sum, all withdrawals, including those
made under the Systematic Withdrawal Program are included.)
DOLLAR COST AVERAGING FACILITY
If elected at the time of the application or at any time thereafter by Written
Notice, an Owner may systematically transfer on a monthly basis, specified
dollar amounts from the VIP Money Market Subaccount or the Janus Short-Term Bond
Subaccount to other Subaccounts. This is known as the dollar-cost averaging
("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.
Owners may only elect Dollar Cost Averaging if their Subaccount Accumulation
Value in either the VIP Money Market Subaccount or the Janus Short-Term Bond
Subaccount is at least $10,000 at the time of the election. The minimum transfer
amount out of the appropriate Subaccount for Dollar Cost Averaging is $100 per
month. The maximum transfer amount out of the appropriate Subaccount for Dollar
Cost Averaging is the Subaccount Accumulation Value in that Subaccount, at the
time of election, divided by 12. If Dollar Cost Averaging transfers are to be
made to more than one Subaccount, percentage allocations of the transfer amount
must be designated as whole number percentages. Dollar allocations may not be
made.
The transfer date for Dollar Cost Averaging will be the same calendar day each
month as the Contract Date. If this calendar day is not a Valuation Day, the
next Valuation Day will be used. Once elected, Dollar Cost Averaging remains in
effect for a Contract until the Subaccount Accumulation Value in the Subaccount
from which the transfers are made is depleted, the Annuity Date occurs or until
the Owner cancels the election by Written Notice at least seven days in advance
of the next transfer date. Alternatively, you may specify a date for Dollar Cost
Averaging to terminate. You may also specify a dollar amount so that when your
Subaccount Accumulation Value in the VIP Money Market Subaccount or Janus
Short-Term Bond Subaccount, as applicable, reached this dollar amount, Dollar
Cost Averaging will terminate. There is no additional charge for using Dollar
Cost Averaging. Southland reserves the right to discontinue offering the Dollar
Cost Averaging facility at any time and for any reason. Any transfer under this
facility will not be included for the purposes of the excess transfer charge.
You may change the transfer amount or the Subaccounts to which transfers are to
be made once each Contract Year, subject to the above limitations. Telephone
instructions, however, are only honored if a currently valid telephone
authorization form is on file with us. (See "TELEPHONE PRIVILEGES," page 26.)
If you elect Dollar Cost Averaging and Automatic Rebalancing at the same time,
Dollar Cost Averaging will commence and Automatic Rebalancing will not commence
until the first Valuation Day of the calendar quarter immediately following the
termination of Dollar Cost Averaging. If you elect Dollar Cost Averaging while
the Automatic Rebalancing feature is in effect, Dollar Cost Averaging will not
commence unless you first terminate Automatic Rebalancing by Written Notice.
(See "AUTOMATIC REBALANCING," page 22.)
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AUTOMATIC REBALANCING
If elected at the time of the application or if subsequently requested prior to
the Annuity Date by Written Notice, an Owner may instruct Southland to
automatically transfer, on a quarterly basis, Variable Accumulation Value
between and among specified Subaccounts in order to achieve a particular
percentage allocation of Variable Accumulation Value among such Subaccounts
("Automatic Rebalancing"). Such percentage allocations must be in whole
numbers. Once elected, Automatic Rebalancing begins on the first Valuation Day
of the next calendar quarter (or, if later, the next calendar quarter after the
expiration of the Free-Look Period).
Owners may stop Automatic Rebalancing at any time at least seven calendar days
before the first Valuation Day in a new calendar quarter. Owners may specify
allocations between and among as many Subaccounts as are available at the time
Automatic Rebalancing is elected. If Automatic Rebalancing is elected but no
allocations are specified, then the rebalancing will be done on the basis of the
Owner's current Purchase Payment allocation instructions. Once Automatic
Rebalancing has been elected, any subsequent allocation instructions that differ
from the then-current Automatic Rebalancing allocation instructions will be
deemed to be a request to change your Automatic Rebalancing allocation. Owners
may change Automatic Rebalancing allocations at any time. Allocation changes
will take effect as of the Valuation Day that we receive your instructions.
Once Automatic Rebalancing is in effect, you may only transfer Variable Account
Accumulation Value among or between Subaccounts by changing your Automatic
Rebalancing allocation instructions. Changes to or termination of Automatic
Rebalancing may be made by instructions given by Written Notice or telephone.
Telephone instructions, however, are only honored if Southland has a currently
valid telephone authorization form on file with us. (See "TELEPHONE PRIVILEGES,"
page 26.)
There is no additional charge for Automatic Rebalancing and Automatic
Rebalancing transfers do not count as one the 12 free transfers available during
any Contract Year. If Automatic Rebalancing is elected at the same time as
Dollar Cost Averaging or when Dollar Cost Averaging is in effect, Automatic
Rebalancing will be postponed until the first Valuation Day in the calendar
quarter following the termination of Dollar Cost Averaging.
In the future, Southland may offer Automatic Rebalancing transfers on a monthly,
semi-annual and annual basis, in which case the foregoing references to calendar
quarters would be changed to monthly, semi-annual or annual periods, as
applicable.
WITHDRAWALS
Prior to the Annuity Date and after the Free Look Period, you may withdraw part
of the Cash Surrender Value of your Contract. Your request must include tax
withholding information as we may require. Withdrawals may be subject to a 10%
tax penalty and may be subject to mandatory withholding. ( See "FEDERAL TAX
CONSIDERATIONS," page 36.) A surrender charge and a withdrawal transaction
charge also may be incurred for withdrawals in excess of certain amounts. (See
"CHARGES DEDUCTED FROM THE ACCUMULATION VALUE," page 28.)
Certain plans or programs sold on a group or sponsored basis to employee or
professional groups may have additional or fewer restrictions on withdrawal
privileges. (See "GROUP OR SPONSORED ARRANGEMENTS," page 17.)
There are three available withdrawal options: Demand Withdrawals; the
Systematic Withdrawal Program; and the IRA Income Program. All three options are
described below.
Demand Withdrawal Option. You may make Demand Withdrawals in minimum amounts of
$100. The maximum Demand Withdrawal amount is the Cash Surrender Value minus
$500. If the amount of the Demand Withdrawal you specify exceeds the maximum
level, the amount of the Demand Withdrawal will automatically be lowered to the
maximum. (See "SURRENDERS," page 24.)
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Unless you specify otherwise, the amount of the Demand Withdrawal will be taken
proportionately from your Subaccount Accumulation Values and Guaranteed Interest
Accumulation Value immediately before the Withdrawal. When specifying otherwise,
you may not withdraw from the Guaranteed Interest Account an amount that is
greater than the total requested Demand Withdrawal amount multiplied by the
ratio of the Guaranteed Interest Account Accumulation Value to the total
Accumulation Value immediately before the withdrawal.
We impose a withdrawal transaction charge for each Demand Withdrawal after the
first in any Contract Year. (See "CHARGES DEDUCTED FROM THE ACCUMULATION VALUE,"
page 28.)
Demand Withdrawals may be made based upon instructions given by Written Notice
or by telephone. Southland will only honor a telephone Demand Withdrawal request
if we have a currently valid telephone authorization form on file signed by the
Owner and if the request is for an amount less than $25,000. (See "TELEPHONE
PRIVILEGES," page 26.)
Systematic Withdrawal Program. You may choose to receive systematic withdrawals
on a monthly or quarterly basis ("Systematic Withdrawal Program"). Withdrawals
under the Systematic Withdrawal Program will be taken proportionately from your
Subaccount Accumulation Values and Guaranteed Interest Accumulation Value. The
withdrawals under this program may not start sooner than one month after the
Contract Date.
You may select the day of the month when the withdrawals will be made. If no day
is selected, the withdrawals will be made on the same day of the month as the
Contract Date. If this day is not a Valuation Day, the next Valuation Day will
be used. You may select a dollar amount or a percentage amount for your
withdrawal subject to the following maximums:
<TABLE>
<CAPTION>
Frequency Maximum Withdrawal Payment Percentage
- --------- -------------------------------------
<S> <C>
Monthly...................1.25% of Accumulation Value on the date of withdrawal
Quarterly.................3.75% of Accumulation Value on the date of withdrawal
</TABLE>
Except as described below, payments under this program may not be less than
$100.
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage listed above, the amount
withdrawn will be reduced to equal such percentage. If a percent amount is
selected that exceeds the maximum percentages listed above, the amount withdrawn
will be reduced to equal such percentage. In either case, if the amount to be
withdrawn is then less than $100, the withdrawal will be made, and the
Systematic Withdrawal Program will be canceled.
If the withdrawals under this program end due to an insufficient Accumulation
Value, any remaining Accumulation Value will be paid to you. This will result in
a Surrender of the Contract.
If a Demand Withdrawal is made during a Contract Year when the Systematic
Withdrawal Program is in effect, the remaining payments to be made under the
Systematic Withdrawal Program for that Contract Year will be considered Demand
Withdrawals for the purpose of assessing any applicable surrender charges or
withdrawal transaction charges. Otherwise, withdrawals made under the Systematic
Withdrawal Program are not assessed surrender charges or withdrawal transaction
charges.
You may change the amount or percentage of your withdrawals under this program
once each Contract Year. You may cancel your participation at any time by
Written Notice, at least seven days prior to the next scheduled withdrawal date.
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IRA Income Program - IRA Contracts Only. If you have an IRA Contract, we will
provide payment of amounts required to be distributed under the Code ("IRA
Income Program") unless the minimum distributions are otherwise satisfied. (See
"IRA INCOME PROGRAM," in the Statement of Additional Information.)
We will determine the amount that is required to be distributed from your
Contract each year based on the information you give us and various choices you
make. If the Systematic Withdrawal Program is in effect at the same time as the
IRA Income Program, additional distributions, if required, will be made at the
same time as the Systematic Withdrawal Program distributions. Otherwise, minimum
distributions will occur when required. For information regarding the
calculation and choices you must make, see the Statement of Additional
Information. The minimum dollar amount of each distribution is $100. At any time
while minimum distributions are being made, if your Cash Surrender Value falls
below $2,000, we will cancel the Contract and send you the amount of your Cash
Surrender Value.
Tax Consequences of Withdrawals. CONSULT YOUR TAX ADVISER REGARDING THE TAX
CONSEQUENCES ASSOCIATED WITH TAKING WITHDRAWALS. A withdrawal made before the
taxpayer reaches Age 59 1/2 may result in imposition of a tax penalty of 10% of
the taxable portion withdrawn. Please refer to "FEDERAL TAX CONSIDERATIONS,"
page 36 for more details.
SURRENDERS
You may Surrender the Contract for its Cash Surrender Value at any time prior to
the Annuity Date. Your Contract's Cash Surrender Value fluctuates daily with the
investment experience of the Subaccounts in which you are invested. We do not
guarantee any minimum Cash Surrender Value for amounts invested in the
Subaccounts.
If you do not wish to receive your Cash Surrender Value in a single sum payment
and you are also the Annuitant, you may avoid a surrender charge by accelerating
the Annuity Date under the Contract. However, any designated period selected
under an Annuity Payment Option must be five years or more. (See "SELECTING AN
ANNUITY PAYMENT OPTION," page 31.) Consult your tax adviser regarding the tax
consequences of a Surrender. A Surrender made before age 59 1/2 may result in
the imposition of a 10% penalty tax. (See "FEDERAL TAX CONSIDERATIONS," page
36.)
DEATH BENEFITS
Upon receipt of Due Proof of Death of an Owner before the Annuity Date, the
Death Benefit will be paid according to the provisions in "ENHANCED DEATH
BENEFIT" below. If the Owner is not an individual, the Death Benefit is payable
upon the death of the Annuitant. The Beneficiary can elect to receive the Death
Benefit either as a single lump sum or under an Annuity Option.
Subject to the applicable provisions of the Code discussed under "TAX STATUS OF
THE CONTRACT", page 37, if the Owner (or a Deemed Owner as defined in the Code)
dies prior to the Annuity Date, and:
1. If the Owner's spouse is the joint Owner, then the spouse becomes the
new Owner and no Death Benefit is payable; or
2. If the Owner's spouse is the Beneficiary, then the spouse may elect to
become the Owner (in which case there is no Death Benefit payable) by
so electing within 60 days of the death; if there is no such election,
the Death Benefit is payable to the Beneficiary; or
3. If the Owner's spouse is not the joint Owner or the Beneficiary, then
the Death Benefit is payable to the Beneficiary.
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If Due Proof of Death is not accompanied by the Beneficiary's election of
whether to receive the Death Benefit as a lump sum or under an Annuity Option,
the amount of the Death Benefit will continue to reflect the investment
performance of the Variable Account until such an election is received at our
Customer Service Center. If no such election is received within 60 days of our
receiving Due Proof of Death, we will pay the Death Benefit in a single lump
sum. If the Death Benefit is paid under an Annuity Option, the Beneficiary
becomes the Annuitant and the Contingent Beneficiary becomes the Contingent
Annuitant. Contact our Customer Service Center or your agent for more
information. (See "SELECTING AN ANNUITY PAYMENT OPTION," page 31.)
Other rules relating to distributions at death apply to Qualified Contracts. You
should consult your tax adviser regarding these rules and their impact on
Qualified Contracts.
ENHANCED DEATH BENEFIT
The Death Benefit under the Contract is an enhanced Death Benefit which is
greater than the death benefit payable under some other annuity contracts. The
enhanced Death Benefit is the greatest of the following amounts as of the
Valuation Period on which we receive Due Proof of Death and all information
necessary to process the claim, including the Beneficiary's election of
receiving the Death Benefit in the form of either a single sum or under an
Annuity Payment Option.
1. Purchase Payments made, less withdrawals (and charges associated with
such withdrawals), accumulated at the guaranteed death benefit
accumulation rate shown in your Contract (0% after Age 75 and for
Contracts issued in certain states), up to a maximum of two times (A-
B), where A = the sum of all Purchase Payments, and B = the sum of all
withdrawals (and charges associated with such withdrawals); or
2. The Accumulation Value; or
3. The Step-up Benefit (as defined below), plus Purchase Payments made,
less withdrawals (and charges associated with such withdrawals) since
the last step-up anniversary;
The Step-Up Benefit at issue is the initial Purchase Payment. As of
each subsequent step-up anniversary, the then-current Accumulation
Value is compared to the prior determination of the Step-Up Benefit,
increased by Purchase Payments made, less withdrawals (and charges
associated with such withdrawals) since the last step-up anniversary.
The greater of these becomes the new Step-Up Benefit.
The step-up anniversaries are every 6th Contract Anniversary for the
duration of the Contract. (i.e., the 6th, 12th, 18th, etc.)
The amount payable to the Beneficiary is the enhanced Death Benefit as
calculated above, minus any taxes incurred but not previously deducted.
WHEN WE MAKE PAYMENTS
Payments of withdrawals, Surrenders or Death Benefits from the Subaccounts will
usually be made within seven days of receipt of the request at our Customer
Service Center. However, we may postpone the processing of any such transactions
for any of the following reasons:
a) When the New York Stock Exchange ("NYSE") is closed for trading for
other than for customary holiday or weekend closings, or trading on
the NYSE is otherwise restricted, as determined by the SEC;
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<PAGE>
b) When the SEC determines that an emergency exists that would make the
disposal of securities held in the Variable Account or the
determination of the value of the Variable Account's assets not
reasonably practicable; or
c) When the SEC by order permits a delay for the protection of Contract
Owners.
We may defer up to six months the payment of any withdrawal or proceeds from the
Guaranteed Interest Account.
TELEPHONE PRIVILEGES
If you have elected this privilege in a form required by us, you may make
transfers or request Demand Withdrawals by telephoning our Customer Service
Center. A telephone authorization form received by Southland at our Customer
Service Center is valid until it is rescinded or revoked by Written Notice or
until a subsequently dated form signed by the Owner is received at the Customer
Service Center. We will send you a written confirmation of all transfers and
withdrawals made pursuant to telephone instructions.
Our Customer Service Center may require a form of personal identification prior
to acting on instructions received by telephone and tape record instructions
received by phone. If Southland follows these procedures, it will not be liable
for any losses due to unauthorized or fraudulent transactions.
THE GUARANTEED INTEREST ACCOUNT
You may allocate all or a portion of your Purchase Payments and transfer your
Accumulation Value to or from the Guaranteed Interest Account, which is part of
our General Account and which pays interest at a declared rate. The General
Account supports our non-variable insurance and annuity obligations. Because of
exemptive and exclusionary provisions, interests in the Guaranteed Interest
Account have not been registered under the Securities Act of 1933, and neither
the Guaranteed Interest Account nor the General Account has been registered as
an investment company under the 1940 Act. Accordingly, neither the General
Account, the Guaranteed Interest Account nor any interest therein are generally
subject to regulation under these Acts. As a result, the staff of the SEC has
not reviewed the disclosures which are included in this prospectus which relate
to the General Account and the Guaranteed Interest Account. These disclosures,
however, may be subject to certain provisions of the federal securities laws
relating to the accuracy and completeness of statements made in this prospectus.
For more details regarding the General Account, see your Contract.
You may accumulate amounts in the Guaranteed Interest Account by (i) allocating
Purchase Payments, (ii) transferring amounts from the Subaccounts, and (iii)
earning interest on amounts you already have in the Guaranteed Interest Account.
(See "CREDITING AND ALLOCATION OF PURCHASE PAYMENTS," page 17.)
The amount you have in the Guaranteed Interest Account at any time is the sum of
all Purchase Payments allocated to this Account, all transfers, and earned
interest. This amount is reduced by amounts transferred out of or withdrawn from
the Guaranteed Interest Account and deductions allocated to the Guaranteed
Interest Account. (See "GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE," page
18.)
We pay a declared interest rate on all amounts that you have in the Guaranteed
Interest Account. These interest rates will never be less than the minimum
guaranteed effective annual interest rate of 3%. When a Purchase Payment is
received or an amount is transferred into the Guaranteed Interest Account, an
interest rate will be credited to that amount. The rate will be guaranteed for a
twelve-month period. Thereafter, interest rates credited to that amount (and
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<PAGE>
amounts earned on that amount) will be similarly guaranteed for successive
periods of at least twelve-months at the then current interest rate. Therefore,
different interest rates may apply to different amounts in the Guaranteed
Interest Account, depending on when and how the amount was initially allocated.
Interest at the guaranteed minimum rate or such higher rate as Southland may
determine will be paid regardless of the actual investment experience of the
General Account. We bear the full amount of the investment risk for the amount
allocated to the Guaranteed Interest Account while the Owner assumes the risk
that interest credited may not exceed the guaranteed minimum rate.
ADDITIONAL CONTRACT INFORMATION
THE OWNER
You are the Owner. You are also the Annuitant unless another Annuitant is named
in the application. You have the rights and options described in the Contract.
You and your spouse may be joint Owners; no other joint ownership is allowed.
You (and your spouse, in the case of joint ownership) must be younger than Age
86 as of the Contract Date.
THE ANNUITANT
The Annuitant will receive the Annuity Payments under the Contract as of the
Annuity Date if the Annuitant is living. If the Annuitant dies before the
Annuity Date and a contingent Annuitant is named, the contingent Annuitant
becomes the Annuitant (unless the Owner is not an individual, in which case the
Death Benefit becomes payable). If no contingent Annuitant has been named, the
Owner must designate a new Annuitant. If no designation is made within 30 days
of the Annuitant's death, the Owner will become the Annuitant.
Upon the death of the Annuitant after the Annuity Date, any remaining designated
period Annuity Payments will be continued to any contingent Annuitant. Upon the
death of both the Annuitant and all contingent Annuitants, any remaining
designated period Annuity Payments will be paid to the estate of the last to die
of the Annuitant and the contingent Annuitants. Such amounts may be paid in one
sum if the Owner so elected. (See "SELECTING AN ANNUITY PAYMENT OPTION," page
31.)
THE BENEFICIARY
The Beneficiary is the person to whom we pay the Death Benefit upon the death of
the Owner (or of the Annuitant, if the Owner is not an individual) prior to the
Annuity Date.
The original Beneficiary and any contingent Beneficiaries are named in the
application. Contingent Beneficiaries are paid a Death Benefit only if no
Beneficiary survives. If more than one Beneficiary in a class survives, they
will share the Death Benefit equally, unless the Owner's designation provides
otherwise. If there is no designated Beneficiary or contingent Beneficiary
surviving, we will pay the Death Benefit to the Owner's estate. We will pay the
Death Benefit to the most recent Beneficiary designation on file with us.
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT
Prior to the Annuity Date and after the Free Look Period, you may transfer
Ownership of the Contract (unless the Contract is a Qualified Contract) subject
to our published rules at the time of the change. A new Owner must be less than
Age 86.
You may name a new Annuitant prior to the Annuity Date. Any Annuitant or
contingent Annuitant must be younger than Age 86 when named. An Annuitant or
contingent Annuitant that is not an individual may not be named without our
consent. If the Owner is not an individual, the Annuitant may not be changed
without our consent.
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The Owner may name a new Beneficiary unless an irrevocable Beneficiary has
previously been named. When an irrevocable Beneficiary has been designated, the
Owner and the irrevocable Beneficiary must act together to make any Beneficiary
changes. If the Contract is a Qualified Contract and a Beneficiary change is
being made, the Owner's spouse must sign a statement agreeing to this
designation.
To make any of these changes, you must send us Written Notice. The change will
take effect as of the day the notice is signed and dated. The change will not
affect any payment made or action taken by us before recording the change at our
Customer Service Center. For possible tax consequences, see "FEDERAL TAX
CONSIDERATIONS," page 36.
OTHER CONTRACT PROVISIONS
If an Age or sex given in the application is misstated, the amounts payable or
benefits provided by the Contract shall be those that the Purchase Payment would
have bought at the correct Age or sex.
We must receive any election, designation, change, assignment, or any other
change request you make in writing, except for those changes for which telephone
privileges are available. The effective date of any such change will be the date
the request was signed. We may require a return of your Contract for any
Contract change or for paying Death Benefits. If your Contract has been lost, we
will require that you complete and return a Contract Replacement Form. Any
change will not affect payments made or action taken by us before the change is
recorded at our Customer Service Center.
You may assign this Contract as collateral security upon Written Notice to us.
Once it is recorded with us, the rights of the Owner and Beneficiary are subject
to the assignment. It is your responsibility to make sure the assignment is
valid. There may be tax consequences. (See "FEDERAL TAX CONSIDERATIONS," page
36.)
AUTHORITY TO CHANGE CONTRACT TERMS
Only the President, a Vice President, or the Secretary of Southland has
authority to agree on behalf of the company to any alteration of the Contract or
to any waiver of the right or requirements of the company.
This Contract is intended to qualify as an annuity contract under the Code. To
that end, all terms and provisions of the Contract shall be interpreted to
ensure or maintain such qualification. Southland will make payments and
distributions in the time and manner necessary to maintain such qualification
under the applicable provisions of the Code.
We reserve the right to amend this Contract, to reflect any clarifications or
changes that may be needed or are appropriate, or to conform it to any
applicable changes in the tax requirements, in order to qualify the Contract as
an annuity. We will send you written notice of such amendments.
CONTRACT CHARGES AND FEES
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
General. No sales charge is deducted from Purchase Payments at the time that
such payments are made. However, within certain time limits described below, a
surrender charge (contingent deferred sales charge) is deducted from
Accumulation Value if a Demand Withdrawal or Surrender occurs prior to the
Annuity Date.
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In the event that surrender charges are not sufficient to cover sales expenses,
such expenses will be borne by Southland. Conversely, if the revenue from such
charges exceeds such expenses, the excess of revenues from such charges over
expenses will be retained by Southland.
Charge for Surrender or Demand Withdrawals. The surrender charge is equal to
the percentage of each Purchase Payment surrendered or withdrawn as shown in the
table below. The surrender charge is separately calculated and applied to each
Purchase Payment at the time that the Payment is surrendered or withdrawn. No
surrender charge applies to Accumulation Value in excess of aggregate Purchase
Payments (less prior withdrawals of such payments) or on Purchase Payments made
more than five full Contract Years since the Contract Anniversary following the
Purchase Payment. For purposes of calculating the surrender charge, Accumulation
Value in excess of aggregate Purchase Payments (less prior withdrawals of such
payments) is deemed withdrawn before Purchase Payments and Purchase Payments are
considered withdrawn on a first-in-first-out basis.
<TABLE>
<CAPTION>
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Contract Anniversaries Since Surrender Charge as a Percentage
Purchase Payment Was Made of Purchase Payment Wit
- --------------------------------------------------------------------------------
<S> <C>
0 7%
- --------------------------------------------------------------------------------
1 6%
- --------------------------------------------------------------------------------
2 5%
- --------------------------------------------------------------------------------
3 4%
- --------------------------------------------------------------------------------
4 3%
- --------------------------------------------------------------------------------
5 2%
- --------------------------------------------------------------------------------
6+ 0%
- --------------------------------------------------------------------------------
</TABLE>
With regard to Demand Withdrawals, the surrender charge is deducted from your
Accumulation Value.
The Amount You May Withdraw Without a Surrender Charge. Demand Withdrawals may
be taken without a surrender charge in an amount which may be greater than that
provided by other annuity contracts. In addition to Purchase Payments held
beyond the surrender charge period, each Contract Year, you may withdraw without
a surrender charge the greater of (1) Accumulation Value in excess of aggregate
Purchase Payments less prior withdrawals (as of the date of receipt of the
written request), or (2) 15% of the Accumulation Value as of the last Contract
Anniversary (less any withdrawals already made during the Contract Year,
including any charges arising from such withdrawals, other than withdrawals of
Purchase Payments).
During any Contract Year, if a Demand Withdrawal is made while the Systematic
Withdrawal Program is in effect, the remaining payments to be made under the
Systematic Withdrawal Program for that Contract Year will be considered Demand
Withdrawals for purposes of calculating withdrawal transaction charges and any
applicable surrender charges. If a Demand Withdrawal is not made in the same
Contract Year, withdrawals made under the Systematic Withdrawal Program will not
be assessed a surrender charge. IRA Income Program withdrawals will not be
assessed a surrender charge.
WITHDRAWAL TRANSACTION CHARGE
Prior to the Annuity Date and after the Free Look Period, you may take one
Demand Withdrawal each Contract Year without a withdrawal transaction charge. We
impose a withdrawal transaction charge on each additional Demand Withdrawal in
that Contract Year equal to the lesser of $25 or 2% of the amount withdrawn. The
withdrawal transaction charge will reduce proportionately your Subaccount
Accumulation Values and Guaranteed Interest Account Accumulation Value. The
withdrawal transaction charge will not apply to withdrawals made pursuant to the
IRA Income Program nor will it apply to withdrawals made pursuant to the
Systematic Withdrawal Program unless a
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Demand Withdrawal occurs in a Contract Year while the Systematic Withdrawal
Program is in effect. Then, the remaining payments to be made under the
Systematic Withdrawal Program in such a Contract Year will be considered Demand
Withdrawals for purposes of calculating withdrawal transaction charges.
ANNUAL ADMINISTRATIVE CHARGE
The administrative charge is deducted each year as of the Contract Anniversary.
We also deduct this charge when determining the Cash Surrender Value payable if
you Surrender the Contract prior to the end of a Contract Year. If aggregate
Purchase Payments made less aggregate withdrawals (and any charges arising from
such withdrawals) are less than $100,000, the amount deducted is $30 per
Contract Year. Otherwise, the charge is zero. This charge is to cover a portion
of our administrative expenses.
The administrative charge is deducted proportionately from your Subaccount
Accumulation Values immediately prior to the deduction. The administrative
charge is not deducted from the Guaranteed Interest Account Accumulation Value.
EXCESS TRANSFER CHARGE
Prior to the Annuity Date, we allow you 12 free transfers among and between the
Subaccounts and the Guaranteed Interest Account per Contract Year. For each
additional transfer, we will charge you $25 at the time each such transfer is
processed. The charge will be deducted proportionately from your Subaccount
Accumulation Values and Guaranteed Interest Account Accumulation Value
immediately prior to the deduction. Any transfer(s) due to the election of
Dollar Cost Averaging or Automatic Rebalancing will not be included in
determining if the excess transfer charge should apply.
After the Annuity Date, only four Annuity Unit exchanges each Contract Year are
allowed, and no transfer charge will be deducted.
TAXES ON PURCHASE PAYMENTS
We make a charge for state and local taxes on Purchase Payments in certain
states and municipalities, which can range from 0% to 3.5% of each Purchase
Payment. The charge generally depends on the Annuitant's place of residence.
In those jurisdictions in which taxes on Purchase Payments are incurred by
Southland as of the Annuity Date, we will deduct the charge for taxes at that
time. In jurisdictions that impose a tax on Purchase Payments at the time the
Purchase Payments are paid, regardless of the Annuity Date, our current practice
is to pay the tax on Purchase Payments for you and then deduct the charge for
these taxes from your Accumulation Value upon Surrender, payment of the Death
Benefit or upon the Annuity Date. We reserve the right to deduct any state and
local taxes on Purchase Payments from your Accumulation Value at the time such
tax is due.
CHARGES DEDUCTED FROM THE SUBACCOUNTS
MORTALITY AND EXPENSE RISK CHARGE
We will deduct a daily charge from the assets in the Subaccounts to compensate
Southland for mortality and expense risks that we assume under the Contract. The
daily charge prior to the Annuity Date is at the rate of 0.003753% (equivalent
to an annual rate of 1.37%) on the assets of the Variable Account. The daily
charge during the Annuity Period is at the rate of 0.003425% (equivalent to an
annual rate of 1.25%) on the assets in the Subaccounts. Prior to the Annuity
Date, approximately 1.02% of this annual charge is for the mortality risk and
0.35% is for the expense risk. During the Annuity Period, when the Death Benefit
is no longer available, approximately 0.90% of this annual
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charge is for mortality risk and 0.35% is for expense risk. The mortality and
expense risk charge is not deducted from the Guaranteed Interest Account.
The mortality risk assumed is the risk that Annuitants, as a group, will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more in Annuity Payments under certain Annuity Payment Options than we
planned. Southland also assumes a mortality risk for paying an Enhanced Death
Benefit, which in periods of declining value and higher mortality rates, could
result in a loss for Southland. The expense risk assumed is the risk that it
will cost us more to issue and administer the Contract than we expected in
setting certain of the charge levels guaranteed in the Contract.
ASSET-BASED ADMINISTRATIVE CHARGE
We will deduct a daily charge from the assets of the Subaccounts to compensate
Southland for a portion of the administrative expenses under the Contract. The
daily charge is at a rate of 0.000411% (equivalent to an annual rate of 0.15%)
on the assets in the Subaccounts. This charge is not deducted from the
Guaranteed Interest Account.
PORTFOLIO EXPENSES
There are fees and charges deducted from the Portfolios. Please read the
prospectus for the Portfolios you are considering for complete details.
SELECTING AN ANNUITY PAYMENT OPTION
GENERAL PROVISIONS
Annuity Payment Option. The proceeds from the Contract are applied to purchase
the Annuity Payment Option selected by the Owner. The proceeds, for this
purpose, are the Accumulation Value under the Contract on the Annuity Date less
the amount of any taxes incurred by Southland in connection with the Contract
but not yet deducted under the Contract. If such taxes are deducted at this
time, the deduction is allocated proportionately to your Subaccount Accumulation
Values and Guaranteed Interest Account Accumulation Value on the Valuation Day
immediately prior to the Annuity Date.
Election and Changes of Annuity Date. The Annuity Date is the date as of which
Annuity Payments begin. It may be elected on your application. You may elect any
Annuity Date that is no earlier than the second Contract Anniversary but no
later than the Annuitant's 85th birthday or the tenth Contract Anniversary,
whichever is later. An earlier Annuity Date may be required in certain states.
If no Annuity Date is elected in the application, the Annuity Date will be the
first day of the month following the Annuitant's 85th birthday or the first day
of the month following the tenth Contract Anniversary, whichever is later.
However, the Annuity Date limitations may vary according to state regulation.
Please refer to your Contract for a description of these limitations. You may
also change the Annuity Date by Written Notice at least 60 days prior to the
then currently elected Annuity Date of the Contract. For an IRA Contract, the
Code stipulates that distributions must commence no later than April 1 of the
calendar year following the calendar year in which you attain Age 70 1/2.
Consult your tax adviser.
Election and Changes of Annuity Payment Option. The Annuity Payment Option is
composed of both a provision which specifies the type of annuity to be paid and
a provision which determines how long the annuity will be paid, the frequency,
and the amount of each payment. The Owner elects the Annuity Payment Option. The
Owner may change the Annuity Payment Option at any time prior to the Annuity
Date. The Owner must specifically elect if the Annuitant is to have the right to
commute payments as provided below. In selecting an Annuity Payment Option, the
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Owner must determine whether the payments will be variable or fixed in amount.
If variable, the Owner must select the Subaccounts to which proceeds will be
applied to purchase variable Annuity Payments. The Owner may also select a
combination of fixed and variable payments as described below. If no selection
has been made by the Annuity Date, proceeds from any Guaranteed Interest Account
Accumulation Value will be applied to purchase fixed Annuity Payments and
proceeds from each Subaccount Accumulation Value will be applied to purchase
variable Annuity Payments from that Subaccount. If no selection has been made,
the Annuity Payment Option will be Annuity Payment Option II (for a variable
Annuity Payment, Benchmark Rate of Return of 3%) with a designated period of 20
years. Any Death Benefit applied to purchase Annuity Payments is allocated among
the Subaccounts and/or the Guaranteed Interest Account as instructed by the
Beneficiary rather than the Owner.
ANNUITY PAYMENTS
We will provide Annuity Payments under the Annuity Payment Option in effect on
the Annuity Date.
Fixed Annuity Payments. Fixed Annuity Payments are periodic payments, the
amount of which are fixed and guaranteed as to dollar amount throughout the
Annuity Period.
The dollar amount of each such Annuity Payment depends 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 of proceeds from the Contract applied to
purchase the Annuity Payments and the applicable annuity purchase rates
(guaranteed minimum rates are found in the Contract). The guaranteed minimum
rates in the Contract are based on a minimum guaranteed interest rate of 3%.
Southland may, in its sole discretion, make Annuity Payments in an amount based
on a higher interest rate. If fixed Annuity Payments are computed based on an
interest rate in excess of the guaranteed minimum interest rate, then, for the
period of the higher rate, the dollar amount of such Annuity Payments will be
greater than the dollar amount based on 3%. We guarantee that any higher rate
will be in effect for at least 12 months.
Variable Annuity Payments. Variable Annuity Payments are periodic payments
that: (1) are not pre-determined nor guaranteed as to dollar amount; and (2)
vary in amount with the investment experience of the Subaccounts which you
select.
The dollar amount of the first variable Annuity Payment is determined in the
same manner as that of a fixed Annuity Payment. Therefore, for any particular
amount of proceeds applied to a particular Annuity Payment Option, the dollar
amount of the first variable Annuity Payment and the first fixed Annuity Payment
(assuming such fixed payment is based on the minimum guaranteed 3% interest rate
and that the 3% Benchmark Rate of Return is selected for such variable payment)
would be the same. Variable Annuity Payments after the first payment will vary,
to reflect the net investment performance of the Subaccount(s) selected.
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 Annuity Units at the Annuity Unit value for the Subaccount
on the Annuity Date by dividing the dollar amount of the payment by the Annuity
Unit Value. The number of Annuity Units of each Subaccount attributable to a
Contract then remains fixed unless (1) an exchange of Annuity Units is made, or
(2) Annuity Payment Option III is selected, both as described below. Each
Subaccount has a separate 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 Annuity Units
under a Contract of each selected Subaccount by the Annuity Unit value for the
Subaccount for the Valuation Period which ends immediately 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% or 5% (whichever was
selected) Benchmark Rate of Return, 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
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annualized rate of 3% or 5% (as applicable) 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% or
5% (as applicable), the payment for that period will be less than the payment
for the prior period.
You must elect either a 3% or 5% Benchmark Rate of Return. Your election may not
be changed after the Annuity Date. Electing the 5% Benchmark Rate of Return
would mean a larger initial Annuity Payment than would electing the 3% rate.
However, electing the 5% rate would result in more slowly rising or more rapidly
falling subsequent payments if actual investment experience varied from an
annual compound rate of 5% than would be the case if the 3% rate were elected
and actual investment experience varied from an annual compound rate of 3%.
After the Annuity Date, the Owner may change the selected Subaccount(s) by
Written Notice, up to four times per Contract Year. Such a change will be made
by exchanging Annuity Units of one Subaccount for another on an equivalent
dollar value basis.
See the Statement of Additional Information for examples of Annuity Unit value
calculations and variable Annuity Payment calculations.
Combination Annuity Payment. A combination Annuity Payment is an Annuity
Payment in which a portion of the payment is variable and a portion of the
payment is fixed as to dollar amount. If a combination Annuity Payment is
selected, at least 25% of the proceeds must be allocated to either option you
elect. As of the Annuity Date, we will then allocate proceeds between the
Guaranteed Interest Account and the Subaccounts to meet the proportions
selected. Any amount of Accumulation Value to be transferred to or from the
Guaranteed Interest Account will be allocated among the Subaccounts in the same
proportion that the Accumulation Value of each of the Subaccounts bears to the
total Variable Accumulation Value. Once a combination Annuity Payment is
selected, the Annuitant may subsequently increase the allocation to a fixed
Annuity Payment but may not increase the allocation to a variable Annuity
Payment. Any Death Benefit to be applied under a combination Annuity Payment
will be allocated to the Subaccounts and the Guaranteed Interest Account as
instructed by the Beneficiary rather than the Owner.
Frequency and Amount of Annuity Payments. Annuity Payments will be made to the
Annuitant based on the Annuity Payment Option and frequency elected. Payments
may be made monthly, quarterly, semiannually or annually. If we do not receive
Written Notice from you, the Annuity Payments will be made monthly. There may be
certain restrictions on minimum payments that we will allow. We may require that
a one sum payment be made and that the Contract be canceled if the proceeds to
be applied is less than $2,000. If the payments to the Annuitant are ever less
than $20, we may change the frequency of payments to result in payments of at
least that amount or require a one sum payment, in which case the Contract would
be canceled.
ANNUITY PAYMENT OPTIONS
OPTION I. PAYMENTS FOR A DESIGNATED PERIOD. Payments will be made in 1, 2, 4,
or 12 installments per year, as elected for a designated period, which may be 5
to 30 years. If variable Annuity Payments are elected, the dollar amount of each
payment will vary based on the Annuity Unit values of the Subaccount(s)
selected. Variable Annuity Payments may only be elected if prior to the Annuity
Date, the Owner has made an irrevocable election to give the Annuitant the right
to commute any remaining designated period installments under this Annuity
Payment Option. (See "Commuting Provisions" below.) If fixed Annuity Payments
are elected, the dollar amount of each payment will depend upon the designated
period elected and will be equal unless one or more payments are based on an
interest rate in excess of 3%, as described previously. If the Annuitant dies
before the end of the designated period, payments will be continued to the
contingent Annuitant (or to the Annuitant's estate if no contingent Annuitant
has been named) until the end of the designated period. The amount of the first
monthly payment for each $1,000 of proceeds applied is shown in Payment Option I
Table in your Contract.
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OPTION II. LIFE INCOME WITH PAYMENTS FOR A DESIGNATED PERIOD. Payments will be
made in 1, 2, 4, or 12 installments per year throughout the Annuitant's
lifetime, or if longer, for a period of 5, 10, 15, or 20 years as elected. If a
fixed Annuity Payment is elected, the dollar amount of each Payment will be
equal unless one or more payments are based on an interest rate in excess of 3%,
as described previously. If variable Annuity Payments are elected, the dollar
amounts of each payment will vary based on the Annuity Unit values of the
selected Subaccount(s). If the Annuitant dies before the end of the designated
period, payments will be continued to the contingent Annuitant (or to the
Annuitant's estate if no contingent Annuitant has been named) until the end of
the designated period. The amount of each payment will depend upon the
Annuitant's sex (unless otherwise prohibited by state law), age at the time the
first payment is due, the designated period elected and, if variable Annuity
Payments are elected, the investment experience of the Subaccount(s) selected.
The amount of the first monthly payout for each $1,000 of proceeds applied is
shown in Payment Option II Table in your Contract. This option is only available
for ages shown in these Tables.
OPTION III. JOINT AND LAST SURVIVOR. Payments will be made in 1, 2, 4, or 12
installments per year as elected while both Annuitants are living. The amount of
each payment will depend upon the Age and sex (unless otherwise prohibited by
state law) of each Annuitant at the time the first payment is due. Upon the
death of one Annuitant, the Annuity Payments will continue throughout the
lifetime of the surviving Annuitant.
If fixed Annuity Payments are elected, the dollar amount of each payment will be
level while both Annuitants are living and upon the death of one Annuitant will
be reduced to 2/3rds of the installment dollar amount while both Annuitants were
living.
If variable Annuity Payments are elected, the number of Annuity Units supporting
each payment will remain fixed while both Annuitants are living and upon the
death of one Annuitant will be reduced by one-third. The dollar amounts of each
payment will vary based on the Annuity Unit Values of the selected
Subaccount(s).
OPTION IV. OTHER. Payments will be made in any other manner as agreed upon in
writing between you or the Beneficiary and us.
Payments Other Than Monthly. The Annuity Payment Option Tables in your Contract
show the first monthly installments for Annuity Payment Options I and II. To
arrive at the first annual, semiannual or quarterly payments, multiply the
appropriate figures by 11.839, 5.963 or 2.993 respectively for a Guaranteed
Interest Rate or Benchmark Total Return of 3% and by 11.736, 5.939 or 2.988
respectively if the Benchmark Total Return is 5%. Factors for other designated
periods or for other options that may be provided by mutual agreement will be
provided upon reasonable request.
Commuting Provisions. If the Owner so elects, the Annuitant may commute
remaining designated period installments under Annuity Payment Option I. If the
election allows, the contingent Annuitant may commute remaining designated
period payments after the death of the Annuitant under Annuity Payment Options I
or II. If no Contingent Annuitant is named, any remaining designated period
payments may be commuted by the Annuitant's estate. Any computation shall be at
the appropriate Benchmark Rate of Return.
OTHER INFORMATION
REPORTS TO OWNERS
Prior to the Annuity Date, we will send you a report within 30 days after the
end of each calendar quarter. This report will show the Subaccount and
Guaranteed Interest Account Accumulation Values, the total Accumulation Value,
the Cash Surrender Value and the Death Benefit, as of the end of the calendar
quarter, as well as activity under the
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Contract since the last report. During the Annuity Period, we will send you a
report within 30 days after the end of each calendar year showing any
information required by law. The reports will include any information that may
be required by the SEC or the insurance supervisory official of the jurisdiction
in which the Contract is delivered.
We will also send you copies of any shareholder reports of the Portfolios in
which the Subaccounts invest, as well as any other reports, notices or documents
required by law to be furnished to Contract Owners.
DISTRIBUTION OF THE CONTRACTS
ING America Equities, Inc. is principal underwriter and distributor of the
Contracts as well as of other contracts issued through the Variable Account and
other separate accounts of Southland. ING America Equities, Inc. is an
affiliate of Southland. It is registered with the SEC as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. ("NASD"). We
pay ING America Equities, Inc. for acting as principal underwriter under a
distribution agreement. The Contract will be offered on a continuous basis and
Southland does not anticipate discontinuing the offer.
ING America Equities, Inc. will enter into sales agreements with broker-dealers
to solicit for the sale of the Contracts through registered representatives who
are licensed to sell securities and variable insurance products, including
variable annuities. Such broker-dealers will generally receive commissions based
on a percent of Purchase Payments made (up to a maximum of 7%), a percent of
Accumulation Value (up to a maximum of .20%), or a combination of these two. The
registered representative will receive a percentage of these commissions from
the respective broker-dealer, depending on the practice of that broker-dealer.
These commissions will be paid to the broker-dealer by ING America Equities,
Inc. and will not be charged to the Owner. In addition, we may also pay
override payments, expense allowances, bonuses, wholesaler fees and training
allowances. Registered representatives who meet specified production levels may
qualify, under our sales incentive programs, to receive non-cash compensation
such as expense-paid trips, expense-paid educational seminars and merchandise.
CUSTOMER SERVICE CENTER
Financial Administrative Services Corporation provides administrative services
for Southland at our Customer Service Center at P.O. Box 173789, Denver, CO
80217-3789. The administrative services include processing Purchase Payments,
Annuity Payments, Death Benefits, Surrenders, withdrawals, and transfers;
preparing confirmation notices, and periodic reports; calculating mortality and
expense risk charges; calculating Accumulation and Annuity Unit values; and
distributing voting materials and tax reports.
VOTING PRIVILEGES
In accordance with its view of current applicable law, Southland will vote fund
shares held in the Variable 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 Southland otherwise determines that it is allowed to
vote the shares in its own right, it 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, and may include fractional votes.
Prior to the Annuity Date, an Owner holds a voting interest in each Subaccount
to which the Variable Accumulation Value is allocated. After the Annuity 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 Owner's Subaccount Accumulation Value 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
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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 selected Benchmark Rate of Return and the 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 Southland in a Subaccount as to which no Owner or Annuitant has a beneficial
interest will be voted in proportion to the voting instructions which are
received with respect to all Contracts participating in that Subaccount. Voting
instructions to abstain on any item to be voted upon will be applied to reduce
the total number of votes eligible to be cast on a matter. Under the 1940 Act,
certain actions affecting the Variable Account (such as some of those described
under "CHANGES WITHIN THE VARIABLE ACCOUNT," page 15) may require Contract
Owner approval. In that case, you will be entitled to vote in proportion to your
Variable Accumulation Value.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or to
which the assets of the Variable Account are subject. Southland, as an insurance
company, is ordinarily involved in litigation. We do not believe that any
current litigation is material to Southland's ability to meet its obligations
under the Contract or to the Variable Account nor do we expect to incur
significant losses from such actions.
FEDERAL TAX CONSIDERATIONS
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 Southland. Any person
concerned about these tax implications should consult a competent tax advisor
before initiating any transaction. This discussion is based upon Southland's
understanding of the present federal income tax laws, as they are currently
interpreted by the Internal Revenue Service ("IRS"). No representation is made
as to the likelihood of the continuation of the present federal income tax laws
or of the current interpretation by the IRS. Moreover, no attempt has been made
to consider any applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and used in
connection with plans qualifying for favorable tax treatment. The Qualified
Contract is designed for use by individuals whose Purchase Payments are
comprised solely of proceeds from and/or contributions under retirement plans
which are intended to qualify as plans entitled to special income tax treatment
under sections 401(a), 403(b), or 408 of the Code. The ultimate effect of
federal income taxes on the amounts held under a Contract, or annuity payments,
and on the economic benefit to the owner, the annuitant, or the beneficiary
depends on the type of retirement plan, on the tax and employment status of
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the individual concerned, and on Southland'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 Variable Account, through
each underlying fund, 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 Southland does not
have direct control over the funds in which the Variable Account invests, we
believe that each fund in which the Variable Account owns shares will meet the
diversification requirements, and therefore, the Contract will be treated as an
annuity contract under the Code.
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includible in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents 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 would
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." As of the date of this prospectus, no such
guidance has been issued.
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. For
example, the owner of a Contract has the choice of several subaccounts in which
to allocate net purchase payments and Contract values, and may be able to
transfer among subaccounts more frequently than in such rulings. These
differences could result in an owner being treated as the owner of the assets of
the Variable Account. In addition, Southland does 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. Southland therefore reserves the
right to modify the Contract as necessary to attempt to prevent the contract
owner from being considered the owner of the assets of the Variable 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 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 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 person designated by
such owner as a beneficiary and to whom ownership of the contract passes by
reason of death and must
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be a natural person. However, if the owner's "designated beneficiary" is the
surviving spouse of the owner, the Contract may be continued with the surviving
spouse as the new owner.
The Non-Qualified Contracts contain provisions which are intended to comply with
the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Southland 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.
Southland believes 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 Accumulation 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
Accumulation 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. "Investment
in the contract" is not affected by the death of the Owner or the Annuitant.
That is, the "investment in the contract" remains the amount of Purchase
Payments 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 and Demand
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
Accumulation Value immediately before the partial withdrawal exceeds the
"investment in the contract" at that time. Any additional amount withdrawn is
not taxable.
In the case of a full surrender under a Qualified or Non-Qualified Contract, the
amount received generally will be taxable only to the extent it exceeds the
"investment in the contract."
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, which
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
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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 or 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. Other rules relating to distributions at death relate to Qualified
Contracts. You should consult your tax adviser regarding these rules and their
impact on Qualified Contracts.
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 date is no later than a year
from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the
annuity payment period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. In past years, legislation has been proposed that
would have adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of non-
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qualified annuities that did not have "substantial life contingencies" by taxing
income as it is credited to the annuity. Although as of the date of this
prospectus Congress is not considering any legislation regarding taxation of
annuities, there is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership of a Contract, the designation of an annuitant, payee or
other beneficiary who is not also the owner, the selection of certain annuity
dates or the exchange of a Contract may result in certain tax consequences to
the owner that are not discussed herein. An owner contemplating any such
transfer, assignment, or exchange of a Contract should contact a competent tax
advisor with respect to the potential tax effects of such a transaction.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding. Certain states also
require withholding of state income tax whenever federal income tax is withheld.
MULTIPLE CONTRACTS
All non-qualified deferred annuity contracts that are issued by Southland (or
its 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) of the Code. The effects of this rule are not yet
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) of the Code through the serial purchase of annuity
contracts or otherwise. There may also be other situations in which the Treasury
Department may conclude that it would be appropriate to aggregate two or more
annuity contracts purchased by the same owner. Accordingly, a Contract owner
should consult a competent tax advisor before purchasing more than one annuity
contract.
TAXATION OF QUALIFIED PLANS
The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract owners, the
annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but Southland shall not be bound by the terms and conditions of
such plans to the extent such terms contradict the Contract, unless Southland
consents. Brief descriptions follow of the various types of qualified
retirement plans in connection with a Contract. Southland will amend the
Contract as necessary to conform it to the requirements of such plan.
Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section 401(a) of
the Code permits corporate employers to establish various types of retirement
plans for employees, and permits self-employed individuals to
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establish these plans for themselves and their employees. Such retirement plans
may permit the purchase of the Contract to provide benefits under the plans.
Adverse tax consequences to the plan, to the participant, or to both may result
if this Contract is assigned or transferred to any individual as a means to
provide benefit payments. Employers intending to use the Contract with such
plans should seek competent advice. As of the date of this prospectus, the
Contract is not available for use with these plans.
Individual Retirement Annuities. Sections 408 and 219 of the Code permits
eligible individuals or their employers 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 and deducted,
the persons who may be eligible, and on the time when distributions may
commence. Also, distributions from certain other types of qualified retirement
plans may be "rolled over" on a tax-deferred basis into an IRA. Sales of the
Contract for use with IRAs may be subject to special requirements of the
Internal Revenue Service. Employers may establish Simplified Employee Pension
(SEP) Plans to provide IRA contributions on behalf of their employees.
Tax Sheltered Annuities. Section 403(b) of the Code allows employees of certain
section 501(c)(3) organizations and public schools to exclude from their gross
income the purchase payments paid, within certain limits, on a Contract that
will provide an annuity for the employee's retirement. These purchase payments
may be subject to FICA (social security) tax. Section 403(b)(11) of the Code
restricts the distribution under section 403(b) annuity contracts or (1)
elective contributions made in years beginning after December 31, 1988; (2)
earnings on those contributions; and (3) earnings on such years in amounts held
as of the last year beginning before January 1, 1989. Distribution of these
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. As of the date of this prospectus, the Contract is not available
for use with these plans.
Deferred Compensation Plans. Section 457 of the Code provides for certain
deferred compensation plans. These plans may be offered with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities, certain affiliates of such entities, and tax exempt
organizations. The plans may permit participants to specify the form of
investment for their deferred compensation account. All investments are owned
by the sponsoring employer and are subject to the claims of the general
creditors of the employer. As of the date of this prospectus, the Contract is
not available for use with these plans.
POSSIBLE CHARGE FOR SOUTHLAND'S TAXES
At the present time, Southland makes no charge to the subaccounts for any
Federal, state, or local taxes that Southland incurs which may be attributable
to such subaccounts or the Contracts. Southland, however, reserves the right in
the future to make a charge for any such tax or other economic burden resulting
from the application of the tax laws that it determines 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 Southland's understanding of
current law and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each owner or
recipient of the distribution. A competent tax advisor should be consulted for
further information.
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STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more details
concerning subjects discussed in this Prospectus. The following is the Table of
Contents for that statement.
<TABLE>
<CAPTION>
<S> <C>
SOUTHLAND LIFE INSURANCE COMPANY................................................ 1
PERFORMANCE INFORMATION......................................................... 1
Money Market Subaccount Yields............................................. 1
Other Subaccount Yields.................................................... 2
Average Annual Total Returns............................................... 3
Other Total Returns........................................................ 4
Effect of the Annual Administrative Charge on Performance Data............. 5
VARIABLE ANNUITY PAYMENTS....................................................... 5
Annuity Unit Value......................................................... 5
Illustration of Calculation of Annuity Unit Value.......................... 6
Illustration of Variable Annuity Payment................................... 6
VALUATION DAYS.................................................................. 6
TERMINATION OF PARTICIPATION AGREEMENTS......................................... 6
The Alger American Fund.................................................... 6
Variable Insurance Products Funds and Variable Insurance Products Fund II.. 7
INVESCO Variable Investment Funds, Inc..................................... 7
Janus Aspen Series......................................................... 7
IRA INCOME PROGRAM.............................................................. 8
LEGAL MATTERS................................................................... 8
OTHER INFORMATION............................................................... 8
EXPERTS......................................................................... 9
FINANCIAL STATEMENTS............................................................ 9
</TABLE>
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APPENDIX A - PERFORMANCE INFORMATION
PERFORMANCE DATA FOR SUBACCOUNTS
Southland may advertise or include in sales literature certain performance
related information for the Subaccounts, including yields and average annual
total returns. Certain Portfolios have been in existence prior to the
commencement of the offering of the Contract described in this prospectus. The
Variable Account may advertise the performance of the Subaccounts that invest in
these Portfolios for these prior periods. The performance information of any
period prior to the commencement of the offering of the Contract is calculated
as if the Contract had been offered during those periods, using current charges
and expenses.
Performance information should be considered in light of the investment
objectives, characteristics and quality of the Portfolios in which that
Subaccount invests, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future. For a description of the methods used to determine yield and total
return for the Subaccounts, see the Statement of Additional Information.
Effective yields, yields and total returns for the Subaccounts are based on the
investment performance of the corresponding Portfolios. The performance of a
Portfolio in part reflects its expenses. See the prospectuses for the
Portfolios.
The yield of the VIP 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 7-day yield
for the VIP Money Market Subaccount for the period ended December 31, 1996 was
3.58%. For the same period, the effective yield was 3.64%
The yield of a Subaccount other than the VIP Money Market Subaccount refers to
the annualized income generated by an investment in the Subaccount over a
specified 30-day or one-month period. The yield is calculated by assuming that
the income generated by the investment during that 30-day or one-month period is
generated each period over a 12-month period and is shown as a percentage of the
investment.
The total return of a Subaccount refers to return quotations assuming an
investment under a Contract has been held in the Subaccount for various periods
of time including, but not limited to, a period measured from the date the
Subaccount commenced operations. Average annual total return refers to total
return quotations that are annualized based on an average return over various
periods of time.
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 standardized 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). When a Subaccount,
other than the VIP Money Market Subaccount, has been in operation for one, five
and ten years respectively, the standard version average annual total return for
these periods will be provided.
In addition to the standard version described above, total return performance
information computed on two different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the surrender charge. In addition, Southland may from time to
time disclose cumulative total return for Contracts funded by Subaccounts.
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<PAGE>
From time to time, yields, standard average annual total returns, and non-
standard total returns for the Portfolios may be disclosed, including such
disclosures for periods prior to the date the Variable Account commenced
operations.
Non-standard performance data will only be disclosed if the standard performance
data for the required periods is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount may be
compared with the performance of other variable annuity issuers in general or to
the performance of particular types of variable annuities investing in mutual
funds, or investment portfolios of mutual funds with investment objectives
similar to the Subaccount. Lipper Analytical Services, Inc. ("Lipper"),
Variable Annuity Research Data Service ("VARDS") and Morningstar, Inc.
("Morningstar") are independent services which monitor and rank the performance
of variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers as
well as variable annuity issuers. VARDS rankings compare only variable annuity
issuers. The performance analyses prepared by Lipper, VARDS and Morningstar
each rank such issuers on the basis of total return, assuming reinvestment of
distributions, but do not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration. In
addition, VARDS prepares risk rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to
which funds provide the highest total return within various categories of funds
defined by the degree of risk inherent in their investment objectives. Normally,
these rankings and ratings are published by independent tracking services and
publications of general interest, including, but not limited to: Lipper, VARDS,
Morningstar, Donoghue, magazines such as Money, Forbes, Kiplinger's Personal
Finance, Financial World, Consumer Reports, Business Week, Time, Newsweek,
National Underwriter, U.S. News and World Report, rating services such as LIMRA,
Value, Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports,
and other publications such as The Wall Street Journal, Barron's, Investor's
Daily, and Standard & Poor's Outlook.
Southland is also rated by independent financial ratings services, among which
are A.M. Best, Duff & Phelp's, Moody's, Standard & Poor's, and Weiss Research,
Inc. Such ratings refer to the claims-paying ability of Southland's General
Account and do not relate to an investment in the Variable Account or in the
underlying Portfolios.
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. Subaccount performance may also be compared to
the Shearson/Lehman Intermediate and Long-Term Government/Corporate Bond
Indices, the Donoghue Money Fund Average, the U.S. Treasury Note Index, and
other indices.
Southland 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 exceeds 1.52% on an annual basis over many years.
All returns on the following page assume that the annual administrative charge
is $30 and that the Accumulation Value per Contract is $30,000, which translates
the administrative charge into an assumed .10% annual asset charge. The
performance figures reflect past performance only and neither guarantee nor
predict future investment results under a Contract.
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<PAGE>
AVERAGE ANNUAL TOTAL RETURNS FOR SUBACCOUNTS
FOR PERIODS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/96 AS OF 12/31/96
ASSUMING CONTRACT NOT SURRENDERED ASSUMING CONTRACT SURRENDERED AT THE
END OF THE APPLICABLE TIME PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 YEAR 5 YEARS SINCE 1 YEAR 5 YEARS SINCE
INCEPTION/ 10 INCEPTION/
10 YEARS/1// 10 YEARS/1//
- -----------------------------------------------------------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
<S> <C> <C> <C> <C> <C> <C>
Alger American Small Capitalization
(9/21/88) 2.51% 9.24% 18.34% -4.49% 8.82% 18.34%
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American MidCap Growth (5/3/93) 10.12% NA 22.12% 3.12% NA 21.47%
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth (1/9/89) 11.54% 14.79% 16.80% 4.54% 14.44% 16.80%
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap
(1/25/95) 10.26% NA 39.18% 3.26% NA 36.88%
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VIP AND VIP II FUNDS
- -----------------------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager (9/6/89) 12.77% 9.48% 9.93% 5.77% 9.06% 9.93%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP II Contrafund (1/3/95) 19.33% NA 28.23% 12.33% NA 25.85%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP Equity-Income (10/9/86) 12.47% 16.12% 11.95% 5.47% 15.79% 11.95%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP Growth (10/9/86) 12.92% 13.35% 13.36% 5.92% 12.98% 13.36%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP High Income (9/19/85) 12.23% 13.15% 9.37% 5.23% 12.78% 9.37%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP II Index 500 (8/27/92) 20.87% NA 15.25% 13.87% NA 14.82%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade Bond (12/5/88) 1.53% 4.94% 6.48% -5.47% 4.44% 6.48%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP Money Market (4/1/82) 3.63% 2.84% 4.27% -3.37% 2.30% 4.27%
- -----------------------------------------------------------------------------------------------------------------------------------
VIP Overseas (1/28/87) 11.40% 7.40% 6.18% 4.40% 6.95% 6.18%
- -----------------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth (9/13/93) 6.21% NA 19.36% -0.79% NA 18.55%
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced (9/13/93) 14.32% NA 12.76% 7.32% NA 11.83%
- -----------------------------------------------------------------------------------------------------------------------------------
Growth (9/13/93) 16.56% NA 14.32% 9.56% NA 13.42%
- -----------------------------------------------------------------------------------------------------------------------------------
International Growth (5/2/94) 32.59% NA 17.72% 25.59% NA 16.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond (9/13/93) 2.31% NA 2.72% -4.69% NA 1.56%
- -----------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth (9/14/93) 26.96% NA 21.19% 19.96% NA 20.40%
- -----------------------------------------------------------------------------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUNDS, INC.
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial Income (8/10/94) 20.32% NA 19.75% 13.32% NA 18.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities (1/1/95) 11.62% NA 9.51% 4.62%% NA 6.72%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ / Return shown is for the 10-year period ended December 31, 1996 or since
- -----
inception of the Portfolio, if less than 10 years.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Future Dimensions Deferred Combination Fixed and Variable
Annuity Contract
Issued by
Southland Life Insurance Company
and
Southland Separate Account A1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
THE INFORMATION CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS FOR THE SOUTHLAND LIFE INSURANCE COMPANY DEFERRED COMBINATION FIXED
AND VARIABLE ANNUITY CONTRACT WHICH IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW
BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN REQUEST TO OUR
CUSTOMER SERVICE CENTER AT
P.O. Box 173789, Denver, CO 80217, OR TELEPHONE 1-800-224-3035.
DATE OF PROSPECTUS: May 1, 1997
DATE OF STATEMENT OF ADDITIONAL INFORMATION: May 1, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SOUTHLAND LIFE INSURANCE COMPANY..................................................... 1
PERFORMANCE INFORMATION.............................................................. 1
Money Market Subaccount Yields.................................................. 1
Other Subaccount Yields......................................................... 2
Average Annual Total Returns.................................................... 3
Other Total Returns............................................................. 4
Effect of the Annual Administrative Charge on Performance Data.................. 5
VARIABLE ANNUITY PAYMENTS............................................................ 5
Annuity Unit Value.............................................................. 5
Illustration of Calculation of Annuity Unit Value............................... 6
Illustration of Variable Annuity Payments....................................... 6
VALUATION DAYS....................................................................... 6
TERMINATION OF PARTICIPATION AGREEMENTS.............................................. 6
The Alger American Fund......................................................... 6
Variable Insurance Products Fund and Variable Insurance Products Fund II........ 7
INVESCO Variable Investment Funds, Inc.......................................... 7
Janus Aspen Series.............................................................. 7
IRA INCOME PROGRAM................................................................... 8
LEGAL MATTERS........................................................................ 8
OTHER INFORMATION.................................................................... 8
EXPERTS.............................................................................. 9
FINANCIAL STATEMENTS................................................................. 9
</TABLE>
-i-
<PAGE>
SOUTHLAND LIFE INSURANCE COMPANY
Southland Life Insurance Company is an indirect wholly-owned subsidiary of ING
Group ("ING"), a Dutch insurance and financial corporation primarily engaged in
banking and insurance services which include life and non-life insurance, life
reinsurance, funds transfer services, savings plans, investments in securities
and other capital market instruments, lending, mortgages, leasing, investment
banking, debtor finance, debt conversion and international project management,
property development, finance and management.
Southland's immediate parent, Internationale Nederlanden America Life
Corporation, is a Georgia corporation whose principal business is to act as the
holding company for ING's U.S. life insurance companies. Southland's indirect
intermediate parents, Internationale Nederlanden U.S. Insurance Holdings, Inc.
and Internationale Nederlanden Verzekeringen N.V. are Dutch insurance and
financial corporations owned by ING.
Southland acts as its own custodian for the Variable Account. ING America
Equities, Inc., an affiliate of Southland, is the principal underwriter of the
Contracts in a continuous offering.
PERFORMANCE INFORMATION
From time to time, Southland 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 charges and deductions imposed under a Contract, the yield for
the Subaccounts will be lower than the yield for their respective Portfolios.
The calculations of yields, total returns and other performance data do not
reflect the effect of any premium tax that may be applicable to a particular
Contract. Premium taxes currently range from 0% to 3.5% of the Purchase
Payments made based on the jurisdiction in which the Contract is sold.
MONEY MARKET SUBACCOUNT YIELDS
From time to time, advertisements and sales literature may quote the current
annualized yield of the VIP 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 VIP Money Market Portfolio or on that Portfolio's
securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Contract having a balance of one unit of the
VIP Money Market Subaccount at the beginning of the period, dividing such net
change in account 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 account 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 administrative charge; 2) the
mortality and expense risk charge; and 3) the asset-based administrative charge.
For purposes of calculating current yields for a Contract, an average per unit
annual administrative charge is used based on the $30 annual administrative
charge deducted at the end of each Contract Year. Current Yield is calculated
according to the following formula:
Current Yield = ((NCS / UV) - ES) x (365/7)
-1-
<PAGE>
Where:
NCS = the net change in the value of the Money Market Portfolio
(exclusive of realized gains or losses on the sale of securities
and unrealized appreciation and depreciation) for the seven-day
period attributable to a hypothetical account having a balance of
1 Subaccount unit.
ES = per unit expenses attributable to the hypothetical account for
the seven-day period.
UV = the unit value for the first day of the seven-day period.
Effective Yield = (1 + (NCS/UV) - ES)/365/7/ - 1
Where:
NCS = the net change in the value of the VIP Money Market Portfolio
(exclusive of realized gains or losses on the sale of securities
and unrealized appreciation and depreciation) for the seven-day
period attributable to a hypothetical account having a balance of
1 Subaccount unit .
ES = per unit expenses attributable to the hypothetical account for
the seven-day period.
UV = the unit value for the first day of the seven-day period.
Because of the charges and deductions imposed under the Contract, the yield for
the VIP Money Market Subaccount is lower than the yield for the VIP Money Market
Portfolio.
The current and effective yields on amounts held in the VIP Money Market
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 VIP Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the VIP Money Market Portfolio, the types and quality of
portfolio securities held by the Portfolio and the Portfolio's operating
expenses. Yields on amounts held in the VIP 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 1% to 7% of certain purchase payments during the five full
contract years subsequent to the Contract Anniversary following each payment.
OTHER SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the Subaccounts (except the VIP Money Market
Subaccount) for a Contract for 30-day or one-month periods. The annualized
yield of a Subaccount refers to income generated by the Subaccount during a 30-
day or one-month period and is assumed to be generated each 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 two. Expenses attributable to the Subaccount include the annual
administrative charge, the asset-based administrative charge and the mortality
and expense risk charge. The yield calculation assumes an annual administrative
charge of $30 per year per Contract deducted at the end of each Contract Year.
For purposes of calculating the 30-day or one-month yield, an average
administrative
-2-
<PAGE>
charge based on the average Accumulation Value in the Variable Account is used
to determine the amount of the charge attributable to the Subaccount for the
30-day or one-month period. The 30-day or one-month yield is calculated
according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV) + 1)/6/ - 1)
Where:
NI = net income of the Portfolio for the 30-day or one-month period
attributable to the Subaccount's units.
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.
Because of the charges and deductions imposed under the Contracts, the yield for
the Subaccount is lower than the yield for the corresponding Portfolio.
The yield on the amounts held in the Subaccounts 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. A Subaccount's actual yield
is affected by the types and quality of the securities held by the corresponding
Portfolio and that Portfolio's operating expenses.
Yield calculations do not take into account the surrender charge under the
Contract equal to 1% to 7% of certain Purchase Payments during the five full
contract years subsequent to the Contract Anniversary following each payment.
AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may also quote standard
average annual total returns for one or more of the Subaccounts for various
periods of time.
When a Subaccount or Portfolio has been in operation for 1, 5, and 10 years,
respectively, the standard 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.
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment as of the last day of each
of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Subaccount unit
values which Southland calculates 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 administrative charge
and the annual administrative charge. The calculation assumes that the annual
administrative charge is $30 per year per Contract deducted at the end of each
Contract year. For purposes of calculating standard average annual total return,
an average per-dollar per-day annual administrative charge 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.
-3-
<PAGE>
Standard average annual total returns will therefore reflect a deduction of the
surrender charge for any period less than six years. The standard average annual
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.
From time to time, sales literature or advertisements may quote standard average
annual total returns for periods prior to the date the Variable Account
commenced operations. Such performance information for the Subaccounts is
calculated based on the performance of the various Portfolios and the assumption
that the Subaccounts were in existence for the same periods as those indicated
for the Portfolios, with the level of Contract charges that were in effect at
the inception of the Subaccounts.
The total return information for the Portfolios has been provided by the
appropriate mutual fund (Janus Aspen Series, The Alger American Fund, Variable
Insurance Products Fund, Variable Insurance Products Fund II, and INVESCO
Variable Investment Funds, Inc. (the "Funds")), including Portfolio total return
information used to calculate the standard average annual total returns of the
Subaccounts for periods prior to the inception of the Subaccounts. The Funds
are not affiliated with Southland. While Southland has no reason to doubt the
accuracy of these figures provided by the Funds, Southland has not independently
verified the accuracy of these figures.
OTHER TOTAL RETURNS
From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as standard average annual 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.
Southland 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.
-4-
<PAGE>
EFFECT OF THE ANNUAL ADMINISTRATIVE CHARGE ON PERFORMANCE DATA
The Contract provides for a $30 annual administrative charge to be deducted
annually at the end of each Contract Year, from the Subaccounts based on the
proportion of the Variable Account Accumulation Value invested in each such
Subaccount. For purposes of reflecting the charge in yield and total return
quotations, the charge is converted into a per-dollar per-day charge based on
the average Variable Account Accumulation 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.
VARIABLE ANNUITY PAYMENTS
ANNUITY UNIT VALUE
The value of an Annuity Unit 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 "YOUR ACCUMULATION VALUE" in the
Prospectus.) The Annuity Unit value for each Subaccount's first valuation
period was set at $10. The Annuity Unit value for a Subaccount is calculated
for each subsequent Valuation Period by dividing (2) by (3), and then
multiplying the result by (1), where:
(1) is the Annuity Unit value for the immediately preceding Valuation
Period;
(2) is the Annuity Experience Factor for the current Valuation Period; and
(3) is a special factor designed to compensate for the Benchmark Rate of
Return of 3% or 5% built into the table used to compute the first
variable Annuity Payment.
For each Subaccount, the Annuity Experience Factor reflects the investment
experience of the Portfolio in which that Subaccount invests and the charges
assessed against that Subaccount for a Valuation Period. The Annuity Experience
Factor is calculated by dividing (1) by (2) and subtracting (3) from the result,
where:
(1) is the result of:
a. the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the current Valuation
Period; plus
b. the per share amount of any dividend or capital gains
distributions made by the Portfolio held in the Subaccount, if
the "ex-dividend" date occurs during the current Valuation
Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by Southland to have resulted from the operations of
the Subaccount.
(2) is the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the last prior Valuation Period.
(3) is a daily factor representing the mortality and expense risk charge
and the asset-based administrative charge deducted from the
Subaccount, adjusted for the number of days in the Valuation Period.
The following illustrations show, by use of hypothetical examples, the method of
determining the Annuity Unit value and the amount of several variable Annuity
Payments based on one Subaccount.
-5-
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
<S> <C>
1. Annuity unit value for immediately preceding <C>
Valuation Period 10.00000000
2. Annuity Experience Factor 1.00036164
3. Daily factor to compensate for Benchmark Rate of
Return of 3% 1.00008099
4. Adjusted Annuity Experience Factor (2)/(3) 1.00028063
5. Annuity unit value for current Valuation Period
(4)x(1) 10.00280630
</TABLE>
<TABLE>
<CAPTION>
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
(assuming no premium tax is applicable)
<S> <C>
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit Value 12.55548000
3. Adjusted contract value (1)x(2) $12,555.48
4. First monthly annuity payment per $1,000 of
adjusted Contract Value $ 9.63
5. First monthly annuity payment (3)x(4)/1,000 $ 120.91
6. Annuity Unit Value 10.00280630
7. Number of annuity units (5)/(6) 12.08760785
8. Assume Annuity Unit value for second month
equal to 10.04000000
9. Second Monthly Annuity Payment (7)X(8) $ 121.36
10. Assume Annuity Unit value for third month
equal to 10.05000000
11. Third Monthly Annuity Payment (7)X(10) $ 121.48
</TABLE>
VALUATION DAYS
As defined in the prospectus, for each Subaccount a Valuation Day is a day on
which both the NYSE and Southland's Customer Service Center are open for
business, except for a day that a Subaccount's corresponding Portfolio does not
value its shares. During 1997, the only date on which the NYSE is open but
Southland's Customer Service Center is closed is November 28th. Therefore,
November 28th will not be a Valuation Day in 1997.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares to
the Variable Account contain varying provisions regarding termination. The
following generally summarizes those provisions:
THE ALGER AMERICAN FUND
This agreement provides for termination: (1) on six months' advance written
notice by any party; (2) at Southland's option if shares of any Portfolio are
not reasonably available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or federal
law; (3) at Southland's option upon the institution of formal proceedings
against the Fund by the SEC, NASD or other regulators; (4) at Southland's option
after having been notified by the Fund of any termination or proposed
termination of the Fund's investment advisory agreement with Fred Alger &
Company; (5) at Southland's option upon the Fund's breach of any material
provision of this agreement; (6) at the option of the Fund, upon a determination
(after 60 days notice) that
-6-
<PAGE>
Southland has suffered a material adverse change in its business, operations,
financial condition or prospects or is the subject of material adverse
publicity; (7) at Southland's option upon a determination (after 60 days notice)
that the Fund is the subject of material adverse publicity; (8) at the Fund's
option upon the institution of formal proceedings against Southland by the SEC,
NASD or other regulators; (9) at the Fund's option if the Contracts cease to
qualify as annuity contracts or endowment contracts under the Code (or if the
Fund reasonably believes that the Contracts may cease to so qualify) or if the
Contracts are not registered, issued or sold in accordance with state and/or
federal law; (10) at the Fund's option upon a reasonable determination by its
board of directors that it is no longer advisable or in the shareholders' best
interests to continue to operate under this agreement; (11) at the Fund's option
upon Southland's breach of any material provision of this agreement; (12) at
Southland's option or the Fund's option upon a determination by either that a
material irreconcilable conflict exists between the interests of Owners and
other investors in the Fund or between Southland's interests and the interests
of other insurance companies invested in the Fund; or (13) upon a requisite vote
of Owners to substitute shares of another fund for the Fund.
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II
These agreements provide for termination: (1) on six months' advance written
notice by any party; (2) at Southland's option if shares of any Portfolio are
not reasonably available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or federal
law; (3) at Southland's option if any Portfolio ceases to be qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code
(the "Code"); (4) at Southland's option if any Portfolio fails to meet certain
diversification requirements of the Code; (5) at the option of the Fund or
Fidelity Distributors Corporation (the "Underwriter") upon a determination that
Southland (or any of its affiliates) has suffered a material adverse change in
its business, operations, financial condition or prospects or is the subject of
material adverse publicity; (6) at Southland's option upon a determination that
either the Fund or the Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects or is the subject of
material adverse publicity; or (7) at the Fund's option or the Underwriter's
option if Southland provides written notice of its intent to use another
investment company as a funding vehicle for the Contracts.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
This agreement provides for termination: (1) on twelve months advance written
notice by any party; (2) at Southland's option if shares of any Portfolio are
not reasonably available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or federal
law; (3) at Southland's option if any Portfolio ceases to be qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code
(the "Code"); (4) at Southland's option if any Portfolio fails to meet certain
diversification requirements of the Code; (5) at Southland's option, upon its
determination (after 60 days notice) that the Fund or INVESCO has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (6) at Southland's
option upon the institution of formal proceedings against the Fund by the SEC,
NASD or other regulators; (7) at the Fund's option upon the institution of
formal proceedings against Southland by the SEC, NASD or other regulators; (8)
at the option of the Fund or INVESCO if either determines (after 60 days notice)
that Southland has suffered a material adverse change in its business,
operations, financial condition or prospects or is the subject of material
adverse publicity; (9) at the Fund's or INVESCO's option if Southland provides
written notice of its intent to use another investment company as a funding
vehicle for the Contracts; or (10) upon a requisite vote of Owners to substitute
shares of another fund for the Fund.
JANUS ASPEN SERIES
This agreement provides for termination: (1) on six months advance written
notice by any party; (2) at Southland's option if shares of any Portfolio are
not reasonably available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or federal
law; (3) at Southland's option, upon its determination (after 60 days notice)
that the Fund has suffered a material adverse change in its business,
-7-
<PAGE>
operations, financial condition or prospects or is the subject of material
adverse publicity; (4) at Southland's option upon the institution of formal
proceedings against the Fund by the SEC, NASD or other regulators; (5) at the
Fund's option upon the institution of formal proceedings against Southland by
the SEC, NASD or other regulators; (6) at the option of the Fund if it
determines (after 60 days notice) that Southland has suffered a material adverse
change in its business, operations, financial condition or prospects or is the
subject of material adverse publicity; (7) at the Fund's option if the Contracts
cease to qualify as annuity contracts under the Code or if the Contracts are not
registered, issued or sold in accordance with state and/or federal law; (8) at
the option of either the Fund or Southland upon the breach by the other of any
material provision of this agreement; or (9) by Southland or the Fund upon a
determination by either that a material irreconcilable conflict exists between
the interests of Owners and other investors in the Fund or interests of
Southland and other insurance companies invested in the Fund.
IRA INCOME PROGRAM
If you have an IRA Contract, we will provide payment of amounts required to be
distributed by the Internal Revenue Service, unless the minimum distributions
are otherwise satisfied. Southland notifies the Owner of the current IRA
regulations in the IRA Disclosure Statement, which you will receive during the
application process.
We will determine the amount that is required to be distributed from your
Contract each year based on the information you give us and various choices you
make. The Owner specifies whether the withdrawal amount will be based on a life
expectancy calculated on a single life basis (Owner's life only) or, if the
Owner is married, on a joint life basis (Owner's and spouse's life combined).
If the Systematic Withdrawal Program is in effect at the same time as the IRA
Income Program, additional distributions, if required, will be made at the same
time as the Systematic Withdrawal Program distributions. Otherwise, minimum
distributions will occur when required. The minimum dollar amount of each
distribution is $100. At any time while minimum distributions are being made,
if your Cash Surrender Value falls below $2,000, we will cancel the Contract and
send you the amount of the Cash Surrender Value.
Southland calculates a required distribution amount each year based on the
Code's minimum distribution rules. We do this by dividing the Accumulation Value
by the life expectancy. In the first year that distributions begin, we use the
Accumulation Value, less taxes incurred but not deducted, as of the date of the
first payment. Thereafter, we use the Accumulation Value as of December 31st of
the prior year. The life expectancy is recalculated each year. If payments
under an Annuity Payment Option selected by the Owner are less than the minimum
distribution, we will increase the payments to this amount in order to avoid the
penalty tax applied to distributions which are less than the minimum required by
the Code. Special minimum distribution rules govern payments if the Beneficiary
is other than the Owner's spouse and the Beneficiary is more than ten years
younger than the Owner.
LEGAL MATTERS
All matters relating to Texas law pertaining to the Contracts, including the
validity of the Contracts and Southland's authority to issue the Contracts, have
been passed upon by B. Scott Burton, Esquire, Vice President -Law, and Secretary
of Southland. Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has
provided advice on certain matters relating to the federal securities laws.
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
-8-
<PAGE>
Information. Statements contained in this Statement of Additional Information
concerning the content of the Contracts and other legal instruments are
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the SEC.
EXPERTS
The financial statements of Southland Life Insurance Company at December 31,
1996 and 1995, and for each of the three years in the period ended December 31,
1996, as well as the financial statements of Southland Separate Account A1 at
December 31, 1996, and for the period from September 11, 1996 through December
31, 1996, appearing in this Statement of Additional Information and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
The audited financial statements of Southland Separate Account A1 at December
31, 1996, and for the period from September 11, 1996 through December 31, 1996,
are included in this Statement of Additional Information.
The audited financial statements of Southland Life Insurance Company at December
31, 1996 and 1995, and for each of the three years in the period ended December
31, 1996, which are included in this Statement of Additional Information, should
be considered only as bearing on Southland's ability to meet its obligations
under the Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Variable Account.
-9-
<PAGE>
Southland Separate Account A1
Financial Statements
Year ended December 31, 1996
CONTENTS
Report of Independent Auditors................... 2
Audited Financial Statements
Statement of Net Assets...................... 3
Statement of Operations...................... 8
Statement of Changes in Net Assets........... 13
Notes to Financial Statements................ 18
<PAGE>
Report of Independent Auditors
Board of Directors
Southland Life Insurance Company
We have audited the accompanying statement of net assets of Southland Separate
Account A1 as of December 31, 1996, and the related statements of operations and
changes in net assets for the period from September 11, 1996 to December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of December 31, 1996, by
correspondence with the transfer agents. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southland Separate Account A1
at December 31, 1996, and the results of its operations and changes in its net
assets for the period from September 11, 1996 to December 31, 1996, in
conformity with generally accepted accounting principles.
Atlanta, Georgia
April 11, 1997
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1996 TOTAL
ALL TOTAL TOTAL TOTAL TOTAL
DIVISIONS ALGER VIP & VIP II INVESCO JANUS ASPEN
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in mutual Portfolios at
market value (See Note C for
cost values) $424,883 $54,331 $165,582 $41,318 $163,652
-------------------------------------------------------
Total Assets $424,883 $54,331 $165,582 $41,318 $163,652
-------------------------------------------------------
LIABILITIES
Due to (from) Southland Life
Insurance Company $ 532 $ 79 $ 289 $ 32 $ 132
Total Liabilities $ 532 $ 79 $ 289 $ 32 $ 132
--------------------------------------------------------
Net Assets $424,351 $54,252 $165,293 $41,286 $163,520
========================================================
CONTRACT OWNER RESERVES
Reserves for redeemable annuity
contracts (See Note B) $424,351 $54,252 $165,293 $41,286 $163,520
--------------------------------------------------------
TOTAL CONTRACT OWNER RESERVES $424,351 $54,252 $165,293 $41,286 $163,520
========================================================
See accompanying notes.
</TABLE>
3
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) ALGER
DECEMBER 31, 1996
AMERICAN AMERICAN AMERICAN
TOTAL SMALL MIDCAP AMERICAN LEVERAGED
ALGER CAPITALIZATION GROWTH GROWTH ALLCAP
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in mutual Portfolios at
market value (See note C for
cost values) $54,331 $ 6,438 $ 35,674 $ 7,238 $ 4,981
---------------------------------------------------------
Total Assets $54,331 $ 6,438 $ 35,674 $ 7,238 $ 4,981
---------------------------------------------------------
LIABILITIES
Due to (from) Southland Life
Insurance Company $ 79 $ 7 $ 42 $ 8 $ 22
---------------------------------------------------------
Total Liabilities $ 79 $ 7 $ 42 $ 8 $ 22
---------------------------------------------------------
Net Assets $54,252 $ 6,431 $ 35,632 $ 7,230 $ 4,959
=========================================================
CONTRACT OWNER RESERVES
Reserves for redeemable annuity
contracts (See Note B) $54,252 $ 6,431 $ 35,632 $ 7,230 $ 4,959
---------------------------------------------------------
TOTAL CONTRACT OWNER RESERVES $54,252 $ 6,431 $ 35,632 $ 7,230 $ 4,959
=========================================================
Number of division units outstanding
(See Note F) 648.89 3,470.95 680.29 471.80
================================================
Net value per subaccount unit $ 9.91 $ 10.27 $ 10.63 $ 10.51
================================================
See accompanying notes.
</TABLE>
4
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) VIP & VIP II
DECEMBER 31, 1996
TOTAL MONEY EQUITY- HIGH INVESTMENT
VIP & VIP II GROWTH MARKET INDEX 500 INCOME INCOME CONTRAFUND GRADE BOND
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in mutual Portfolios at
market value (See Note C for
cost values) $165,582 $ 17,929 $ 96,164 $ 4,917 $ 22,256 $ 6,546 $ 5,270 $ 12,500
-------------------------------------------------------------------------------------------
Total Assets $165,582 $ 17,929 $ 96,164 $ 4,917 $ 22,256 $ 6,546 $ 5,270 $ 12,500
-------------------------------------------------------------------------------------------
LIABILITIES
Due to (from) Southland Life
Insurance Company $ 289 $ 4 $ 257 - $ 10 $ 1 $ 6 $ 11
-------------------------------------------------------------------------------------------
Total Liabilities $ 289 $ 4 $ 257 - $ 10 $ 1 $ 6 $ 11
-------------------------------------------------------------------------------------------
Net Assets $165,293 $ 17,925 $ 95,907 $ 4,917 $ 22,246 $ 6,545 $ 5,264 $ 12,489
CONTRACT OWNER RESERVES
Reserves for redeemable annuity
contracts (See Note B) $165,293 $ 17,925 $ 95,907 $ 4,917 $ 22,246 $ 6,545 $ 5,264 $ 12,489
-------------------------------------------------------------------------------------------
TOTAL CONTRACT OWNER RESERVES $165,293 $ 17,925 $ 95,907 $ 4,917 $ 22,246 $ 6,545 $ 5,264 $ 12,489
===========================================================================================
Number of division units outstanding
(See Note F) 1,678.94 9,327.36 432.39 2,078.52 603.22 461.87 1,201.26
=============================================================================
Net value per subaccount unit $ 10.68 $ 10.28 $ 11.37 $ 10.70 $ 10.85 $ 11.40 $ 10.40
=============================================================================
See accompanying notes.
</TABLE>
5
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) INVESCO
DECEMBER 31, 1996
TOTAL INDUSTRIAL
INVESCO INCOME
----------------------------
<S> <C> <C>
ASSETS
Investments in mutual Portfolios at
market value (See Note C for
cost values) $41,318 $ 41,318
----------------------------
Total Assets $41,318 $ 41,318
----------------------------
LIABILITIES
Due to (from) Southland Life
Insurance Company $ 32 $ 32
----------------------------
Total Liabilities $ 32 $ 32
----------------------------
Net Assets $41,286 $ 41,286
CONTRACT OWNER RESERVES
Reserves for redeemable annuity
contracts (See Note B) $41,286 $ 41,286
----------------------------
TOTAL CONTRACT OWNER RESERVES $41,286 $ 41,286
============================
Number of division units outstanding
(See Note F) 3,548.07
===============
Net value per subaccount unit $ 11.64
===============
See accompanying notes.
</TABLE>
6
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996 JANUS ASPEN
TOTAL AGGRESSIVE WORLDWIDE INTERNATIONAL SHORT-TERM
JANUS ASPEN GROWTH GROWTH GROWTH GROWTH BALANCED BOND
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in mutual Portfolios at
market value (See Note C for
cost values) $163,652 $ 35,230 $ 24,860 $10,457 $ 4,079 $ 58,405 $ 30,621
-------------------------------------------------------------------------------------
Total Assets $163,652 $ 35,230 $ 24,860 $10,457 $ 4,079 $ 58,405 $ 30,621
-------------------------------------------------------------------------------------
LIABILITIES
Due to (from) Southland Life
Insurance Company $ 132 $ 22 $ 21 $ 5 $ 5 $ 55 $ 24
-------------------------------------------------------------------------------------
Total Liabilities $ 132 $ 22 $ 21 $ 5 $ 5 $ 55 $ 24
-------------------------------------------------------------------------------------
Net Assets $163,520 $ 35,208 $ 24,839 $10,452 $ 4,074 $ 58,350 $ 30,597
CONTRACT OWNER RESERVES
Reserves for redeemable annuity
contracts (See Note B) $163,520 $ 35,208 $ 24,839 $10,452 $ 4,074 $ 58,350 $ 30,597
-------------------------------------------------------------------------------------
TOTAL CONTRACT OWNER RESERVES $163,520 $ 35,208 $ 24,839 $10,452 $ 4,074 $ 58,350 $ 30,597
=====================================================================================
Number of division units outstanding
(See Note F) 3,290.04 2,561.68 895.32 336.05 5,301.79 2,967.17
========================================================================
Net value per subaccount unit $ 10.70 $ 9.70 $ 11.67 $ 12.13 $ 11.01 $ 10.31
========================================================================
See accompanying notes.
</TABLE>
7
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 11,
1996 TO DECEMBER 31, 1996 TOTAL
ALL TOTAL TOTAL TOTAL TOTAL
DIVISIONS ALGER VIP & VIP II INVESCO JANUS ASPEN
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends from mutual Portfolios $ 4,842 $ - $1,006 $ 2,827 $1,009
Less: Valuation period deductions
(See Note B) 718 126 334 46 212
----------------------------------------------------------
Net Investment Income 4,124 (126) 672 2,781 797
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains on investments 278 269 - 1 8
Net unrealized gains (losses) on
investments (1,984) 236 (225) (2,391) 396
----------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments (1,706) 505 (225) (2,390) 404
----------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 2,418 $ 379 $ 447 $ 391 $1,201
==========================================================
See accompanying notes.
</TABLE>
8
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (CONTINUED) ALGER
FOR THE PERIOD FROM SEPTEMBER 11, 1996
TO DECEMBER 31, 1996
AMERICAN AMERICAN AMERICAN
TOTAL SMALL MIDCAP AMERICAN LEVERAGED
ALGER CAPITALIZATION GROWTH GROWTH ALLCAP
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends from mutual Portfolios $ - $ - $ - $ - $ -
Less: Valuation period deductions
(See Note B) 126 8 66 9 43
----------------------------------------------------------
Net Investment Income (126) (8) (66) (9) (43)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains on investments 269 - 1 - 268
Net unrealized gains (losses) on
investments 236 (42) 426 (107) (41)
----------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments 505 (42) 427 (107) 227
----------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 379 $(50) $361 $(116) $184
==========================================================
See accompanying notes.
</TABLE>
9
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (CONTINUED) VIP & VIP II
FOR THE PERIOD FROM SEPTEMBER 11, 1996
TO DECEMBER 31, 1996
TOTAL MONEY EQUITY- HIGH INVESTMENT
VIP & VIP II GROWTH MARKET INDEX 500 INCOME INCOME CONTRAFUND GRADE BOND
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends from mutual Portfolios $1,006 $ - $1,006 $ - $ - $ - $ - $ -
Less: Valuation period deductions
(See Note B) 334 6 288 - 12 1 9 18
----------------------------------------------------------------------------------------
Net Investment Income 672 (6) 718 - (12) (1) (9) (18)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains on investments - - - - - - - -
Net unrealized gains (losses) on
investments (225) (145) - (83) (131) 27 100 7
----------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments (225) (145) - (83) (131) 27 100 7
----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 447 $(151) $ 718 $(83) $(143) $26 $ 91 $(11)
========================================================================================
See accompanying notes. $
</TABLE>
10
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE PERIOD FROM SEPTEMBER 11, INVESCO
1996 TO DECEMBER 31, 1996
TOTAL INDUSTRIAL
INVESCO INCOME
-------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends from mutual Portfolios $ 2,827 $ 2,827
Less: Valuation period deductions
(See Note B) 46 46
-------------------------------
Net Investment Income 2,781 2,781
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains on investments 1 1
Net unrealized gains (losses) on
investments (2,391) (2,391)
-------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments (2,390) (2,390)
-------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 391 $ 391
===============================
See accompanying notes.
</TABLE>
11
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE PERIOD FROM SEPTEMBER 11, JANUS ASPEN
1996 TO DECEMBER 31, 1996
TOTAL AGGRESSIVE WORLDWIDE INTERNATIONAL SHORT-TERM
JANUS ASPEN GROWTH GROWTH GROWTH GROWTH BALANCED BOND
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends from mutual portfolios $1,009 $ 98 $ - $ 37 $10 $386 $ 478
Less: Valuation period deductions
(See Note B) 212 36 34 10 5 90 37
----------------------------------------------------------------------------------
Net Investment Income 797 62 (34) 27 5 296 441
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains on investments 8 - - - - 1 7
Net unrealized gains (losses) on
investments 396 146 (126) 136 91 552 (403)
----------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments 404 146 (126) 136 91 553 (396)
----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $1,201 $208 $(160) $163 $96 $849 $ 45
==================================================================================
See accompanying notes.
</TABLE>
12
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM SEPTEMBER 11, TOTAL
1996 TO DECEMBER 31, 1996 ALL TOTAL TOTAL TOTAL TOTAL
DIVISIONS ALGER VIP & VIP II INVESCO JANUS ASPEN
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 4,124 $ (126) $ 672 $ 2,781 $ 797
Net realized gains (losses) on
investments 278 269 - 1 8
Net unrealized gains (losses) on
investments (1,984) 236 (225) (2,391) 396
-------------------------------------------------------------
Increase (Decrease) in Net Assets
from Operations 2,418 379 447 391 1,201
CHANGES FROM PRINCIPAL
TRANSACTIONS
Contract purchase payments 421,881 64,900 253,781 15,000 88,200
Net transfers among divisions
(including the guaranteed interest
account in the general account) 52 (11,027) (88,935) 25,895 74,119
-------------------------------------------------------------
Increase (Decrease) from Principal
Transactions 421,993 53,873 164,846 40,895 162,319
Total Increase (Decrease) in Net
Assets 424,351 54,252 165,293 41,286 163,520
Net Assets at Beginning of Year - - - - -
-------------------------------------------------------------
Net Assets at End of Year $424,351 $ 54,252 $165,293 $41,286 $163,520
=============================================================
See accompanying notes.
</TABLE>
13
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) ALGER
FOR THE PERIOD FROM SEPTEMBER 11,
1996 TO DECEMBER 31, 1996 AMERICAN AMERICAN AMERICAN
TOTAL SMALL MIDCAP AMERICAN LEVERAGED
ALGER CAPITALIZATION GROWTH GROWTH ALLCAP
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ (126) $ (8) $ (66) $ (9) $ (43)
Net realized gains (losses) on
investments 269 - 1 - 268
Net unrealized gains (losses) on
investments 236 (42) 426 (107) (41)
-------------------------------------------------------------
Increase (Decrease) in Net Assets
from Operations 379 (50) 361 (116) 184
CHANGES FROM PRINCIPAL
TRANSACTIONS
Contract purchase payments 64,900 6,300 29,100 7,000 22,500
Net transfers among divisions
(including the guaranteed interest
account in the general account) (11,027) 181 6,171 346 (17,725)
-------------------------------------------------------------
Increase (Decrease) from Principal
Transactions 53,873 6,481 35,271 7,346 4,775
Total Increase (Decrease) in Net
Assets 54,252 6,431 35,632 7,230 4,959
Net Assets at Beginning of Year - - - - -
-------------------------------------------------------------
Net Assets at End of Year $ 54,252 $6,431 $35,632 $7,230 $ 4,959
=============================================================
See accompanying notes.
</TABLE>
14
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE PERIOD FROM SEPTEMBER 11, VIP & VIP II
1996 TO DECEMBER 31, 1996
TOTAL MONEY EQUITY- HIGH INVESTMENT
VIP & VIP II GROWTH MARKET INDEX 500 INCOME INCOME CONTRAFUND GRADE BOND
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 672 $ (6) $ 718 $ - $ (12) $ (1) $ (9) $ (18)
Net realized gains (losses) on
investments - - - - - - - -
Net unrealized gains (losses) on
investments (225) (145) - (83) (131) 27 100 7
---------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
from Operations 447 (151) 718 (83) (143) 26 91 (11)
CHANGES FROM PRINCIPAL
TRANSACTIONS
Contract purchase payments 253,781 2,325 233,631 - 6,250 - 4,075 7,500
Net transfers among divisions
(including the guaranteed interest
account in the general account) (88,935) 15,751 (138,442) 5,000 16,139 6,519 1,098 5,000
---------------------------------------------------------------------------------------
Increase (Decrease) from Principal
Transactions 164,846 18,076 95,189 5,000 22,389 6,519 5,173 12,500
Total Increase (Decrease) in Net
Assets 165,293 17,925 95,907 4,917 22,246 6,545 5,264 12,489
Net Assets at Beginning of Year - - - - - - - -
---------------------------------------------------------------------------------------
Net Assets at End of Year $165,293 $17,925 $ 95,907 $4,917 $22,246 $6,545 $5,264 $12,489
=======================================================================================
See accompanying notes.
</TABLE>
15
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) INVESCO
FOR THE PERIOD FROM SEPTEMBER 11,
1996 TO DECEMBER 31, 1996 TOTAL INDUSTRIAL
INVESCO INCOME
----------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 2,781 $ 2,781
Net realized gains (losses) on
investments 1 1
Net unrealized gains (losses) on
investments (2,391) (2,391)
----------------------
Increase (Decrease) in Net Assets
from Operations 391 391
CHANGES FROM PRINCIPAL
TRANSACTIONS
Contract purchase payments 15,000 15,000
Net transfers among divisions
(including the guaranteed interest
account in the general account) 25,895 25,895
----------------------
Increase (Decrease) from Principal
Transactions 40,895 40,895
Total Increase (Decrease) in Net
Assets 41,286 41,286
Net Assets at Beginning of Year - -
----------------------
Net Assets at End of Year $41,286 $41,286
======================
See accompanying notes.
</TABLE>
16
<PAGE>
Southland Separate Account A1
<TABLE>
<CAPTION>
STATEMENT OF CHANGES NET ASSETS (CONTINUED)
FOR THE PERIOD FROM SEPTEMBER 11, JANUS ASPEN
DECEMBER 31, 1996
TOTAL AGGRESSIVE WORLDWIDE INTERNATIONAL SHORT-TERM
JANUS ASPEN GROWTH GROWTH GROWTH GROWTH BALANCED BOND
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 797 $ 62 $ (34) $ 27 $ 5 $ 296 $ 441
Net realized gains (losses) on
investments 8 - - - - 1 7
Net unrealized gains (losses) on
investments 396 146 (126) 136 91 552 (403)
-----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
from Operations 1,201 208 (160) 163 96 849 45
CHANGES FROM PRINCIPAL
TRANSACTIONS
Contract purchase payments 88,200 15,000 15,000 1,850 3,850 37,500 15,000
Net transfers among divisions
(including the guaranteed interest
account in the general account) 74,119 20,000 9,999 8,439 128 20,001 15,552
-----------------------------------------------------------------------------------
Increase (Decrease) from Principal
Transactions 162,319 35,000 24,999 10,289 3,978 57,501 30,552
Total Increase (Decrease) in Net
Assets 163,520 35,208 24,839 10,452 4,074 58,350 30,597
Net Assets at Beginning of Year - - - - - - -
-----------------------------------------------------------------------------------
Net Assets at End of Year $163,520 $35,208 $24,839 $10,452 $4,074 $58,350 $30,597
===================================================================================
See accompanying notes.
</TABLE>
17
<PAGE>
Southland Separate Account A1
Notes to Financial Statements
December 31, 1996
NOTE A. ORGANIZATION
The Southland Separate Account A1 (the Separate Account) was established by
resolution of the Board of Directors of Southland Life Insurance Company (the
Company) on February 25, 1994. The Separate Account was inactive prior to
September 11, 1996, except for matters relating to its organization as a unit
investment trust registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended.
The Separate Account supports the operations of the Future Dimensions Variable
Annuity (Future Dimensions) contracts offered by the Company. The Separate
Account may be used to support other variable annuity contracts as they are
offered by the Company. The assets of the Separate Account are the property of
the Company. However, the portion of the Separate Account's assets attributable
to the contracts will not be chargeable with liabilities arising out of any
other operations of the Company.
The Separate Account currently consists of twenty-one subaccounts available to
the contractholders, each of which invests in an independently managed mutual
fund portfolio (Portfolio). The Portfolios are as follows:
The Alger American Fund
Alger American Small Capitalization Portfolio
Alger American MidCap Growth Portfolio
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Variable Insurance Products (VIP & VIP II) Funds
VIP Growth Portfolio
VIP Overseas Portfolio
VIP Money Market Portfolio
VIP Equity-Income Portfolio
VIP High Income Portfolio
VIP II Asset Manager Portfolio
VIP II Index 500 Portfolio
VIP II Contrafund Portfolio
VIP II Investment Grade Bond Portfolio
18
<PAGE>
Southland Life Separate Account A1
Notes to Financial Statements
NOTE A. ORGANIZATION (CONTINUED)
INVESCO Variable Investment Funds, Inc.
Industrial Income Portfolio
Utilities Portfolio
Janus Aspen Series
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
International Growth Portfolio
Balanced Portfolio
Short-Term Bond Portfolio
The Future Dimensions contracts allow the contractholders to specify the
allocation of their purchase payments to the various Portfolios. They can also
transfer their account values among the Portfolios. The Future Dimensions
product also provides the contractholders the option to allocate their purchase
payments, or to transfer their account values, to a Guaranteed Interest Account
(GIA). The GIA guarantees a rate of interest to the contractholder, and it is
not variable in nature. Therefore, it is not included in the Separate Account
financial statements.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Separate Account have been prepared
on the basis of generally accepted accounting principles (GAAP). The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and to disclose contingent
assets and liabilities at the date of financial statements along with the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The accounting principles followed by the Separate Account and the methods of
applying those principles are presented below or in the footnotes which follow:
19
<PAGE>
Southland Separate Account A1
Notes to Financial Statements
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITY VALUATION - The investment in shares of the Portfolios are valued at
the closing net asset value (market value) per share as determined by the
Portfolios on the day of measurement.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - The investments in shares
of the Portfolios are accounted for on the date the order to buy or sell is
executed (trade date). Dividend income and distributions of capital gains are
recorded on the ex-dividend date. Realized gains and losses from security
transactions are reported using the first-in-first-out (FIFO) method of
accounting for cost. The difference between cost and current market value of
investments owned on the day of measurement is recorded as unrealized gain or
loss on investment.
VALUATION PERIOD DEDUCTIONS - Charges are made directly against the assets of
the Separate Account subaccounts and are reflected daily in the computation of
the unit values of the subaccounts.
For Future Dimensions contracts, a daily deduction, at an annual rate of 1.37%
of the daily asset value of the Separate Account subaccounts is charged to the
Separate Account for mortality and expense risks assumed by the Company. Total
mortality and expense charges for the period from September 11, 1996 to December
31, 1996 were $649.
Future Dimensions contracts are subject to a daily deduction, at an annual rate
of .15% of the daily asset value of the Separate Account subaccounts, for an
asset based administrative charge to compensate the Company for a portion of the
administrative expenses under the contract. Total asset based administrative
charges for the period from September 11, 1996 to December 31, 1996 were $69.
ANNUITY RESERVES - None of the Future Dimensions contracts in the Separate
Account have reached the annuity date. Prior to the annuity date, the
contracts are redeemable for the net cash surrender value of the contracts.
The annuity reserves are recorded in the financial statements at the aggregate
account values of the contractholders invested in the Separate Account
subaccounts. To the extent that benefits to be paid to the contractholders
exceed their account values, the Company will contribute additional funds to the
benefit proceeds.
20
<PAGE>
Southland Separate Account A1
Notes to Financial Statements
NOTE C. INVESTMENTS
Portfolio shares are purchased at net asset value with proceeds from contract
purchase payments and subaccount transfers. Portfolio shares are redeemed at net
asset value for the payment of benefits, for surrenders, for transfers to other
divisions, and for payment of certain administrative charges of the Company.
Distributions made by the Portfolios are reinvested in the Portfolios.
The following is a summary of Portfolio shares owned as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER NET ASSET VALUE
OF VALUE OF SHARES COST OF
PORTFOLIO SHARES AT MARKET AT MARKET SHARES
-------------------------------------------
<S> <C> <C> <C> <C>
The Alger American Fund:
American Small Capitalization 157.38 $40.91 $ 6,438 $ 6,480
American MidCap Growth 1,670.92 21.35 35,674 35,248
American Growth 210.83 34.33 7,238 7,345
American Leveraged AllCap 257.28 19.36 4,981 5,022
Variable Insurance Products (VIP & VIP
II) Funds:
VIP Growth 575.75 31.14 17,929 18,074
VIP Money Market 96,164.23 1.00 96,164 96,164
VIP Equity-Income 1,058.32 21.03 22,256 22,387
VIP High Income 522.81 12.52 6,546 6,519
VIP II Index 500 55.17 89.13 4,917 5,000
VIP II Contrafund 318.26 16.56 5,270 5,170
VIP II Investment Grade Bond 1,021.20 12.24 12,500 12,493
INVESCO Variable Investment Funds, Inc.:
Industrial Income 2,883.35 14.33 41,318 43,709
Janus Aspen Series:
Growth 2,271.43 15.51 35,230 35,084
Aggressive Growth 1,362.95 18.24 24,860 24,986
Worldwide Growth 537.90 19.44 10,457 10,321
International Growth 259.45 15.72 4,079 3,988
Balanced 3,954.30 14.77 58,405 57,853
Short-Term Bond 3,071.31 9.97 30,621 31,024
---------------------
Total $424,883 $426,867
=====================
</TABLE>
21
<PAGE>
Southland Separate Account A1
Notes to Financial Statements
NOTE C. INVESTMENTS (CONTINUED)
For the period from September 11, 1996 to December 31, 1996, the cost of
purchases (plus reinvested dividends) and the proceeds from sales of investments
are as follows:
<TABLE>
<CAPTION>
BEGINNING END
PORTFOLIO OF PERIOD PURCHASES SALES OF PERIOD
---------------------------------------------
<S> <C> <C> <C> <C>
The Alger American Fund:
American Small Capitalization $ - $ 6,480 $ - $ 6,480
American MidCap Growth - 35,248 - 35,248
American Growth - 7,352 (7) 7,345
American Leveraged AllCap - 22,500 (17,478) 5,022
Variable Insurance Products (VIP & VIP
II) Funds:
VIP Growth - 18,076 (2) 18,074
VIP Money Market - 234,650 (138,486) 96,164
VIP Equity-Income - 22,395 (8) 22,387
VIP High Income - 6,519 - 6,519
VIP II Index 500 - 5,000 - 5,000
VIP II Contrafund - 5,173 (3) 5,170
VIP II Investment Grade Bond - 12,500 (7) 12,493
INVESCO Variable Investment Funds, Inc.:
Industrial Income - 43,723 (14) 43,709
Janus Aspen Series:
Growth - 35,098 (14) 35,084
Aggressive Growth - 25,000 (14) 24,986
Worldwide Growth - 10,325 (4) 10,321
International Growth - 3,988 - 3,988
Balanced - 57,886 (33) 57,853
Short-Term Bond - 31,864 (840) 31,024
---------------------------------------------
Total $ - $583,777 $(156,910) $426,867
=============================================
</TABLE>
NOTE D. OTHER CONTRACT DEDUCTIONS
The Future Dimensions contracts provide for certain deductions for surrender
charges, withdrawal transaction charges, annual administrative charges, excess
transfer charges and taxes on purchase payments from amounts paid to
contractholders. Such deductions are taken after the redemption of subaccount
units in the Separate Account and are not included in the Separate Account
financial statements.
22
<PAGE>
Southland Separate Account A1
Notes to Financial Statements
NOTE E. FEDERAL INCOME TAXES
The Separate Account is not taxed separately because the operations of the
Separate Account are part of the total operations of the Company. The Company
is taxed as a life insurance company under the Internal Revenue Code.
NOTE F. SUMMARY OF CHANGES IN UNITS
The following schedule summarizes the change in subaccount units for the period
from September 11, 1996 to December 31, 1996:
<TABLE>
<CAPTION>
(DECREASE)
INCREASE FOR
OUTSTANDING INCREASE (DECREASE) SURRENDERS OUTSTANDING
AT BEGINNING FOR PAYMENTS FOR DIVISIONAL AND AT END
SUBACCOUNT OF PERIOD RECEIVED TRANSFERS WITHDRAWALS OF PERIOD
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Alger American Fund:
American Small Capitalization - 634.37 14.52 - 648.89
American MidCap Growth - 2,869.65 601.30 - 3,470.95
American Growth - 647.81 32.48 - 680.29
American Leveraged AllCap - 2,142.42 (1,670.62) - 471.80
Variable Insurance Products (VIP &
VIP II) Funds:
VIP Growth - 212.74 1,466.20 - 1,678.94
VIP Money Market - 22,815.55 (13,488.19) - 9,327.36
VIP Equity-Income - 582.39 1,496.13 - 2,078.52
VIP High Income - 0.00 603.22 - 603.22
VIP II Index 500 - 0.00 432.39 - 432.39
VIP II Contrafund - 360.25 101.62 - 461.87
VIP II Investment Grade Bond - 722.69 478.57 - 1,201.26
INVESCO Variable Investment Funds,
Inc.:
Industrial Income - 1,332.23 2,215.84 - 3,548.07
Janus Aspen Series:
Growth - 1,429.59 1,860.45 - 3,290.04
Aggressive Growth - 1,518.39 1,043.29 - 2,561.68
Worldwide Growth - 158.86 736.46 - 895.32
International Growth - 324.68 11.37 - 336.05
Balanced - 3,485.88 1,815.91 - 5,301.79
Short-Term Bond - 1,461.34 1,505.83 - 2,967.17
</TABLE>
23
<PAGE>
Southland Separate Account A1
Notes to Financial Statements
NOTE G. NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
ACCUMULATED NET
NET REALIZED UNREALIZED
ACCUMULATED GAINS GAINS
PRINCIPAL INVESTMENT (LOSSES) ON (LOSSES) ON
SUBACCOUNT TRANSACTIONS INCOME INVESTMENTS INVESTMENTS NET ASSETS
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Alger American Fund:
American Small Capitalization
American MidCap Growth $ 6,481 $ (8) $ - $ (42) $ 6,431
American Growth 35,271 (66) 1 426 35,632
American Leveraged AllCap 7,346 (9) - (107) 7,230
4,775 (43) 268 (41) 4,959
Variable Insurance Products (VIP & VIP
II) Funds:
VIP Growth 18,076 (6) - (145) 17,925
VIP Money Market 95,189 718 - 0 95,907
VIP Equity-Income 22,389 (12) - (131) 22,246
VIP High Income 6,519 (1) - 27 6,545
VIP II Index 500 5,000 0 - (83) 4,917
VIP II Contrafund 5,173 (9) - 100 5,264
VIP II Investment Grade Bond 12,500 (18) - 7 12,489
INVESCO Variable Investment Funds, Inc.:
Industrial Income 40,895 2,781 1 (2,391) 41,286
Janus Aspen Series:
Growth 35,000 62 - 146 35,208
Aggressive Growth 24,999 (34) - (126) 24,839
Worldwide Growth 10,289 27 - 136 10,452
International Growth 3,978 5 - 91 4,074
Balanced 57,501 296 1 552 58,350
Short-Term bond 30,552 441 7 (403) 30,597
------------------------------------------------------------------
Total $421,933 $4,124 $278 $(1,984) $424,351
===================================================================
</TABLE>
24
<PAGE>
Financial Statements
Southland Life Insurance Company
Years ended December 31, 1996, 1995 and 1994
with Report of Independent Auditors
<PAGE>
Southland Life Insurance Company
Financial Statements
Years ended December 31, 1996, 1995 and 1994
CONTENTS
Report of Independent Auditors............................ l
Audited Financial Statements
Balance Sheets............................................ 2
Statements of Income...................................... 4
Statements of Stockholder's Equity........................ 5
Statements of Cash Flows.................................. 6
Notes to Financial Statements............................. 8
<PAGE>
Report of Independent Auditors
Board of Directors
Southland Life Insurance Company
We have audited the accompanying balance sheets of Southland Life Insurance
Company as of December 31, 1996 and 1995, and the related statements of income,
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southland Life Insurance
Company at December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1994 the Company changed
its method of accounting for investments in debt and equity securities.
Atlanta, Georgia
April 4, 1997
<PAGE>
Southland Life Insurance Company
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
----------------------------
<S> <C> <C>
(In Thousands)
ASSETS
Investments (Notes 1, 2, 3 and 4):
Fixed maturities:
Available-for-sale, at fair value
(amortized cost: 1996- $815,916;
1995- $793,055) $ 856,166 $ 871,637
Equity securities, at fair value (cost:
1996- $625; 1995 - $614) 816 764
Mortgage loans on real estate 351,958 300,671
Investment real estate, at cost, less
accumulated depreciation (1995 - $10) -- 190
Policy loans 82,140 80,164
Short-term investments 15,149 --
-------------------------
Total investments 1,306,229 1,253,426
Cash 7,907 1,268
Accrued investment income 17,309 15,951
Reinsurance recoverable:
Paid benefits 6,853 8,886
Unpaid benefits and IBNR 1,949 16,400
Prepaid reinsurance premiums 260,358 282,943
Deferred policy acquisition costs 171,453 145,431
Present value of future profits less
accumulated amortization (1996-
$179,657; 1995 - $163,605) 72,345 78,204
Goodwill less accumulated amortization
(1996 -$11,081; 1995 - $9,540) 49,380 50,921
Separate account assets (Note 13) 425 --
Federal taxes recoverable from related
party (Note 8) 50 --
Other assets 6,029 5,841
-------------------------
Total assets $1,900,287 $1,859,271
=========================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
----------------------------
(In Thousands,
Except Share Amounts)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits:
Life and annuity reserves $1,168,318 $1,052,649
Accident and health reserves 10,399 10,473
Guaranteed investment contracts 254,366 276,365
Policyholders' funds 2,998 2,890
Advance premiums 80 83
Accrued dividends and dividends on
deposit 771 764
Unpaid claims 17,410 30,383
---------------------------
Total future policy benefits 1,454,342 1,373,607
Accounts payable and accrued expenses 5,909 5,383
Indebtedness to related parties 9,395 5,939
Other liabilities 17,857 34,593
Separate account liabilities (Note 13) 425 --
Federal income taxes payable (Note 8):
Current -- 5,816
Deferred 42,206 55,236
---------------------------
Total liabilities 1,530,134 1,480,574
Stockholder's equity (Note 9):
Common stock, $3 par value:
Authorized-2,550,000 shares
Issued and outstanding-2,500,000 shares 7,500 7,500
Additional paid-in capital 246,906 246,906
Net unrealized investment gains (Note 1) 19,013 37,906
Retained earnings 96,734 86,385
---------------------------
Total stockholder's equity 370,153 378,697
---------------------------
Total liabilities and stockholder's
equity $1,900,287 $1,859,271
===========================
See accompanying notes.
</TABLE>
3
<PAGE>
Southland Life Insurance Company
Statements of Income
Year ended December 31
1996 1995 1994
------------------------------
(In Thousands)
Revenues:
Traditional life insurance premiums $ 43,379 $39,182 $36,116
Health insurance premiums 71,587 60,318 18,495
Universal life and investment product
charges 76,907 67,073 56,735
Reinsurance assumed 16 201 1,740
------------------------------
191,889 166,774 113,086
Reinsurance ceded premiums (68,663) (56,059) (17,501)
------------------------------
123,226 110,715 95,585
Net investment income 100,556 103,279 93,802
Net realized gains (losses) on
investments 9,585 2,880 (1,345)
Other revenues 13,391 11,437 2,148
------------------------------
Total revenues 246,758 228,311 190,190
Benefits and expenses:
Insurance claims and benefits
incurred:
Traditional life insurance:
Death benefits 27,756 24,305 24,124
Other benefits 20,543 21,661 21,830
Universal life and investment contracts:
Interest credited to account balances 38,051 31,465 25,181
Death benefit incurred in excess of
account balances 17,573 33,902 12,690
Health benefits 49,849 28,883 8,841
Increase in policy reserves and
other funds 5,344 94 3,757
Reinsurance recoveries (41,920) (39,883) (9,489)
------------------------------
117,196 100,427 86,934
Commissions 19,195 15,229 8,178
Insurance operating expenses (Note 11) 30,910 20,924 18,945
Amortization of goodwill 1,541 1,541 1,541
Amortization of present value of
future profits, net of
accrued interest 9,148 10,155 10,414
Amortization of deferred policy
acquisition costs 17,905 13,326 10,060
------------------------------
195,895 161,602 136,072
------------------------------
Income before federal income taxes 50,863 66,709 54,118
Federal income taxes (Note 8) 19,514 23,828 18,722
------------------------------
Net income $ 31,349 $ 42,881 $ 35,396
==============================
See accompanying notes.
4
<PAGE>
Southland Life Insurance Company
Statements of Stockholder's Equity
Year ended December 31
1996 1995 1994
--------------------------------
(In Thousands)
Common stock:
Balance at beginning and end of year $7,500 $7,500 $7,500
================================
Additional paid-in capital:
Balance at beginning of year $246,906 $366,536 $366,536
Return of capital to stockholder - (119,630) -
--------------------------------
Balance at end of year $246,906 $246,906 $366,536
================================
Net unrealized investment gains (losses)
on securities:
Balance at beginning of year $ 37,906 $ (8,874) $ (23)
Adjustment to beginning balance for
adoption of SFAS 115, net of
income taxes of $20,440
and effect on DPAC and PVFP of
$14,692 (net of income taxes
of $7,911) (Note 1) - - 23,268
Change in net unrealized investment
gains (losses), net of tax (24,889) 65,248 (52,010)
Effect on DPAC and PVFP of
unrealized gains (losses) on
fixed maturities, net of tax 5,996 (18,468) 19,891
--------------------------------
Balance at end of year $ 19,013 $ 37,906 $ (8,874)
================================
Retained earnings:
Balance at beginning of year $ 86,385 $ 58,239 $ 51,543
Net income 31,349 42,881 35,396
Dividends to stockholder (21,000) (14,735) (28,700)
--------------------------------
Balance at end of year $ 96,734 $ 86,385 $ 58,239
================================
Total stockholder's equity $370,153 $378,697 $423,401
================================
See accompanying notes.
5
<PAGE>
Southland Life Insurance Company
Statements of Cash Flows
Year ended December 31
1996 1995 1994
---------------------------------
(In Thousands)
Operating activities
Net income $ 31,349 $ 42,881 $ (5,682)
Adjustments to reconcile to net income
to net cash provided by operating
activities: 8,586 92,996 189,867
Increase in future policy benefits
Net (decrease) increase in federal
income taxes (18,896) 8,528 (5,682)
(Decrease) increase in accounts
payable and accrued expenses and
other liabilities (12,887) (3,404) 3,967
(Increase) decrease in accrued
investment income (1,358) 777 (2,092)
Net realized investment (gains)
losses (9,585) (2,880) 1,345
Decrease (increase) in reinsurance
recoverable 16,484 (22,484) 197
Decrease (increase) in prepaid
reinsurance premiums 22,585 (42,119) (161,654)
Depreciation and amortization
expense 10,681 11,708 12,001
Policy acquisition costs deferred (37,992) (41,581) (38,423)
Amortization of deferred policy
acquisition costs 17,905 13,326 10,060
Other, net 9,385 (1,057) (7,313)
---------------------------------
Net cash provided by operating
activities 36,257 56,691 37,669
Investing activities
Securities available-for-sale:
Sales:
Fixed maturities 116,988 118,212 34,553
Equity securities 25 1,105 50,485
Maturities - fixed maturities 82,646 36,740 38,925
Purchases:
Fixed maturities (215,464) (201,698) (143,013)
Equity securities (35) (186) (43,685)
Securities held-to-maturity:
Maturities - fixed maturities - 19,202 40,114
Purchases - fixed maturities - - (43,000)
Sale, maturity or repayment of
investments:
Mortgage loans on real estate 20,115 16,613 22,069
Investment real estate 150 450 3,068
Other long-term investments - - 250
6
<PAGE>
Southland Life Insurance Company
Statements of Cash Flows (continued)
Year ended December 31
1996 1995 1994
---------------------------------
(In Thousands)
Investing activities (continued)
Purchase or issuance of investments:
Mortgage loans on real estate (71,512) (85,580) (76,403)
Investment real estate (11) - (462)
Policy loans, net (1,976) (727) 2,812
Short-term investments, net (15,149) - 14,600
Additions to property and equipment - (62) (9)
Disposal of property and equipment - 780 206
---------------------------------
Net cash used by investing activities (84,223) (95,151) (99,490)
Financing activities
Increase (decrease) in indebtedness
to related parties 3,456 (5,261) 3,968
Receipts from interest sensitive
products credited to policyholder
account balances 97,400 101,462 81,927
Return of policyholder account
balances on interest sensitive
policies (25,251) (25,244) (16,305)
Return of capital and dividends paid
to stockholder (21,000) (42,060) (23,700)
---------------------------------
Net cash provided by financing
activities 54,605 28,897 45,890
---------------------------------
Net increase (decrease) in cash 6,639 (9,563) (15,931)
Cash at beginning of year 1,268 10,831 26,762
---------------------------------
Cash at end of year $ 7,907 $ 1,268 $ 10,831
=================================
Significant Noncash Transactions
During 1995, the Company transferred fixed maturity securities having a fair
value plus accrued interest of $92,305,000 and $27,325,000 of cash to the parent
company as a return of capital. This transaction was approved by state
regulatory authorities and is reflected in the accompanying statement of
stockholder's equity as a reduction to additional paid-in capital and unrealized
investment gains on securities. The gain on securities transferred of $4,549,000
and $7,447,000 at December 31, 1996 and 1995, respectively, was deferred and is
included in other liabilities until such time as the securities are sold to an
unrelated party.
Held-to-maturity fixed maturity securities having an amortized cost value of
$182,430,000 and a fair value of $199,206,000 were transferred to the available-
for-sale category on December 26, 1995.
The Company declared a $5,000,000 dividend to its parent company during 1994
which was unpaid as of December 31, 1994 and was presented as indebtedness to
related parties in the accompanying balance sheet. The dividend was paid in cash
by the Company in January 1995.
See accompanying notes.
7
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Southland Life Insurance Company (the Company) is a wholly-owned subsidiary of
Internationale Nederlanden Groep America Life Corporation (America Life), an
indirect, wholly-owned subsidiary of Internationale Nederlanden Groep.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NATURE OF OPERATIONS
The Company's market focus is on the middle-income consumer. The life insurance
products offered address retirement accumulation, wealth transfer and estate
planning, and death protection needs. Products include universal life,
survivorship and traditional life. The Company also provides stop-loss coverage
on group health insurance. Operations are conducted through independent
producers. The Company is presently licensed in forty-eight states (all states
except for New York and Vermont), the District of Columbia, and Puerto Rico.
The significant accounting policies followed by the Company that materially
affect the financial statements are summarized below:
8
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CHANGES
In May 1993, the Financial Accounting Standards Board issued FASB Statement No.
115, Accounting for Certain Investments in Debt and Equity Securities. The
Company adopted the provisions of the new standard for investments held as of or
acquired after January 1, 1994. In accordance with the statement, prior period
financial statements have not been restated to reflect the change in accounting
principle. The cumulative effect as of January 1, 1994 of adopting Statement
115 had no impact on income. The opening balance of stockholder's equity was
increased by $37,960,000 (net of tax of $20,440,000) to reflect the net
unrealized holding gains on securities classified as available-for-sale
previously carried at amortized cost less an adjustment for $14,692,000 (net of
tax of $7,911,000) to deferred policy acquisition costs and present value of
future profits (PVFP) for the change in expected future gross profits.
In 1996, the Company adopted FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement No. 121 also addresses the accounting for long-
lived assets that are expected to be disposed of. Adoption of this standard had
no impact on net income or stockholder's equity.
9
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
Investments are shown on the following bases:
The carrying value of fixed maturities depends on the classification of the
security: securities held-to-maturity, securities available-for-sale, and
trading securities. Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Debt securities are classified as held-to-maturity
when the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity and marketable equity
securities are classified as available-for-sale. Available-for-sale securities
are stated at fair value, with unrealized gains and losses, net of tax, and
deferred acquisition cost and present value of future profit adjustments,
reported in a separate component of stockholder's equity.
All of the Company's securities were classified as available-for-sale at
December 31, 1996 and 1995.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest
income from investments. Interest and dividends are included in net investment
income as earned.
10
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Equity securities are reported at fair value. Mortgage loans are carried at the
unpaid balances. Investment real estate is carried at cost, less accumulated
depreciation. Investment real estate is depreciated on a straight line basis
over the estimated useful life of the respective properties. Policy loans are
carried at unpaid balances. Short-term investments are carried at cost, which
approximates fair value. Derivatives are accounted for on the same basis as the
asset hedged.
Realized gains and losses, and declines in value judged to be other-than-
temporary are included in net realized gains (losses) on investments. The cost
of securities sold is based on the specific identification method.
RECOGNITION OF PREMIUM REVENUES AND COSTS
For life and annuity contracts other than universal life or investment-type
contracts, premiums are recognized as revenues over the premium-paying period,
with valuation reserves for future benefits established on a pro-rata basis from
such premiums.
Revenues for universal life and investment-type contracts consist of policy
charges for the cost of insurance and policy administration and surrender
charges assessed during the period. Expenses include interest credited to
policy account balances and benefits incurred in excess of policy account
balances. Certain profits on limited-payment policies are deferred and
recognized over the policy term.
For accident and health policies, gross premiums are prorated over the contract
term of the policies with the unearned premium included in the policy reserves.
Anticipated investment income is considered in determining if a premium
deficiency related to short-term contracts exists.
11
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED POLICY ACQUISITION COSTS
Commissions and other costs of acquiring traditional life insurance, universal
life insurance (including interest sensitive products) and investment products
that vary with and are primarily related to the production of new and renewal
business have been deferred. Traditional life insurance acquisition costs are
being amortized over the premium-paying period of the related policies using
assumptions consistent with those used in computing policy benefit reserves.
For universal life insurance and investment products, acquisition costs are
being amortized generally in proportion to the present value (using the assumed
crediting rate) of expected gross profits from surrender charges and investment,
mortality, and expense margins. This amortization is adjusted retrospectively
when estimates of current or future gross profits to be realized from a group of
products are revised.
Deferred policy acquisition costs are adjusted to reflect changes that would
have been necessary if unrealized investment gains and losses related to
available-for-sale securities had been realized. The Company has reflected
those adjustments in the asset balance with the offset as a direct adjustment to
stockholder's equity.
FUTURE POLICY BENEFITS
Benefit reserves, with the exception of reserves for universal life-type
policies and investment products, are computed using a net level premium method
including assumptions as to investment yields, mortality, withdrawals and other
assumptions based on the Company's and industry experience, modified as
necessary to reflect anticipated trends to include provisions for possible
unfavorable deviations. Reserve interest assumptions are those deemed
appropriate at the time of policy issue, and range from 6.5% to 9%. Policy
benefit claims are charged to expense in the year that the claims are incurred.
Health reserves consist principally of unearned premiums and claim reserves.
12
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FUTURE POLICY BENEFITS (CONTINUED)
Benefit reserves for interest sensitive products (including universal life-type
policies) and investment products are computed under a retrospective deposit
method and represent policy account balances before applicable surrender
charges. Policy benefits and claims that are charged to expense include
benefit claims incurred during the year in
excess of related policy account balances. Interest crediting rates for
universal life and investment products range from 4.5% to 7.25% during 1996,
and from 4.5% to 8.18% during 1995 and 1994.
Included in life and annuity reserves is an unearned revenue reserve that
reflects the unamortized balance of excess policy fees over ultimate policy
fees on universal life and investment products. These excess fees have been
deferred and are being recognized in income over the periods benefited, using
the same assumptions and factors used to amortize deferred policy acquisition
costs.
UNPAID CLAIMS
The liabilities for unpaid claims include estimates of amounts due on reported
claims and claims that have been incurred but were not reported as of December
31. Such estimates are based on actuarial projections applied to historical
claim payment data. Such liabilities are reasonable and adequate to discharge
the Company's obligations for claims incurred but unpaid as of December 31.
GOODWILL
The excess cost of acquired subsidiaries over the sum of amounts assigned to
identifiable assets at acquisition, less liabilities assumed, is recorded as
goodwill. Generally, goodwill is amortized using the straight-line method over
forty years.
13
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRESENT VALUE OF FUTURE PROFITS
The present value of future profits (PVFP) represents the profits to be realized
from future premiums on insurance in-force (at the date of acquisition) from
businesses acquired. The PVFP arises from the acquisition of the Company by
America Life.
The PVFP is being amortized over the years that it is anticipated such profits
will be received. In general, this value is determined using the same
assumptions applied to compute benefit reserves and deferred policy acquisition
costs, discounted to provide an appropriate rate of return. Interest for
traditional life business is accrued at a rate of 8.28% and 8.45% in 1996 and
1995, respectively, grading down to 6% over the next 13 years. Interest for
universal life business is amortized based on the credited rate.
An analysis of the PVFP for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
(In Thousands)
Balance at beginning of year $ 78,204 $100,602 $107,318
Interest accrued on unamortized balance 6,904 7,915 8,882
Amortization (16,052) (18,070) (19,296)
FAS 115 adjustment 3,289 (12,243) 3,698
-------------------------------------
Balance at end of year $ 72,345 $ 78,204 $100,602
=====================================
</TABLE>
14
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRESENT VALUE OF FUTURE PROFITS (CONTINUED)
The estimated amount to be amortized during each of the next five years is shown
below (in thousands):
<TABLE>
<CAPTION>
AMORTIZATION
OF PVFP
--------------
(In Thousands)
<S> <C>
1997 $15,090
1998 12,989
1999 11,528
2000 10,059
2001 8,520
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Depreciation for major classes of assets is calculated on a straight-line basis
over the estimated useful lives of the respective assets.
FEDERAL INCOME TAXES
Deferred federal income taxes have been provided or credited to reflect
significant temporary differences between income reported for tax and financial
reporting purposes using reasonable assumptions.
CASH FLOW INFORMATION
Cash includes cash on hand and demand deposits.
RECLASSIFICATIONS
Certain amounts in the 1994 and 1995 financial statements have been reclassified
to conform to the 1996 presentation.
15
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial instruments at
December 31, 1996 and 1995 are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities:
Available-for-sale $856,166 $856,166 $871,637 $871,637
Equity securities 816 816 764 764
Commercial mortgages 351,740 370,343 300,445 331,584
Residential mortgages 218 223 226 226
Policy loans 82,140 73,046 80,164 69,383
Short-term investments 15,149 15,149 -- --
LIABILITIES
Supplemental contracts without
life contingencies 879 879 934 934
Other policyholder funds left
on deposit 3,849 3,849 2,992 2,992
Individual and group annuities,
net of reinsurance 19,905 19,765 22,452 22,220
</TABLE>
The following methods and assumptions were used by the Company in estimating the
fair value disclosures for financial instruments:
FIXED MATURITIES, EQUITY SECURITIES AND SHORT-TERM INVESTMENTS: The fair values
for fixed maturities (including redeemable preferred stocks) are based on quoted
market prices, where available. For fixed maturities not actively traded, fair
values are estimated using values obtained from independent pricing services or,
in the case of private placements and collateralized mortgage obligations and
other mortgage derivative investments, are estimated by discounting expected
future cash flows using a current market rate applicable to the yield, credit
quality, and maturity of the investments. The fair values of equity securities
are based on quoted market prices. The fair values of short-term investments
approximate the carrying amount of such assets.
16
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE: Estimated fair values for commercial real estate
loans are generated using a discounted cash flow approach. Loans in good
standing are discounted using interest rates determined by U.S. Treasury yields
at December 31 and spreads required on new loans with similar characteristics.
The amortizing features of all loans are incorporated in the valuation. Where
data on option features is available, option values are determined using a
binomial valuation method and are incorporated into the mortgage valuation.
Restructured loans are valued in the same manner; however, these are discounted
at a greater spread to reflect increased risk. Fair values for residential loans
are based on discounted cash flows and approximate carrying value.
POLICY LOANS: The fair values for policy loans are estimated by discounting
cash flows at the interest rates charged on policy loans of similar policies
currently being issued. Loans with similar characteristics are aggregated for
purposes of the calculations.
DERIVATIVE FINANCIAL INSTRUMENTS: Fair values for on-balance-sheet derivative
financial instruments (swaps hedging fixed maturities) are based on
broker/dealer valuations or on internal discounted cash flow pricing models
taking into account current cash flow assumptions and the counterparties' credit
standing. Swaps with a fair value of $88,000 at December 31, 1996 and
$1,544,000 at December 31, 1995 represent asset hedges and are reported as a
component of fixed maturity securities on the accompanying balance sheets.
OTHER INVESTMENT-TYPE INSURANCE CONTRACTS: The fair values of the Company's
deferred annuity contracts and supplemental contracts without life contingencies
are estimated based on the cash surrender value. The carrying values of other
liabilities including immediate annuities, dividend accumulations, and premium
deposits approximate their fair values.
17
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
3. INVESTMENTS
The amortized cost and estimated fair value of investments in fixed maturities
and equity securities are as follows at December 31, 1996:
<TABLE>
<CAPTION>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS GAINS VALUE
-----------------------------------------------------
<S> <C> <C> <C> <C>
(In Thousands)
Available-for-sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 23,187 $ 4,053 $ -- $ 27,240
States, municipalities and political
subdivisions 660 17 -- 677
Public utilities securities 38,818 3,553 82 42,289
Corporate securities 457,299 27,407 1,459 483,247
Mortgage-backed securities 232,684 6,531 1,608 237,607
Other asset-backed securities 63,268 2,103 353 65,018
Derivatives hedging fixed maturities -- 573 485 88
-------------------------------------------------
Total fixed maturities 815,916 44,237 3,987 856,166
Preferred stocks 521 61 -- 582
Common stocks 104 174 44 234
-------------------------------------------------
Total $816,541 $44,472 $4,031 $856,982
=================================================
</TABLE>
18
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
The amortized cost and estimated fair value of investments in fixed maturities
and equity securities are as follows at December 31, 1995:
<TABLE>
<CAPTION>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 41,415 $ 8,310 $ -- $ 49,725
States, municipalities and political
subdivisions 6,208 232 -- 6,440
Public utilities securities 48,451 6,217 -- 54,668
Corporate securities 418,769 47,814 64 466,519
Mortgage-backed securities 239,419 12,677 397 251,699
Other asset-backed securities 38,793 2,284 35 41,042
Derivatives hedging fixed maturities -- 1,774 230 1,544
-------------------------------------------------------------
Total fixed maturities 793,055 79,308 726 871,637
Preferred stocks 530 73 12 591
Common stocks 84 108 19 173
-------------------------------------------------------------
Total $793,669 $79,489 $757 $872,401
=============================================================
</TABLE>
19
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
Held-to-maturity fixed maturity securities having an amortized cost of
$182,430,000 and a fair value of $199,206,000 were transferred to the available-
for-sale category on December 26, 1995, resulting in a net unrealized gain of
$10,904,000 (net of $5,872,000 of deferred taxes). The Company reassessed the
appropriateness of its classification of securities as held-to-maturity upon
reviewing the interpretive guidance provided in the FASB publication A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities.
The amortized cost and estimated fair value of debt securities by contractual
maturity and marketable equity securities at December 31, 1996 are shown in the
following table. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
COST OR ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------------------
(In Thousands)
<S> <C> <C>
Available-for-sale:
Due in one year or less $ 13,728 $ 13,834
Due after one year through five years 84,806 88,785
Due after five years through ten years 184,783 194,243
Due after ten years 236,647 256,679
-------------------------
519,964 553,541
Mortgage-backed securities 232,684 237,607
Other asset-backed securities 63,268 65,018
Equity securities 625 816
-------------------------
Total available-for-sale $816,541 $856,982
=========================
</TABLE>
20
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
Changes in unrealized gains (losses) on investments in available-for-sale
securities for the years ended December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
FIXED EQUITY TOTAL
------------------------------------
(In Thousands)
<S> <C> <C> <C>
Gross unrealized gains $ 43,752 $235 $ 43,987
Gross unrealized losses 3,502 44 3,546
------------------------------------
Net unrealized gains 40,250 191 40,441
Deferred income tax expense (14,088) (67) (14,155)
------------------------------------
Net unrealized gains after taxes 26,162 124 26,286
Less:
Balance at beginning of year 51,078 97 51,175
------------------------------------
Change in net unrealized gains
(losses) $(24,916) $ 27 $(24,889)
====================================
DECEMBER 31, 1995
FIXED EQUITY TOTAL
------------------------------------
(In Thousands)
Gross unrealized gains $ 79,308 $181 $ 79,489
Gross unrealized losses 726 31 757
------------------------------------
Net unrealized gains 78,582 150 78,732
Deferred income tax expense (27,504) (53) (27,557)
------------------------------------
Net unrealized gains after taxes 51,078 97 51,175
Less:
Balance at beginning of year (14,120) 47 (14,073)
------------------------------------
Change in net unrealized gains $ 65,198 $ 50 $ 65,248
====================================
</TABLE>
21
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
As part of its overall investment management strategy, the Company has entered
into agreements to purchase securities as follows:
DECEMBER 31
1996 1995
-----------------
(In Thousands)
Investment purchase commitments $4,278 $21,865
These commitments were settled in January 1997 and 1996, respectively.
Major categories of investment income for the years ended December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities $ 66,337 $ 74,911 $69,031
Equity securities 37 73 --
Mortgage loans on real estate 28,622 23,851 19,139
Policy loans 5,025 4,775 4,735
Short-term investments 1,446 -- --
Other investments 759 1,457 2,986
-----------------------------
102,226 105,067 95,891
Investment expenses (1,670) (1,788) (2,089)
-----------------------------
Net investment income $100,556 $103,279 $93,802
=============================
</TABLE>
22
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
Net realized gains (losses) on investments for the years ended December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities $7,209 $2,824 $ 1,248
Equity securities -- -- (2,577)
Real estate and other (522) 56 (16)
Fixed maturities transferred to parent
company in 1995 2,898 -- --
----------------------------
Net realized gain (losses) on
investments $9,585 $2,880 $(1,345)
============================
</TABLE>
During 1996, 1995 and 1994, debt and marketable equity securities available-for-
sale were sold with a fair value at the date of sale of $117,013,000,
$119,317,000 and $85,038,000, respectively. Gross gains of $7,326,000,
$3,494,000 and $1,940,000 and gross losses of $117,000, $670,000 and $3,269,000
were realized on those sales in 1996, 1995 and 1994, respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS HELD FOR PURPOSES OTHER THAN TRADING
The Company enters into interest rate contracts to reduce and manage interest
rate risk associated with individual assets and liabilities and its overall
aggregate portfolio.
Interest rate swap agreements generally involve the exchange of fixed and
floating interest payments over the life of the agreement without an exchange of
the underlying principal amount. The differential to be paid or received is
accrued as interest rates change and is recognized as an adjustment to interest
expense or income. The related amount payable to or receivable from
counterparties is included in other liabilities or assets.
23
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
4. DERIVATIVE FINANCIAL INSTRUMENTS HELD FOR PURPOSES OTHER THAN TRADING
(CONTINUED)
The Company manages the potential credit exposure from interest rate contracts
through careful evaluation of the counterparty credit standing and master
netting agreements. The Company is exposed to credit loss in the event of
nonperformance by counterparties on interest rate contracts; however, the
Company does not anticipate nonperformance by any of these counterparties. The
amount of such exposure is generally the unrealized gains in such contracts.
The table below summarizes the Company's interest rate contracts at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
NOTIONAL AMORTIZED FAIR BALANCE
AMOUNT COST VALUE SHEET
-------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Interest rate contracts:
Swaps $28,000 $ -- $ 573 $ 573
Swaps-affiliates 25,000 -- (485) (485)
-------------------------------------------
Total swaps $53,000 $ -- $ 88 $ 88
============================================
DECEMBER 31, 1995
NOTIONAL AMORTIZED FAIR BALANCE
AMOUNT COST VALUE SHEET
-------------------------------------------
(In Thousands)
Interest rate contracts:
Swaps $28,000 $ -- $1,774 $1,774
Swaps-affiliates 25,000 -- (230) (230)
-------------------------------------------
Total swaps $53,000 $ -- $1,544 $1,544
============================================
</TABLE>
24
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
5. CONCENTRATIONS OF RISK
At December 31, 1996, the Company held below-investment-grade bonds classified
as available-for-sale with a carrying value of $34,792,000 and a fair value of
$36,383,000. These holdings amounted to 4.2% of the Company's investment in
bonds and less than 2% of total assets. The holdings of below-investment-grade
bonds are widely diversified and of satisfactory quality based on the Company's
investment policies and credit standards.
At December 31, 1996, the Company's commercial mortgages involved a
concentration of properties located in Florida (24%), Texas (11%) and
Pennsylvania (10%). The remaining commercial mortgages relate to properties
located in 24 other states. The portfolio is well diversified, covering many
different types of income-producing properties on which the Company has first
mortgage liens. The maximum mortgage outstanding on any individual property is
$6,800,000.
The Company also has a concentration of direct premium income in Texas (17%) and
California (16%) at December 31, 1996.
6. EMPLOYEE BENEFIT PLANS
The Company does not sponsor an employee retirement plan. Home office and field
office services are provided to the Company by employees of Life Insurance
Company of Georgia (Life of Georgia), an affiliated insurer. The Company
reimburses Life of Georgia for the actual cost of salaries and fringe benefits
of employees utilized in providing administrative services to the Company.
The Company does not sponsor a deferred compensation plan, but reimburses Life
of Georgia for the actual cost of fringe benefits for employees providing
administrative services to the Company. The Company has an unfunded
noncontributory, nonqualified deferred compensation plan covering certain agents
in the General Agency Sales Division.
25
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
7. REINSURANCE
The Company is involved in both ceded and assumed reinsurance with other
companies for the purpose of diversifying risk and limiting exposure on larger
risks. Substantially all of the guaranteed investment contracts and the
associated prepaid reinsurance premiums are ceded under a reinsurance agreement
with an affiliate. As of December 31, 1996, the Company's retention limit for
acceptance of risk on life insurance policies had been set at various levels up
to $250,000. Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms of
the reinsurance contacts.
To the extent that the assuming companies become unable to meet their
obligations under these treaties, the Company remains contingently liable to its
policyholders for the portion reinsured. Consequently, allowances are
established for amounts deemed uncollectible. To minimize its exposure to
significant losses from reinsurer insolvencies, the Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk
arising from similar geographic regions, activities, or economic characteristics
of the reinsurer.
The carrying values of amounts recoverable from reinsurers approximate their
fair value.
26
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
7. REINSURANCE (CONTINUED)
Additional information regarding the Company's reinsurance activity for the
years ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
--------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
1996
Life insurance in force $20,482,429 $5,293,509 $ 777 $15,189,697 0.01%
================================================================================
Premiums:
Life insurance $ 43,379 $ 11,918 $ 16 $ 31,477 0.05%
Health insurance 71,587 56,745 -- 14,842 0.00%
--------------------------------------------------------------------------------
Total premiums $ 114,966 $ 68,663 $ 16 $ 46,319 0.03%
================================================================================
1995
Life insurance in force $18,048,076 $4,138,717 $ 809 $13,910,168 0.01%
================================================================================
Premiums:
Life insurance $ 39,182 $ 8,073 $ 201 $ 31,310 0.64%
Health insurance 60,318 47,986 -- 12,332 0.00%
--------------------------------------------------------------------------------
Total premiums $ 99,500 $ 56,059 $ 201 $ 43,642 0.46%
================================================================================
1994
Life insurance in force $15,284,670 $3,396,943 $2,307 $11,890,034 0.02%
================================================================================
Premiums:
Life insurance $ 36,116 $ 7,356 $1,740 $ 30,500 5.70%
Health insurance 18,495 10,145 -- 8,350 0.00%
--------------------------------------------------------------------------------
Total premiums $ 54,611 $ 17,501 $1,740 $ 38,850 4.48%
================================================================================
</TABLE>
27
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
8. INCOME TAXES
The Company, which was acquired by America Life in 1989, filed a separate
federal income tax return for years prior to 1995 due to consolidated return
eligibility regulations.
Beginning in 1995, the Company filed a consolidated federal income tax return
with Internationale Nederlanden Groep America Insurance Holdings, Inc. (the
direct parent of America Life) and other U.S. affiliates and subsidiaries, with
the exception of First ING Life Insurance Company of New York. The affiliated
companies that join in the filing of the consolidated federal return have
entered into a tax sharing agreement which provides for an allocation of taxes
among life and nonlife members. Under the agreement, a life member may not
receive the full benefit of a taxable loss in the year the loss is incurred.
The agreement provides that a loss member will receive at least 50% of the loss
utilized by other members and that any remaining benefit will be fully repaid
when the loss member could have used the loss had it filed a separate federal
income tax return. The deferred payments or receipts for the use of losses are
accounted for as a component of the Company's deferred tax liability.
The current tax asset of $50,000 at December 31, 1996 and current tax liability
of $5,816,000 at December 31, 1995 are due from and payable to, respectively,
the parent company, America Life, under the terms of the tax sharing agreement.
28
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-----------------
(In Thousands)
<S> <C> <C>
Deferred income tax liability:
Deferred policy acquisition costs $39,494 $34,700
PVFP 15,126 7,500
Deferred investment gains -- 2,300
Unrealized investment gains and losses 15,418 24,800
Bond/mortgage loans market discount 115 700
Other reserves 2,238 2,100
------------------
Total deferred income tax liability 72,391 72,100
Deferred income tax asset:
Benefit reserves 28,863 14,100
Other assets 1,322 2,764
------------------
Total deferred income tax asset 30,185 16,864
------------------
Net deferred income tax liability $42,206 $55,236
==================
</TABLE>
29
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
A reconciliation of the income tax attributable to continuing operations
computed at U.S. federal statutory tax rates to the income tax expense included
in the accompanying statements of income follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Tax-preferred investment income -- -- (.1)
Goodwill 1.1 .7 1.0
Other items, net 2.3 -- (1.3)
------------------------
Effective tax rate 38.4% 35.7% 34.6%
========================
</TABLE>
The components of federal income tax expense consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
---------------------------
(In Thousands)
<S> <C> <C> <C>
Current $22,370 $22,913 $13,768
Deferred (2,856) 915 4,954
---------------------------
Federal income tax expense $19,514 $23,828 $18,722
===========================
</TABLE>
The Company made net income tax payments of $29,320,000 during 1996, $16,254,000
during 1995, and $22,585,000 during 1994 for current income taxes and
settlements of prior year returns.
9. STATUTORY ACCOUNTING INFORMATION AND PRACTICES
Statutory capital and surplus was $100,228,000 and $78,992,000 at December 31,
1996 and 1995, respectively. Statutory net income was $43,594,000, $42,182,000
and $36,539,000, for the years ended December 31, 1996, 1995, and 1994,
respectively.
30
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
9. STATUTORY ACCOUNTING INFORMATION AND PRACTICES (CONTINUED)
The Company exceeded its minimum statutory capital and surplus requirements at
December 31, 1996. Additionally, the amount of dividends which can be paid by
the Company to its stockholder without prior approval of the state insurance
department is generally limited to the greater of 10% of statutory surplus or
the statutory net gain from operations.
The Company, which is domiciled in Texas, prepares its statutory-basis financial
statements in accordance with accounting principles and practices prescribed or
permitted by the state of Texas. "Prescribed" statutory accounting practices
include state laws, regulations and general administrative rules, as well as a
variety of publications of the National Association of Insurance Commissioners
(NAIC). "Permitted" statutory accounting practices encompass all accounting
practices that are not prescribed; such practices may differ from state to
state, from company to company within the state, and may change in the future.
The NAIC is currently in the process of codifying statutory accounting
practices, the result of which is expected to constitute the only source of
"prescribed" statutory accounting practices. Accordingly, that project, which
is expected to be completed in 1997, will likely change, to some extent,
prescribed statutory accounting practices, and may result in changes to the
accounting practices that insurance companies use to prepare their statutory
financial statements. The Company does not currently apply permitted statutory
practices which differ from prescribed accounting practices.
The NAIC has established certain Risk-Based Capital (RBC) requirements for
life/health insurance companies. The NAIC RBC formula attempts to measure the
risk profile of insurance companies in relation to actual capitalization levels.
The Company exceeded the NAIC RBC minimum requirements for 1996 and 1995.
At December 31, 1996 and 1995, bonds with an amortized cost of $8,790,000 and
$8,376,000, respectively, were on deposit with various state insurance
departments to meet regulatory requirements.
31
<PAGE>
Southland Life Insurance Company
Notes to Financial Statements (continued)
10. COMMITMENTS AND CONTINGENT LIABILITIES
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. The Company has accrued for estimated future assessments net of future
premium tax deductions.
11. SERVICE AGREEMENT WITH AFFILIATE
The Company has a service agreement with Life of Georgia whereby this affiliate
provides personnel, certain services and facilities for the conduct of the
Company's operations in return for payment representing the costs incurred in
providing such services and facilities. Substantially all insurance operating
expenses and employment taxes are incurred under the terms of this service
agreement. During 1996, 1995, and 1994, the Company reimbursed Life of Georgia
$21,586,000, $24,573,000 and $28,000,000, respectively, under this agreement.
The Company has a payable to Life of Georgia of $9,363,000 and $5,894,000 at
December 31, 1996 and 1995, respectively, related to this agreement. This
payable is included within indebtedness to related parties in the accompanying
balance sheets.
12. FINANCING ARRANGEMENTS
The Company has a revolving line of credit totaling $100,000,000 which matures
30 days from the date of advancement. This line of credit expires June 30, 1997.
Interest rates on these borrowings are tied to the Federal Funds rate plus .25%.
Outstanding borrowings under this agreement were $0 at December 31, 1996 and
1995.
13. SEPARATE ACCOUNTS
Separate account assets and liabilities represent funds segregated by the
Company for the benefit of certain policyholders who bear the investment risk.
The separate account assets and liabilities are carried at fair value. Revenues
and expenses on the separate account assets and related liabilities equal the
benefits paid to the separate account policyholders and are excluded from the
amounts reported in the Statements of Income except for fees charged for
administration services and mortality risk.
32
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
(1) Certified resolution by the board of directors of Southland Life
Insurance Company (the "Company") establishing Southland Separate
Account A1 (the "Account")/1/.
(2) Not Applicable
(3) (a) Form of Underwriting Agreement between the Company, the Account
and ING America Equities, Inc. ("INGAE")./2/
(b) Form of distribution agreement between INGAE and retail broker-
dealers./2/
(4) (a) Form of Contract for Variable Annuity /2/
(a)(1) Montana Form of Contract for Variable Annuity
(a)(2) Pennsylvania Form of Contract for Variable Annuity
(a)(3) Washington Form of Contract for Variable Annuity
(b) Form of Individual Retirement Annuity Endorsement/2/
(5) Form of Contract Application/2/
(6) (a) Form of amended and restated Articles of Incorporation of the
Company./2/
(b) By-Laws of the Company/1/.
(7) Not Applicable
(8) (a) Form of participation/distribution agreement between Janus Aspen
Series and the Company./2/
__________________
/1/ Incorporated herein by reference to the Form N-4 Registration Statement
filed with the Securities and Exchange Commission on February 17, 1995 (File No.
33-89574).
/2/ Incorporated herein by reference to the Form N-4 Registration Statement
filed with the Securities and Exchange Commission on September 29, 1995 (File
No. 33-89574).
<PAGE>
(b) Form of participation/distribution agreement between The Alger
American Fund and the Company./2/
(c) Form of participation/distribution agreement between Variable
Insurance Products Fund and the Company./2/
(d) Form of participation/distribution agreement between Variable
Insurance Products Fund II and the Company./2/
(e) Form of participation/distribution agreement between INVESCO
Variable Investment Funds, Inc. and the Company./2/
(f) Form of Administration Services Agreement between Financial
Administrative Services Corporation and the Company./2/
(9) Opinion and Consent of B. Scott Burton, Esquire.
(10) (a) Consent of Sutherland, Asbill & Brennan, L.L.P.
(b) Consent of Ernst & Young LLP.
(11) Not Applicable.
(12) Not Applicable.
(13) Performance Data Computations.
(14) Financial Data Schedule
ITEM 25. DIRECTORS AND OFFICERS OF THE COMPANY
DIRECTORS
Name and Principal Business Address*
-----------------------------------
Michael W. Cunningham
Linda B. Emory
R. Glenn Hilliard
P. Randall Lowery
James D. Thompson
Valerie G. Brown
B. Scott Burton
________________________________
/2/ Incorporated herein by reference to the Form N-4 Registration Statement
filed with the Securities and Exchange Commission on September 29, 1995 (File
No. 33-89574).
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE COMPANY (CONT'D)
OFFICERS
Name and Principal Position With Depositor
------------------- -----------------------
Business Address*
----------------
Glenn R. Hilliard Chairman of the Board & Chief Executive Officer
James D. Thompson President & Chief Operating Officer
Keith Glover Executive Vice President
John R. Barmeyer Senior Vice President - Legal Services
James Joseph Carey Senior Vice President - Chief Marketing Officer
Pamela Crane Senior Vice President - Actuarial/Finance
Michael E. Fisher Senior Vice President - Litigation
Charles D. Lewis, Jr. Senior Vice President - Corporate Services
Larry Nordin Senior Vice President - Sales & Marketing
Samuel H. Turner Senior Vice President - Emerging Markets
William S. Adams, Jr. Vice President - General Agency Sales
B. Scott Burton Vice President, Secretary & General Counsel
Craig Collins Vice President - General Agency Sales
David R. Greene Vice President - General Agency Sales
Karen Holmes Vice President - Communications
Rochele W. Hosford Vice President - Information Systems, SL/BIO
William H. Johnson Vice President - Worksite Marketing
Richard J.Lyons Vice President - Sales
T. Scott Mackenzie Vice President - Product Management, SL/BIO
Jeffrey B. McClellan Vice President - Legal Services
Lyndon S. Oliver Vice President & Treasurer
Michael Bryan Parker Vice President - Managed Care Marketing
Allen Wayne Rightmeyer Vice President - Operations
John Ross Vice President - General Agency Sales
Doran Stanford Vice President - Partnership Relations
Richard Wolf Vice President & Group Actuary
Charlene P. Cochran Actuarial Officer
James H. Cooper, Jr. Underwriting Officer
Linda B. Emory Appointed Actuary
Carroll S. Glenn Tax Officer
Thomas M. Hendricks Associate General Counsel & Assistant Secretary
Lynn C. McPherson Operations Officer
David Mitchell Valuation Actuary
Jeffrey E. Morrison Associate General Counsel
Charles L. Norton, Jr. Assistant General Counsel
Linda R. Sessler Counsel & Assistant Secretary
James A. Schubert Associate General Counsel
* The principal business address of each director and officer is
Southland Life Insurance Company, 5780 Powers Ferry Road, N.W.,
Atlanta, GA 30327.
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The registrant is a segregated asset account of the Company and is
therefore owned and controlled by the Company. All of the Company's
outstanding stock is owned and controlled by International Nederlanden
Groep N.V. ("ING"). ING is described more fully in the statement of
additional information included in this registration statement. Various
companies and other entities controlled by ING may therefore be considered
to be under common control with the registrant or the Company. Such other
companies and entities, together with the identity of their controlling
persons (where applicable), are set forth on the following organizational
chart.
INTERNATIONAL NEDERLANDEN GROEPN.V. (THE NETHERLANDS)
INTERNATIONALE NEDERLANDEN BANK N.V. (THE NETHERLANDS)
INTERNATIONALE NEDERLANDEN VERZEKERINGEN N.V. (THE NETHERLANDS)
ING INSURANCE INTERNATIONAL B.V. (THE NETHERLANDS)
NEDERLANDSE REASSURANTIE GROEP HOLDING N.V. (THE NETHERLANDS)
NRG AMERICA HOLDING COMPANY (PENNSYLVANIA)
NRG AMERICA SYNDICATE (NEW YORK)
NRG AMERICA MANAGEMENT CORPORATION (PENNSYLVANIA)
NRG AMERICA LIFE REASSURANCE CORPORATION (PENNSYLVANIA)
PHILADELPHIA REINSURANCE CORPORATION (PENNSYLVANIA)
NATIONALE-NEDERLANDEN INTERTRUST B.V. (THE NETHERLANDS)
INTERNATIONAL NEDERLANDEN US INSURANCE HOLDINGS, INC. (DELAWARE)
INTERNATIONALE NEDERLANDEN NORTH AMERICA INVESTMENT CENTRE INC.
(DELAWARE)
INTERNATIONALE NEDERLANDEN NORTH AMERICA INSURANCE CORPORATION
(DELAWARE)
INTERNATIONALE-NEDERLANDEN U.S. P&C HOLDINGS, INC. (DELAWARE)
EXCELSIOR INSURANCE COMPANY (NEW HAMPSHIRE)
PEERLESS INSURANCE COMPANY (NEW HAMPSHIRE)
FIRST OF GEORGIA INSURANCE COMPANY (GEORGIA)
AMERICA FIRST INSURANCE COMPANY (FLORIDA)
ALABAMA FIRST INSURANCE COMPANY (ALABAMA)
FIDELITY SOUTHERN INSURANCE COMPANY (TEXAS)
THE NETHERLANDS INSURANCE COMPANY (NEW HAMPSHIRE)
INDIANA INSURANCE COMPANY (INDIANA)
CONSOLIDATED INSURANCE COMPANY (INDIANA)
INTERNATIONALE NEDERLANDEN AMERICA LIFE CORPORATION (GEORGIA)
SOUTHLAND LIFE INSURANCE COMPANY (TEXAS)
LIFE INSURANCE COMPANY OF GEORGIA (GEORGIA)
SECURITY LIFE OF DENVER INSURANCE COMPANY (COLORADO)
ING AMERICA EQUITIES, INC. (COLORADO)
MIDWESTERN UNITED LIFE INSURANCE COMPANY (INDIANA)
FIRST SECURED MORTGAGE DEPOSIT CORPORATION (COLORADO)
CAMVEST COMPANY NO. 3 (COLORADO)
UNITED PROTECTIVE COMPANY (ARIZONA)
FIRST ING OF NEW YORK (NEW YORK)
COLUMBINE LIFE INSURANCE COMPANY (COLORADO)
LION CUSTOM INVESTMENTS(DELAWARE) (NON-INSURER)
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 20, 1997, a date within 90 days prior to the date of the
filing, there were 48 Contract Owners of non-qualified contracts and 0 Contract
Owners of qualified contracts.
ITEM 28. INDEMNIFICATION
Incorporated herein by reference to the Form N-4 Registration Statement
filed with the Securities and Exchange Commission on April 29, 1996 (File No.
33-89574).
ITEM 29. PRINCIPAL UNDERWRITER
(a) INGAE is the principal underwriter (as defined in the Investment
Company Act of 1940) for the Contracts and is also the principal
underwriter for variable life insurance contracts to be issued by the
Company.
(b) Name and Principal Position with INGAE
------------------- -------------------
Business Address*
-----------------
Edward K. Campbell Director, Vice President & Chief Legal
Officer
Melodie A. Maxwell-Jones Director & Chief Compliance Officer
Gary W. Waggoner Secretary
Irene M. Colorosa Assistant Secretary
Debra M. Bell Chief Financial Officer & Financial
Operations Officer
Shari Ann Eng1er Treasurer
Jerrianne N. Smith Chief Operating Officer
Daniel B. Lazarus Director
Martha K. Evans Vice President
Carol D. Hard Director, President & Chief Executive
Officer
Wesley A. Coleman Vice President
* The principal business address of Daniel B. Lazarus is 5780
Powers Ferry Road, Atlanta, Georgia. The principal business
address of each other officer and director is Security Life of
Denver, 1290 Broadway, Denver, CO 80203.
ITEM 30. LOCATION OF 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 5780 Powers Ferry Road,
N.W., Atlanta, GA 30327 or at 8515 East Orchard Road - 9T2, Englewood,
CO 80111.
<PAGE>
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this
registration statement.
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, of (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,
as amended, 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 the paragraphs numbered (1) through (4) of that
letter will be complied with.
(e) Southland 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 the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Southland Separate Account A1, certifies that it meets all of the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Post-Effective Amendment
Number 2 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the County of Fulton, State of Georgia, this 25th day of
------
April, 1997.
Southland Separate Account A1
(Registrant)
(SEAL) Southland Life Insurance Company
(Depositor)
Attest: /s/ B. Scott Burton By: /s/ James D. Thompson
------------------------- --------------------------
B. Scott Burton, Vice President, James D. Thompson, President
Secretary & General Counsel & Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, Southland Life
Insurance Company has duly caused this Post-Effective Amendment Number 2 to the
Registration Statement to be signed on its behalf by the undersigned persons in
their capacities with Southland Life Insurance Company thereunto authorized, and
its seal to be hereunto affixed and attested, all in the County of Fulton, State
of Georgia, this 25th day of April, 1997.
--------
(SEAL) Southland Life Insurance Company
Attest: /s/ B. Scott Burton By: /s/ James D. Thompson
------------------------- --------------------------
B. Scott Burton, Vice President, James D. Thompson, President
Secretary & General Counsel & Chief Operating Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment Number 2 to the Registration Statement has been signed below by the
following persons in the capacities indicated on the date(s) set forth below.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ James D. Thompson President, Chief 4/25
- ------------------------- ----------, 1997
James D. Thompson Operating Officer & Director
/s/ R. Glenn Hilliard Chief Executive Officer & 4/25
- ------------------------- ----------, 1997
R. Glenn Hilliard Chairman of the Board
/s/ B. Scott Burton Vice President, Secretary, 4/25
- ------------------------- ----------, 1997
B. Scott Burton General Counsel & Director
/s/ Michael W. Cunningham Director 4/25
- ------------------------- ----------, 1997
Michael W. Cunningham
/s/ Linda B. Emory Director 4/25
- ------------------------- ----------, 1997
Linda B. Emory
/s/ P. Randall Lowery Director 4/25
- ------------------------- ----------, 1997
P. Randall Lowery
/s/ Valerie G. Brown Director 4/25
- ------------------------- ----------, 1997
Valerie G. Brown
</TABLE>
<PAGE>
EXHIBIT 4(A)(1)
SOUTHLAND LIFE INSURANCE COMPANY
(A TEXAS CORPORATION)
5780 POWERS FERRY ROAD, N. W. ATLANTA, GA 30327-4390
A STOCK COMPANY - ESTABLISHED 1908
[John Q. Doe] [310000004]
AGREEMENT BY SOUTHLAND LIFE INSURANCE COMPANY
Southland Life Insurance Company will pay the benefits described in this
Contract in accordance with the terms of this Contract.
PLEASE READ YOUR CONTRACT CAREFULLY.
This Contract is a legal contract between the Contract Owner and the Company.
FREE LOOK PERIOD
You have the right to examine and return this Contract within ten days after
your receipt. It may be returned by delivering or mailing it to us at our
Customer Service Center. It will then be void from the beginning. Within seven
days after receipt of the Contract at our Customer Service Center, we will
refund the Accumulation Value, in addition to any charges deducted, as of the
date of receipt. If required by state law, we will refund your Purchase
Payment.
This Contract is signed for Southland Life Insurance Company by
/s/ Signature Illegible /s/ Signature Illegible
President Secretary
THIS CONTRACT IS A FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED AND VARIABLE
ANNUITY CONTRACT.
Annuity Payments and other values provided by this Contract, when based on the
investment experience of Southland Separate Account A1 are variable. These
values may increase or decrease based on investment experience and are not
guaranteed as to fixed dollar amount. Annuity Payments begin as of the Annuity
Date. Purchase Payments are flexible and may be made until the earlier of the
Annuity Date or the maximum age shown in the Schedule. The Enhanced Death
Benefit will be paid if the Owner dies prior to the Annuity Date.
CUSTOMER SERVICE CENTER
[P.O. BOX 173789
DENVER, CO 80217-3789
TOLL-FREE NUMBER (800) 224-3035]
Form 15208-95
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
CONTRACT SCHEDULE......................................... 4
Allocation of Initial Purchase Payment.......... 5
Contract Expense Provisions..................... 6
Guaranteed Interest Rate........................ 7
Enhanced Death Benefit Accumulation Rate........ 7
DEFINITIONS............................................... 8
OWNERS, ANNUITANTS AND BENEFICIARIES...................... 11
Owners and Death of Owners...................... 11
Annuitants and Death of Annuitants.............. 11
Beneficiaries and Death of Beneficiaries........ 11
Required Distributions.......................... 12
PURCHASE PAYMENTS......................................... 12
Purchase Payment Allocation..................... 13
VARIABLE ACCOUNT.......................................... 13
GUARANTEED INTEREST ACCOUNT............................... 14
ACCUMULATION VALUES....................................... 14
Accumulation Unit Value......................... 14
Accumulation Experience Factor.................. 15
Subaccount Accumulation Value................... 15
Guaranteed Interest Account Accumulation Value.. 16
TRANSFERS................................................. 16
Transfers and Excess Transfers.................. 16
Transfers from the Guaranteed Interest Account.. 17
Excess Transfer Charge.......................... 17
Dollar Cost Averaging Facility.................. 17
Automatic Rebalancing........................... 18
WITHDRAWALS............................................... 18
Demand Withdrawal Option........................ 18
Withdrawal Transaction Charge................... 19
Systematic Withdrawal Program................... 19
IRA Income Program.............................. 20
SURRENDERS................................................ 20
DEATH BENEFIT............................................. 20
Death Benefit Prior to the Annuity Date......... 20
Enhanced Death Benefit.......................... 20
</TABLE>
Form 15208-95
2
<PAGE>
TABLE OF CONTENTS (cont.)
<TABLE>
<CAPTION>
<S> <C>
ANNUITY PAYMENTS.......................................... 21
Election and Changes of Annuity Date............ 21
Election and Changes of Annuity Payment Option.. 21
Annuity Payment Options - General............... 22
Variable Annuity Payments....................... 22
Fixed Annuity Payment........................... 23
Combination Annuity Payments.................... 23
Annuity Payment Options......................... 23
Commuting....................................... 24
Excess Interest................................. 24
Minimum Amounts................................. 24
Income Protection............................... 25
Payments Other than Monthly..................... 25
GENERAL CONTRACT PROVISIONS............................... 25
The Contract.................................... 25
Conformity with Montana Statutes................ 25
Age............................................. 25
Procedures...................................... 25
Deferral of Payment............................. 26
Tax Qualifications.............................. 26
Contract Changes................................ 26
Collateral Assignment........................... 26
Incontestability................................ 26
Misstatement of Age............................. 26
Periodic Reports................................ 26
Basis of Computations........................... 27
Taxes........................................... 27
Non Participating............................... 27
Customer Service Center......................... 27
ANNUITY PAYMENTS OPTIONS TABLES........................... 28
</TABLE>
Form 15208-95
3
<PAGE>
CONTRACT SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
OWNER: JOHN DOE AGE AND SEX: 35, MALE
- ---------------------------------------------------------------
ANNUITANT: JOHN DOE AGE AND SEX: 35, MALE
- ---------------------------------------------------------------
CONTRACT DATE: JULY 1, 1995 CONTRACT NUMBER: 310000004
- ---------------------------------------------------------------
ANNUITY DATE: AUGUST 1, 2027
- ---------------------------------------------------------------
INITIAL PURCHASE PAYMENT: $25,000.00
- ---------------------------------------------------------------
MINIMUM FOR EACH SUBSEQUENT $ 500.00
PURCHASE PAYMENT:
- ---------------------------------------------------------------
MAXIMUM CUMULATIVE PURCHASE $1,500,000
PAYMENT:
- ---------------------------------------------------------------
MAXIMUM OWNER'S AGE TO WHICH 86
PURCHASE PAYMENTS MAY BE MADE:
- ---------------------------------------------------------------
CUSTOMER SERVICE CENTER: CUSTOMER SERVICE CENTER
P.O. BOX 173789
DENVER, CO 80217-3789
- ---------------------------------------------------------------
</TABLE>
Form 15208-95
4
<PAGE>
CONTRACT SCHEDULE (CONT.)
ALLOCATION OF INITIAL PURCHASE PAYMENT
<TABLE>
<CAPTION>
<S> <C>
[Alger American Small Capitalization Subaccount] 0%
[Alger American Growth Subaccount] 0%
[Alger American MidCap Growth Subaccount] 10%
[Alger American Leveraged AllCap Subaccount] 0%
[INVESCO Industrial Income Subaccount] 10%
[INVESCO Utilities Subaccount] 0%
[Janus Growth Subaccount] 5%
[Janus Agressive Growth Subaccount] 15%
[Janus Worldwide Growth Subaccount] 0%
[Janus International Growth Subaccount] 0%
[Janus Balanced Subaccount] 0%
[Janus Short-Term Bond Subaccount] 0%
[Fidelity VIP Money Market Subaccount] 0%
[Fidelity VIP High IncomeSubaccount] 0%
[Fidelity VIP Equity-Income Subaccount] 0%
[Fidelity VIP Growth Subaccount] 0%
[Fidelity VIP Overseas Subaccount] 20%
[Fidelity VIP II Investment Grade Bond Subaccount] 15%
[Fidelity VIP II Asset Manager Subaccount] 15%
[Fidelity VIP II Index 500 Subaccount] 0%
[Fidelity VIP II Contrafund Subaccount] 0%
Guaranteed Interest Account 10%
</TABLE>
If you elect to invest in a particular investment option, at least 1% of your
Purchase Payment must be allocated to that option. All percentage allocations
must be in whole numbers.
Form 15208-95
5
<PAGE>
CONTRACT SCHEDULE (CONT.)
CONTRACT EXPENSE PROVISIONS
OWNER TRANSACTION EXPENSES (Deducted from the Accumulation Value)
1. Excess Transfer Charges: Refer to the Transfer section for details.
2. Withdrawal Charges: Refer to the Withdrawal section for details.
3. Surrender Charge: This charge is deducted upon Surrender or Withdrawal of
Purchase Payments held less than five full Contract Years since the
Contract Anniversary at the end of the Contract Year in which the Purchase
Payment was made. It is calculated as a percentage of the Purchase
Payments withdrawn or surrendered. The percentage is based on the number
of Contract Anniversaries since the Contract Year in which each Purchase
Payment was made.
CONTRACT ANNIVERSARIES SINCE 0 1 2 3 4 5 6 and
PURCHASE PAYMENT WAS MADE: more
- --------------------------------------------------------------
PERCENTAGE: 7% 6% 5% 4% 3% 2% 0%
- --------------------------------------------------------------
ANNUAL ADMINISTRATIVE CHARGE (Deducted from the Variable Account Accumulation
Value)
This charge is based on the Purchase Payments paid. If aggregate Purchase
Payments received less aggregate Withdrawals (including any Withdrawal charges
and Surrender charges arising from such Withdrawals) are:
less than $100,000: $30.00 per year
$100,000 or more: $ 0.00 per year
VARIABLE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in each Subaccount)
Mortality And Expense Risk Charge Prior To The Annuity Date: 1.37%
Mortality And Expense Risk Charge During The Annuity Period: 1.25%
Asset-Based Administrative Charge: 0.15%
Form 15208-95
6
<PAGE>
CONTRACT SCHEDULE (CONT.)
GUARANTEED INTEREST RATE
Guaranteed Interest Rate for the Guaranteed Interest Account: 3.00% per year
ENHANCED DEATH BENEFIT ACCUMULATION RATE
Up to Attained Age 75: 4.00% per year
After Attained Age 75: 0.00% per year
Form 15208-95
7
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: An Accumulation Unit is a unit of measure used to calculate
Variable Account Accumulation Value.
ACCUMULATION VALUE: The Accumulation Value is the total value under a Contract.
It is the sum of the Variable Account Accumulation Value and the Guaranteed
Interest Account Accumulation Value.
ANNUITANT: The Annuitant(s) is the person or persons whose life (or lives)
determines the Annuity Payments payable under the Contract and who receives
payments during the Annuity Period. The maximum number of joint Annuitants is
two and provisions referring to the death of an Annuitant mean the death of the
last surviving Annuitant.
ANNUITY DATE: The Annuity Date is the date as of which, if the Annuitant is
still living, the Accumulation Value (less previously undeducted taxes) is
applied under an Annuity Payment Option and Annuity Payments begin.
ANNUITY PAYMENT: An Annuity Payment is one of a number of periodic payments
made by the Company to the Annuitant under a Contract.
ANNUITY PAYMENT OPTION: An Annuity Payment Option specifies the form that
Annuity Payments take or the type of payments. Various Annuity Payment Options
are offered under the Contract.
ANNUITY PERIOD: The Annuity Period is the period after the Annuity Date when
Annuity Payments are made.
ANNUITY UNIT: An Annuity Unit is a unit of measure used to calculate variable
Annuity Payments.
BENCHMARK RATE OF RETURN: The Benchmark Rate of Return is an annual rate of
return used by the Company to determine the amount of variable Annuity Payments
by assuming (among other things) that Subaccounts supporting variable Annuity
Payments will have a net annual investment return over the anticipated Annuity
Period equal to that rate of return.
BENEFICIARY: The Beneficiary is the person designated by the Owner to receive
the Death Benefit, upon the death of the Owner prior to the Annuity Date.
CASH SURRENDER VALUE: The Cash Surrender Value is the Accumulation Value, less
any applicable Surrender charges, premium taxes not previously deducted, and the
annual administrative charge.
CODE: The Code is the Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY: The Contract Anniversary is the same date in each
Contract Year as the Contract Date.
CONTRACT DATE: The Contract Date is the date that the Contract is issued. It
is set forth on the Contract Schedule and is used to determine Contract Years
and Contract Anniversaries.
CONTRACT YEAR: A Contract Year is a twelve-month period beginning on the
Contract Date or on a Contract Anniversary.
Form 15208-95
8
<PAGE>
CUSTOMER SERVICE CENTER: The Customer Service Center is the Company's offices
at P.O. Box 173789, Denver, CO 80217-3789. For overnight delivery, the address
is 8515 East Orchard Road -9T2, Englewood, CO 80111.
DEATH BENEFIT: The amount payable to the Beneficiary upon death of the Owner
prior to the Annuity Date.
DEMAND WITHDRAWAL: A withdrawal of Cash Surrender Value made at the Owner's
request.
DUE PROOF OF DEATH: Due Proof of Death is proof of death satisfactory to the
Company. Such proof may consist of the following if acceptable to the Company:
(a) A certified copy of the death record;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FREE LOOK PERIOD: The Free Look Period is the period during which you may
return the Contract and receive a refund.
GENERAL ACCOUNT: The General Account is the assets of the Company other than
those allocated to the Variable Account or any other separate account of the
Company.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE: The Guaranteed Interest Account
Accumulation Value is the value under a Contract in the Guaranteed Interest
Account.
GUARANTEED INTEREST ACCOUNT: The Guaranteed Interest Account is an allocation
option under the Contract supported by the Company's General Account. It is not
part of nor dependent upon the investment performance of the Variable Account.
IRA CONTRACT: A Contract issued as an Individual Retirement Annuity in
connection with sections 408(a) and (b) of the Code.
OWNER: The Owner is the person(s) who owns the Contract and who is entitled to
exercise all rights and privileges provided in the Contract.
PORTFOLIO: A Portfolio is an investment portfolio (sometimes called a series or
a fund) of an open-end management investment company listed in the prospectus or
any other open-end management investment company or unit investment trust in
which a Subaccount invests.
PURCHASE PAYMENT: A payment or payments made by the Owner to purchase the
benefits provided by the Contract.
SEC: The SEC is the U.S. Securities and Exchange Commission.
SUBACCOUNT: A Subaccount is a subdivision of the Variable Account, the assets
of which are invested in a corresponding Portfolio.
SUBACCOUNT ACCUMULATION VALUE: The Subaccount Accumulation Value is the value
under a Contract in a particular Subaccount.
SURRENDER: The termination of the Contract by payment of the Cash Surrender
Value.
VALUATION DAY: For each Subaccount, a Valuation Day is each day on which the
New York Stock Exchange ("NYSE") and Southland's Customer Service Center are
both open for business, except for a day that a Subaccount's corresponding
Portfolio does not value its shares.
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VALUATION PERIOD: A Valuation Period is a period that starts at 4:00 p.m.
eastern time on one Valuation Day and ends at 4:00 p.m. eastern time on the next
succeeding Valuation Day.
VARIABLE ACCOUNT: The Variable Account is Southland Separate Account A1.
VARIABLE ACCOUNT ACCUMULATION VALUE: The Variable Account Accumulation Value is
the value under a Contract in the Variable Account. It is the sum of the
Subaccount Accumulation Values.
WE, US, OUR AND THE COMPANY: We, us, our and the Company refer to Southland
Life Insurance Company.
WRITTEN NOTICE: A written notice or request in a form satisfactory to the
Company which is signed by the Owner and received at the Customer Service
Center.
YOU AND YOUR: You and your refer to the Owner of this Contract.
Form 15208-95
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OWNERS, ANNUITANTS, AND BENEFICIARIES
OWNERS AND DEATH OF OWNERS
The original Owner of this Contract is the person named as the Owner in the
application. Consistent with the terms of any Beneficiary designation and any
assignment, the Owner may, prior to the Annuity Date:
1. Assign this Contract or Surrender it in whole or in part;
2. Amend or change this Contract with the consent of the Company;
3. Exercise any right and receive any benefit; or
4. Change the ownership.
Subject to the applicable provisions of the Required Distributions section, if
the Owner (or Deemed Owner as defined in the Required Distributions section)
dies prior to the Annuity Date, and:
1. If the deceased Owner's spouse is the joint Owner, then the spouse
becomes the new Owner and no Death Benefit is payable; or
2. If the Owner's spouse is the Beneficiary, then the spouse may elect to
become the Owner (in which case there is no Death Benefit payable) by so
electing within 60 days of the death; if there is no such election, the
Death Benefit is payable to the Beneficiary; or
3. If the Owner's spouse is not the joint Owner or the Beneficiary, then the
Death Benefit is payable to the Beneficiary.
ANNUITANTS AND DEATH OF ANNUITANTS
The original Annuitant and any contingent Annuitant are named in the
application. The Annuitant will receive the Annuity Payments of the Contract
if, on the Annuity Date, the Annuitant is living. You may name a new Annuitant
prior to the Annuity Date. Any Annuitant or contingent Annuitant must be
younger than age 86 when named. Any Annuitant or contingent Annuitant that is
not an individual may not be named without our consent.
If the Annuitant dies before the Annuity Date, and a contingent Annuitant has
been named, the contingent Annuitant becomes the Annuitant. If no contingent
Annuitant has been named, you must designate a new Annuitant. If no designation
is made within 30 days of the Annuitant's death, the Owner will become the
Annuitant.
If any Owner is not an individual, the death of the Annuitant will be treated as
the death of the Owner.
Upon the death of the Annuitant after the Annuity Date, any remaining payments
will be continued to any contingent Annuitant. Upon the death of both the
Annuitant and any contingent Annuitant, any remaining payments will be paid to
the estate of the last to die of the Annuitant and contingent Annuitant.
Payments may be made in one sum if the Owner's election allows. See the Annuity
Payments section.
BENEFICIARIES AND DEATH OF BENEFICIARIES
The original Beneficiary and any contingent Beneficiaries are named in the
application. Surviving contingent Beneficiaries are paid the Death Benefit only
if no Beneficiary survives. If more than one Beneficiary in a class survives,
they will share the Death Benefit equally, unless the Owner's designation
provides otherwise. If there is no designated Beneficiary or contingent
Beneficiary surviving, we will pay the Death Benefit to the Owner's estate. We
will pay the Death Benefit in accordance with the most recent Beneficiary
designation on file. The Owner may name a new Beneficiary unless an irrevocable
Beneficiary has been named. When an irrevocable Beneficiary has been designated,
the Owner and the irrevocable Beneficiary must act together to make any
Beneficiary changes.
REQUIRED DISTRIBUTIONS
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The following required distribution rules shall apply if and to the extent
required under section 72(s) of the Code:
1. Subject to the alternative election or spousal beneficiary provisions in
subsection (2) or (3) below,
a) If an Owner dies on or after the Annuity Date and before the entire
interest in this Contract has been distributed, the remaining portion
of such interest shall be distributed at least as rapidly as under the
method of distribution being used as of the date of such death;
b) If an Owner dies before the Annuity Date, the entire interest in
this Contract will be distributed within five years after such death;
and
c) If any Owner is not an individual, then for purposes of this
subsection (1), the primary Annuitant under this Contract shall be
treated as the Owner (the "Deemed Owner"), and any change in the
primary Annuitant shall be treated as the death of the Owner. The
primary Annuitant is the individual, the events in the life of whom
are of primary importance in affecting the timing or amount of the
payment under the Contract.
2. If any portion of the interest of an Owner (or a Deemed Owner) in
subsection (1) is payable to or for the benefit of a designated
beneficiary, and such beneficiary elects to have such portion distributed
under an Annuity Payment Option over a period that: (A) does not extend
beyond such beneficiary's life or life expectancy and (B) starts within
one year after such death, or such later date as Treasury Regulation may
proscribe (a "Qualifying Distribution Period"); then for purposes of
satisfying the requirements of subsection (1), such portion shall be
treated as distributed entirely on the date such periodic distributions
begin. Such beneficiary may elect any Annuity Payment Option for a
Qualifying Distribution Period, subject to any restrictions imposed by
any regulations under section 72(s) of the Code.
3. If any portion of the interest of an Owner (or a Deemed Owner) described
in subsection (1) is payable to or for the benefit of such Owner's
spouse, or is co-owned by such spouse, then such spouse shall be treated
as the Owner of such portion for purposes of the requirements of
subsection (1).
PURCHASE PAYMENTS
This Contract will not be issued until the initial Purchase Payment shown on the
Schedule is received by us and accepted at our Customer Service Center. The
initial Purchase Payment is due on the issue date. A receipt will be furnished
upon request. Any subsequent Purchase Payments may be made at any time prior to
the Annuity Date subject to our requirements at the time the Purchase Payment is
made. We reserve the right to modify the requirements. The requirements in
effect on the issue date are shown on the Schedule. No benefit associated with
any Purchase Payment will be provided until the Purchase Payment is accepted by
us at our Customer Service Center.
We reserve the right to refuse to accept additional Purchase Payments at any
time for any reason.
PURCHASE PAYMENT ALLOCATION
The initial Purchase Payment will be allocated to the Subaccounts and to the
Guaranteed Interest Account as you directed in the application and as indicated
on the Schedule. Any Purchase Payments made thereafter will be allocated to
each Subaccount and/or the Guaranteed Interest Account in the same proportion
that each of your Subaccount Accumulation Values and Guaranteed Interest Account
Accumulation Value bears to your Accumulation Value as of the date we accept
that additional Purchase Payment at our Customer Service Center. You may
designate a different allocation with respect to any Purchase Payment by sending
us Written Notice with the Purchase Payment.
In states where we are required to refund Purchase Payments during the Free Look
Period, that portion of the initial Purchase Payment to be allocated to any
Subaccount is allocated to the Fidelity VIP Money Market Subaccount for a period
of 15 days from the date that the Contract is mailed from the Customer
Form 15208-95
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Service Center. At the expiration of this period, such portion of the Purchase
Payment, as adjusted to reflect the investment performance of the Fidelity VIP
Money Market Subaccount during this period, is then allocated to the Subaccounts
as described above.
VARIABLE ACCOUNT
The Variable Account is an account established by us pursuant to the laws of the
State of Texas, to separate the assets funding the variable benefits for the
class of Contracts to which this Contract belongs from the other assets of the
Company.
The Variable Account is registered as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). All income, gains and losses,
realized or unrealized, from assets allocated to the Variable Account are
credited to or charged against the Variable Account without regard to other
income, gains or losses of the Company. The assets of the Variable Account are
our property, but are separate from our General Account and any other separate
account maintained by us. That portion of the assets of the Variable Account
which is equal to the reserves and other Contract liabilities with respect to
the Variable Account is not chargeable with liabilities arising out of any other
business we may conduct. We have the right to transfer to our General Account
any assets of the Variable Account that are in excess of such reserves and other
liabilities.
The Variable Account is divided into Subaccounts, each of which invests in a
corresponding Portfolio designed to meet the objectives of the Subaccount. The
current Subaccounts are shown on the Schedule. We may, from time to time,
subject to review by the SEC and other regulatory authorities:
(1) Make additional subaccounts available to such classes of Contracts as we
may determine. These subaccounts will invest in portfolios we find
suitable for the Contract;
(2) Eliminate Subaccounts from the Variable Account, combine two or more
Subaccounts or substitute a new portfolio for the Portfolio in which a
Subaccount invests;
(3) Transfer assets of the Variable Account, which we determine to be
associated with the class of contracts to which your Contract belongs, to
another variable account;
(4) Withdraw the Variable Account from registration under the 1940 Act;
(5) Operate the Variable Account as an investment management company under
the 1940 Act or in any other form permitted by law;
(6) Cause one or more Subaccounts to invest in new portfolios;
(7) Create new separate accounts or combine separate accounts, including the
Variable Account;
(8) Restrict or eliminate any voting rights as to the Variable Account, as
permitted by applicable laws and regulations; and
(9) Make any changes required by the 1940 Act or the rules or regulations
thereunder or other applicable laws or regulations.
GUARANTEED INTEREST ACCOUNT
The Guaranteed Interest Account is another account to which you may allocate
Purchase Payments or make transfers. We pay a declared interest rate on all
amounts that you have in the Guaranteed Interest Account. Interest is credited
at the guaranteed annual effective interest rate shown on the Schedule or may be
credited at a higher rate. If declared, Southland will determine such higher
interest rates at the
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beginning of a twelve-month period, and such rates shall apply to all amounts in
the Guaranteed Interest Account throughout that twelve-month period.
ACCUMULATION VALUES
ACCUMULATION UNIT VALUE
Purchase Payments allocated to a Subaccount or amounts transferred to a
Subaccount are converted into Accumulation Units. For any Subaccount, the
number of Accumulation Units credited is determined by dividing the dollar
amount directed to the Subaccount by the value of the Accumulation Unit for that
Subaccount for the Valuation Period on which the Purchase Payment is received or
the transfer is effective. In this manner, an increase in Subaccount
Accumulation Value under a Contract occurs by the addition of Accumulation Units
of that Subaccount.
The Accumulation Unit Value for each Subaccount was arbitrarily set initially at
$10 when the Subaccount was established. Thereafter, for any Subaccount, the
Accumulation Unit Value for a Valuation Period equals the Accumulation Unit
Value for the preceding Valuation Period multiplied by the "Accumulation
Experience Factor" (defined below) for the current Valuation Period.
Decreases in Subaccount Accumulation Value under a Contract are effected by the
cancellation of an appropriate number of Accumulation Units of a Subaccount.
Therefore, Surrenders, withdrawals, transfers out of a Subaccount, payment of a
Death Benefit, the application of the Accumulation Value to an Annuity Payment
Option and the deduction of the annual administrative charge all result in the
cancellation of an appropriate number of Accumulation Units of one or more
Subaccounts. Accumulation Units are cancelled as of the end of the Valuation
Period in which the Company received notice of or instructions regarding the
event.
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ACCUMULATION EXPERIENCE FACTOR
For each Subaccount of the Variable Account, the Accumulation Experience Factor
reflects the investment experience of the Portfolio in which that Subaccount
invests and the charges assessed against that Subaccount for a Valuation Period.
The Accumulation Experience Factor is calculated by dividing (1) by (2) and
subtracting (3) from the result, where:
(1) is the result of:
a. the net asset value per share of the Portfolio held in the Subaccount,
determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gains distributions
made by the Portfolio held in the Subaccount, if the "ex-dividend"
date occurs during the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the operations of the
Subaccount.
(2) is the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the last prior Valuation Period.
(3) is the daily factor representing the mortality and expense risk charge
and the administrative charge deducted from the Subaccount adjusted for
the number of days in the Valuation Period.
SUBACCOUNT ACCUMULATION VALUE
The Subaccount Accumulation Value as of the Contract Date is equal to the amount
of the initial Purchase Payment allocated to that Subaccount.
On subsequent Valuation Days, the Subaccount Accumulation Value equals:
1. The number of Accumulation Units in that Subaccount as of the end of the
preceding Valuation Period multiplied by that Subaccount's Accumulation
Unit value for the current Valuation Period; plus
2. Any additional Purchase Payments allocated to that Subaccount during the
current Valuation Period; plus
3. Any Accumulation Value transferred to such Subaccount during the current
Valuation Period; minus
4. Any Accumulation Value transferred from such Subaccount during the
current Valuation Period; minus
5. Any excess transfer charge allocated to such Subaccount during the
current Valuation Period; minus
6. Any Withdrawals (and any withdrawal transaction charges and Surrender
charges arising from such withdrawals) allocated to that Subaccount
during the current Valuation Period; minus
7. The portion of the annual administrative charge applicable to that
Subaccount if a Contract Anniversary occurs during the Valuation Period.
The annual administrative charge is deducted proportionately from your
Subaccount Accumulation Values immediately prior to the deduction.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE
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The Guaranteed Interest Account Accumulation Value as of the Contract Date is
equal to the amount of the initial Purchase Payment allocated to the Guaranteed
Interest Account.
On subsequent Valuation Days, the Guaranteed Interest Account Accumulation Value
equals:
1. The Guaranteed Interest Account Accumulation Value as of the end of the
preceding Valuation Period plus any interest earned during the current
Valuation Period; plus
2. Any additional Purchase Payments allocated to the Guaranteed Interest
Account during the current Valuation Period; plus
3. Any Accumulation Value transferred to the Guaranteed Interest Account
during the current Valuation Period; minus
4. Any Accumulation Value transferred from the Guaranteed Interest Account
during the current Valuation Period; minus
5. Any excess transfer charge allocated to the Guaranteed Interest Account
during the current Valuation Period; minus
6. Any withdrawals (and any withdrawal transaction charges and Surrender
charges) allocated to the Guaranteed Interest Account during the current
Valuation Period.
TRANSFERS
After the Free Look Period, the Accumulation Value in each Subaccount or the
Guaranteed Interest Account may be transferred, upon written request, to any
other Subaccount or the Guaranteed Interest Account subject to the limitations
on transfers involving the Guaranteed Interest Account as detailed in the
following section. The number of free transfers permitted in any one Contract
Year without an excess transfer charge, the total number of transfers permitted
and the excess transfer charge are shown in the table below. Any transfers made
due to the operation of Dollar Cost Averaging or Automatic Rebalancing will not
count toward the limit on the number of transfers allowed free of charge. The
minimum amount that may be transferred from each Subaccount or the Guaranteed
Interest Account is the lesser of $100 or the Accumulation Value of that
Subaccount or the Guaranteed Interest Account.
The table below summarizes the number of transfers available and the associated
charges during any Contract Year.
TRANSFERS AND EXCESS TRANSFERS
PRIOR TO ANNUITY DATE ANNUITY PERIOD
- -------------------------------------------------------------------------------
FREE TRANSFERS 12 4
- -------------------------------------------------------------------------------
TOTAL NUMBER OF TRANSFERS Unlimited 4
PERMITTED
- -------------------------------------------------------------------------------
EXCESS TRANSFER CHARGE $25 for each transfer in excess of Not Applicable
12 during any Contract Year
- -------------------------------------------------------------------------------
We reserve the right to limit the number of transfers per Contract Year to
twelve and to limit, modify or eliminate the transfer privilege.
Form 15208-95
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TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT
Once during the first 30 days of each Contract Year, you may transfer amounts
from the Guaranteed Interest Account. Transfer requests received within 30 days
prior to the Contract Anniversary will be deemed requests to transfer on the
Contract Anniversary. A request to transfer from the Guaranteed Interest
Account that is received on the Contract Anniversary or during the next 30 days
will be processed if it is the first such transfer received during the 30-day
period. Transfer requests received at any other time will not be processed.
The maximum transfer amount from the Guaranteed Interest Account in any Contract
Year is the greatest of:
1. 25% of the Guaranteed Interest Account Accumulation Value immediately
prior to the transfer;
2. $100; or
3. the sum of the amounts that were transferred out of and withdrawn from
the Guaranteed Interest Account in the prior Contract Year. (For purposes
of calculating this sum, all withdrawals, including those made under the
Systematic Withdrawal Program are included.)
EXCESS TRANSFER CHARGE
If you exceed the number of free transfers allowed, you will be assessed an
excess transfer charge as shown in the above table. This charge will be
deducted proportionately from your Subaccount Accumulation Values and your
Guaranteed Interest Account Accumulation Value immediately prior to the
deduction.
DOLLAR COST AVERAGING
Prior to the Annuity Date, if you have at least $10,000 of Accumulation Value in
either the [Fidelity VIP Money Market] Subaccount or the [Janus Short-Term Bond]
Subaccount, you may choose to transfer a specified dollar amount each month from
one of these Subaccounts and have a percentage of that amount transferred to
other Subaccounts of the Variable Account ("Dollar Cost Averaging"). You may
elect the Dollar Cost Averaging transfer option at any time prior to the Annuity
Date by Written Notice.
The minimum amount that you may elect to transfer each month is $100. The
maximum amount that you may transfer is equal to the Subaccount Accumulation
Value (when the election is made) of the Subaccount from which the transfer is
taken divided by twelve.
The percentages to be transferred to the other Subaccounts must be designated in
whole numbers. No specific dollar designation may be made to the Subaccounts.
If you elect to transfer to a particular Subaccount, the minimum percentage that
may be transferred to that Subaccount is 1% of the total amount transferred.
The transfer date will be the same calendar day each month as the Contract Date.
If this calendar day is not a Valuation Day, the next Valuation Day will be
used. If, on any transfer date, the Accumulation Value in the selected
Subaccount is equal to or less than the amount you have elected to have
transferred, the entire amount will be transferred, and this option will end.
Dollar Cost Averaging will end as of the Valuation Day immediately preceding the
Annuity Date.
You may change the transfer amount or the Subaccount to which transfers are to
be made once each Contract Year. You may cancel this election by Written Notice
at least seven days before the next transfer date. Any transfer under this
option will not be included for purposes of computing the excess transfer
charge.
AUTOMATIC REBALANCING
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You may choose to automatically transfer, on a quarterly basis, between and
among specified Subaccounts, in order to achieve a particular percentage
allocation among such Subaccounts ("Automatic Rebalancing"). Percentage
allocations must be in whole numbers. Once elected, Automatic Rebalancing
transfers begin on the first Valuation Day of the next calendar quarter (or, if
later, the next calendar quarter after expiration of the Free Look Period).
Automatic Rebalancing transfers do not count as one of the 12 free transfers
available during any Contract Year.
You may change your Automatic Rebalancing allocations at any time. Such
allocation changes will take effect as of the Valuation Day that we receive your
instructions. You may stop Automatic Rebalancing at least seven calendar days
before the first Valuation Day in a new calendar quarter.
If Automatic Rebalancing is elected at the same time as Dollar Cost Averaging or
when Dollar Cost Averaging is in effect, Automatic Rebalancing will be postponed
until the first Valuation Day in the calendar quarter following the termination
of Dollar Cost Averaging.
WITHDRAWALS
After the Free Look Period and prior to the Annuity Date, you may by written
request withdraw all or part of the Cash Surrender Value of this Contract. A
withdrawal may incur withdrawal transaction charges and may incur Surrender
charges. Withdrawals may be subject to a 10% penalty tax.
In no case will you be allowed to withdraw more than your Cash Surrender Value.
A withdrawal will result in a decrease in the Accumulation Value of this
Contract as described in the Accumulation Values section above.
There are three withdrawal options available:
1. "Demand Withdrawal Option";
2. "Systematic Withdrawal Program"; and
3. "IRA Income Program".
DEMAND WITHDRAWAL OPTION
After the Free Look Period and prior to the Annuity Date, you may make a Demand
Withdrawal. The minimum Demand Withdrawal amount is $100. The maximum Demand
Withdrawal amount is the Cash Surrender Value minus $500. If the amount of
Demand Withdrawal you specify exceeds the maximum, the amount of the withdrawal
will automatically be lowered to the maximum.
Demand Withdrawals are deemed to be withdrawn in the following order:
1. Accumulation Value in excess of aggregate Purchase Payments;
2. Purchase Payments held more than five full Contract Years since the
Contract Anniversary immediately following the end of the Contract Year
in which the Purchase Payment was made;
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3. The amount by which 15% of the Accumulation Value as of the last Contract
Anniversary, minus any withdrawals (including any withdrawal transaction
charges and Surrender charges arising from such withdrawals) already made
during the Contract Year, which are not considered withdrawals of
Purchase Payments, exceeds earnings, if any;
4. Purchase Payments held less than five full Contract Years since the
Contract Anniversary at the end of the Contract Year in which the
Purchase Payment was made, withdrawn on a first-in, first-out basis.
Unless you specify otherwise, the amount of the withdrawal will be taken from
each Subaccount and the Guaranteed Interest Account in which you are invested in
the same proportion that the amount of Accumulation Value in that Subaccount or
the Guaranteed Interest Account bears to the total Accumulation Value
immediately prior to the withdrawal. You may not withdraw from the Guaranteed
Interest Account an amount that is greater than the total withdrawal amount
requested multiplied by the ratio of the Guaranteed Interest Account
Accumulation Value to the total Accumulation Value immediately prior to the
withdrawal.
WITHDRAWAL TRANSACTION CHARGE
After the Free Look Period and prior to the Annuity Date, you may make one
Demand Withdrawal each Contract Year without a withdrawal transaction charge.
If you take more than one Demand Withdrawal in a Contract Year, we will impose a
withdrawal transaction charge. This charge is equal to the lesser of $25 or 2%
of the amount withdrawn.
SYSTEMATIC WITHDRAWAL PROGRAM
You may elect this option by Written Notice at any time prior to the Annuity
Date. You may choose to receive systematic withdrawals on a monthly or
quarterly basis from the Accumulation Value ("Systematic Withdrawal Program").
Withdrawals will be deducted proportionately from your Subaccount Accumulation
Values and your Guaranteed Interest Account Accumulation Value immediately prior
to the withdrawal. The withdrawals under this option may not start sooner than
one month after the Contract Date. You may select the day of the month when the
withdrawals will be made. If no day is selected, the withdrawals will be made
on the same day of the month as the Contract Date. If this day is not a
Valuation Day, the withdrawal will be made on the next Valuation Day. You may
select a dollar amount or a percentage amount for your withdrawal subject to the
following maximums:
MONTHLY 1.25% of the Accumulation Value on the date of withdrawal
QUARTERLY 3.75% of the Accumulation Value on the date of withdrawal
Except as described in the following sections, payments may not be less than
$100.
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage listed above, the amount
withdrawn will be reduced to equal such percentage. If a percentage amount is
selected that exceeds the maximum applicable percentage listed above, the amount
withdrawn will be reduced to equal such percentage. In either case, if the
amount to be withdrawn is then less than $100, the withdrawal will be made and
systematic withdrawals will be ended.
If systematic withdrawals are ended due to an insufficient Accumulation Value,
any remaining Cash Surrender Value will be paid to you. This will result in the
termination of the Contract.
You may change the amount or percentage of your systematic withdrawals once each
Contract Year. You may cancel your election at any time by Written Notice at
least seven days prior to the next scheduled withdrawal date.
If a Demand Withdrawal is made during a Contract Year when the Systematic
Withdrawal Program is in effect, the remaining payments to be made under the
Systematic Withdrawal Program for that Contract Year will be considered Demand
Withdrawals for purposes of calculating withdrawal transaction charges
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and any applicable Surrender charges. Otherwise, systematic withdrawals will not
be assessed a Surrender Charge. However, the amount available for systematic
withdrawals is never greater than the Cash Surrender Value.
IRA INCOME PROGRAM
If you have an IRA Contract, we will send you withdrawals to accommodate IRS
required minimum distribution rules. These withdrawals will begin automatically
if the minimum distributions are not otherwise satisfied.
SURRENDERS
You may Surrender this Contract for its Cash Surrender Value at any time prior
to the Annuity Date. The Surrender charge shown on the Schedule will be
deducted upon Surrender. The Surrender charge is applicable only to the
Surrender of Purchase Payments held less than five full Contract Years since the
Contract Anniversary at the end of the Contract Year in which the Purchase
Payment was made.
Surrenders may be subject to a 10% penalty tax.
No Surrender may be made on or after the Annuity Date or with respect to any
amounts applied to an Annuity Option.
DEATH BENEFIT
DEATH BENEFIT PRIOR TO THE ANNUITY DATE
Upon the death of an Owner prior to the Annuity Date, any Enhanced Death
Benefit (as defined below) will be paid according to the provisions in the
Owners and Death of Owners and the Required Distributions sections. We will pay
the Enhanced Death Benefit in one lump sum unless the Beneficiary elects an
Annuity Payment Option within 60 days of our receiving Due Proof of Death. If a
one sum payment is made, it will be paid within seven days of determination of
the amount of the payment unless we are authorized by appropriate regulatory
authorities to defer payment. If the Enhanced Death Benefit is paid under an
Annuity Payment Option, the Beneficiary becomes the Annuitant and the contingent
Beneficiary becomes the contingent Annuitant. The available Annuity Payment
Options are described in the Annuity Payment Option section. Contact our
Customer Service Center or your agent for more information.
ENHANCED DEATH BENEFIT
The Enhanced Death Benefit is calculated as of the Valuation Day on which we
receive Due Proof of Death and all information necessary to process the Death
Benefit claim. The Enhanced Death Benefit is the greatest of the following
amounts:
1. Purchase Payments made, less withdrawals (and charges associated with
such withdrawals) accumulated at the Enhanced Death Benefit Accumulation
Rate shown in the Schedule, up to a maximum of two times (A - B), where A
= the sum of all Purchase Payments, and B = the sum of all withdrawals
(and charges associated with such withdrawals)
2. The Accumulation Value.
3. The Step-Up Benefit (as defined below), plus Purchase Payments made, less
withdrawals (and charges associated with such withdrawals) since the last
Step-Up Anniversary (as defined below).
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The Step-Up Benefit at issue is the initial Purchase Payment. As of
each Step-Up Anniversary, the then current Accumulation Value is compared
to the prior Step-Up Benefit increased by Purchase Payments made, less
withdrawals (and charges associated with such withdrawals) since the last
Step-Up Anniversary. The greater of these becomes the new Step-Up
Benefit.
The Step-Up Anniversaries are every 6th Contract Anniversary for the
duration of the Contract (i.e., the 6th, 12th, 18th, etc.).
The amount payable to the Beneficiary is the Enhanced Death Benefit as
calculated above minus any taxes incurred but not deducted.
ANNUITY PAYMENTS
ELECTION AND CHANGES OF ANNUITY DATE
The Annuity Date may be elected on your application, but may not be earlier than
the second Contract Anniversary. If no Annuity Date is elected in the
application, the Annuity Date will be the first day of the month following the
Annuitant's 85th birthday or on the first day of the month following the tenth
Contract Anniversary, whichever occurs later. You may change the Annuity Date
at any time prior to 60 days prior to the Annuity Date currently elected by
Written Notice.
ELECTION AND CHANGES OF ANNUITY PAYMENT OPTION
The Owner elects the Annuity Payment Option. Once elected, the Owner may change
the Annuity Payment Option at any time prior to the Annuity Date. In selecting
an Annuity Payment Option, the Owner must determine whether the payments will be
variable or fixed in amount. If variable, the Owner must determine from which
Subaccounts variable Annuity Payments are to be made. The Owner may select a
combination of fixed and variable payments as described below. If the Owner has
not chosen an Annuity Payment Option and if the Annuitant is living on the
Annuity Date, then:
1. Any Guaranteed Interest Account Accumulation Value will be applied to
purchase fixed Annuity Payments and proceeds from each Subaccount
Accumulation Value will be applied to purchase variable Annuity Payments
from each such Subaccount; and
2. The Annuity Payment Option will be Annuity Payment Option II (with a
Benchmark Rate of Return of 3% for any variable Annuity Payments) with a
designated period of 20 years.
The Owner must specifically elect that the Annuitant have the right to commute
payments as provided in the Commuting section.
Any Death Benefit proceeds to be applied under an Annuity Option will be
allocated to the Subaccounts and/or the Guaranteed Interest Account as
instructed by the Beneficiary.
ANNUITY PAYMENT OPTIONS - GENERAL
The Annuity Payment Option becomes effective on the Annuity Date. The Annuity
Payment Option utilizes the Accumulation Value under the Contract on the Annuity
Date, less the amount of any taxes incurred by the Company but not yet
deducted, to activate the Annuity Payment Option selected by the Owner. If such
taxes are deducted at this time, the taxes will be deducted proportionately from
your Subaccount Accumulation Values and your Guaranteed Interest Account
Accumulation Value immediately prior to the deduction.
VARIABLE ANNUITY PAYMENTS
Form 15208-95
21
<PAGE>
Variable Annuity Payments are Annuity Payments that:
1. Are not pre-determined or guaranteed as to dollar amount; and
2. Vary in amount with the investment experience of the Subaccount(s) which
you select.
The dollar amount of an initial variable Annuity Payment attributable to a
Subaccount is determined from the attached Annuity Payment Option Tables using
that portion of the Accumulation Value applied to that Subaccount as of the
Annuity Date. Each Table reflects a different Annuity Payment Option, including
the selection of either a 3% or 5% Benchmark Rate of Return.
The dollar amount of each subsequent variable Annuity Payment attributable to a
Subaccount is determined by multiplying the number of Annuity Units of that
Subaccount credited under a Contract by the Annuity Unit value for that
Subaccount for the Valuation Period as of which the Annuity Payment is made.
The number of Annuity Units of a Subaccount credited under a Contract is
determined by dividing the dollar amount of the initial variable Annuity Payment
attributable to that Subaccount by the Annuity Unit value for that Subaccount
for the Valuation Period ending on the Annuity Date or during which the Annuity
Date falls. The number of Annuity Units attributable to each Subaccount under a
Contract remains fixed unless there is an exchange of Annuity Units, as provided
below.
ANNUITY UNIT VALUE
The Annuity Unit value of each Subaccount for any Valuation Period is calculated
by dividing (2) by (3), and then multiplying the result by (1), where:
(1) is the Annuity Unit value for the immediately preceding Valuation
Period;
(2) is the Annuity Experience Factor for the current Valuation Period; and
(3) is a special factor designed to compensate for the Benchmark Rate of
Return of 3% or 5% (as applicable) built into the Table used to compute
the first variable Annuity Payment.
BENCHMARK RATE OF RETURN
You must elect either a 3% or 5% Benchmark Rate of Return. Your election may not
be changed after the Annuity Date. Electing the 5% Benchmark Rate of Return
would mean a higher initial payment but more slowly rising or more rapidly
falling subsequent payments if actual investment experience varied from 5%. The
3% Benchmark Rate of Return assumption would have the opposite effect. If the
actual annual rate of return is 3% or 5%, the Annuity Payments will be level if
you elected either the 3% or 5% respectively.
EXCHANGE OF ANNUITY UNITS
The Annuitant may exchange the dollar value of all or a portion of the Annuity
Units in a Subaccount for an equivalent dollar amount of Annuity Units of
another Subaccount. The limit on exchanges of Annuity Units is shown in the
table in the Transfer section. After the exchanges, the number of Annuity
Units in the Subaccount from which you are transferring will be reduced by the
number of Annuity Units exchanged. The number of Annuity Units in the
Subaccount to which the exchange is made will be increased by the number of
Annuity Units acquired in the exchange.
FIXED ANNUITY PAYMENTS
Fixed Annuity Payments are Annuity Payments which remain fixed as to dollar
amount throughout the Annuity Period. As of the Annuity Date, any Subaccount
Accumulation Value applied to purchase fixed Annuity Payments will be allocated
to the Guaranteed Interest Account. The fixed Annuity Payment will be that
amount shown in the attached Tables. If the fixed Annuity Payment is credited
at an interest rate
Form 15208-95
22
<PAGE>
above the guaranteed minimum rate, the dollar amount of each
payment will be greater than the guaranteed dollar amount for the time period
that the higher rate is declared.
COMBINATION ANNUITY PAYMENTS
Combination Annuity Payments are Annuity Payments where a portion of the payment
is variable and a portion of the payment is fixed as to dollar amount. If a
combination Annuity Payment is elected, at least 25% of the proceeds must be
allocated to each elected option. As of the Annuity Date, we will allocate
proceeds between the Guaranteed Interest Account and the Subaccounts to meet the
proportions selected. Any amount of Accumulation Value to be transferred to or
from the Guaranteed Interest Account will be allocated among the Subaccounts in
which you are invested in the same proportion that each Subaccount Accumulation
Value bears to your Variable Account Accumulation Value. Once a combination
Annuity Payment is selected, the Annuitant may subsequently increase the
allocation to a fixed Annuity Payment, but may not increase the allocation to a
variable Annuity Payment.
ANNUITY PAYMENT OPTIONS
Under each Annuity Payment Option, the payment period is elected from one of the
following:
OPTION I. PAYMENTS FOR A DESIGNATED PERIOD. Payments will be made in 1, 2, 4,
or 12 installments per year as elected for a designated period, which may be 5
to 30 years. If the Annuitant dies before the end of the designated period,
payments will be continued to the contingent Annuitant (or to the Annuitant's
estate, if no contingent Annuitant has been named) until the end of the
designated period. If variable Annuity Payments are elected, the dollar amount
of each payment will vary, based on the Annuity Unit value(s) of the
Subaccount(s) selected. Variable Annuity Payments may only be elected if prior
to the Annuity Date, the Owner has made an irrevocable election to give the
Annuitant the right to commute any remaining designated period installments
under this option. If fixed Annuity Payments are elected, the dollar amount of
each payment will depend upon the designated period elected and will be equal
unless one or more payments are based on an interest rate in excess of the
guaranteed minimum rate. The amount of the first monthly payment for each
$1,000 of proceeds applied is shown in Annuity Payment Option Table I.
OPTION II. LIFE INCOME WITH PAYMENTS FOR A DESIGNATED PERIOD. Payments will be
made in 1, 2, 4, or 12 installments per year throughout the Annuitant's
lifetime, or if longer, for a period of 5, 10, 15, or 20 years as elected. If
the Annuitant dies before the end of the designated period, payments will be
continued to the contingent Annuitant (or to the Annuitant's estate, if no
contingent Annuitant has been named) until the end of the designated period.
The amount of each payment will depend upon the Annuitant's age at the time the
first payment is due and the designated period elected. If variable Annuity
Payments are elected, the dollar amount of each payment will vary based on the
Annuity Unit value(s) of the selected Subaccount(s). If fixed Annuity Payments
are elected, the dollar amount will be equal unless one or more payments are
based on an interest rate in excess of the guaranteed minimum rate. The amount
of the first monthly payout for each $1,000 of proceeds applied is shown in
Annuity Payment Option Table II. This option is only available for ages shown in
these Tables.
OPTION III. JOINT AND LAST SURVIVOR. Payments will be made in 1, 2, 4, or 12
installments per year as elected while both Annuitants are living. Upon the
death of one Annuitant, the survivor's Annuity Payment will be paid throughout
the lifetime of the surviving Annuitant. If variable Annuity Payments are
elected, the number of Annuity Units supporting each payment will be level while
both Annuitants are living and upon the death of one Annuitant will be reduced
to 2/3rds of the number of Annuity Units supporting each payment while both
Annuitants were living. The dollar amounts of each payment will vary based on
the Annuity Unit Value(s) of the selected Subaccount(s). If fixed Annuity
Payments are elected, the dollar amount of each payment will be level while both
Annuitants are living and upon the death of one Annuitant will be reduced to
2/3rds of the installment dollar amount while both Annuitants were living.
OPTION IV. OTHER. Payments will be made in any other manner as agreed upon in
writing between you or the Beneficiary and us.
Form 15208-95
23
<PAGE>
If you have elected to have payments made less frequently than monthly, the
payment amount is adjusted according to the factors in Payments Other Than
Monthly section.
COMMUTING
If the Owner elects, the Annuitant may commute remaining designated period
payments under Annuity Payment Option I. If the election allows, the contingent
Annuitant may commute remaining designated period payments after the death of
the Annuitant under Annuity Payment Options I or II. If no contingent Annuitant
is named, any remaining designated period payments after the death of the
Annuitant may be commuted by the estate. Any computation shall be at the
appropriate Benchmark Rate of Return.
EXCESS INTEREST
We may declare that fixed Annuity Payments will be computed based on an interest
rate above the guaranteed minimum rate. We guarantee that any higher rate, once
declared effective, will remain in effect for a 12-month period.
MINIMUM AMOUNTS
The minimum amount that may be applied under any Annuity Payment Option is
$2,000. If the proceeds to be applied are less than $2,000, or, if Annuity
Payments are ever less than $20, we may change the frequency of Annuity Payments
to result in payments of at least that amount or require a one sum payment, in
which case the Contract would be terminated.
INCOME PROTECTION
Unless elected by the Owner, an Annuitant or contingent Annuitant does not have
the right to commute, assign, transfer to a third party or encumber amounts held
or future Annuity Payments to become payable pursuant to this Contract. To the
extent provided by law, such proceeds and Annuity Payments are not subject to
any Annuitant's debts, contracts, or engagements.
PAYMENTS OTHER THAN MONTHLY
Tables at the end of the Contract show initial monthly payments for Annuity
Payment Options I and II. To arrive at annual, semiannual, or quarterly
payments, multiply the appropriate figures by 11.839, 5.963, or 2.993
respectively for a Guaranteed Interest Rate or Benchmark Rate of Return of 3%,
and, by 11.736, 5.939 or 2.988 respectively if the Benchmark Rate of Return is
5%. Factors for other designated periods or for other options that may be
provided by mutual agreement will be provided upon reasonable request.
GENERAL CONTRACT PROVISIONS
THE CONTRACT
This Contract, the application, riders and endorsements, make up the entire
Contract between you and us. A copy of the initial application will be attached
to this Contract at issue. In the absence of fraud, all statements made in an
application will be considered representations and not warranties. No statement
will be used to void this Contract or to deny a claim unless it is contained in
the application.
CONFORMITY WITH MONTANA STATUTES
The provisions of this Contract conform to the minimum requirements of Montana
law and control over any conflicting statutes of any state in which an insured
resides on or after the effective date of such insured's coverage.
Form 15208-95
24
<PAGE>
AGE
The Owner's Age is shown on the Schedule. This is defined as the Owner's Age as
of last birthday on the Contract Date. The Annuitant's attained age on any date
for which age is to be determined is the Annuitant's age as of last birthday.
PROCEDURES
We must receive any election, designation, assignment or any other change
request you make in writing, except those specified on the application. We may
require a return of this Contract for any Contract change or for paying its Cash
Surrender Value. Any change will not affect payments made or action taken by us
before the change is recorded at our Customer Service Center.
In the event of the Owner's death before the Annuity Date, we should be informed
as soon as possible. Claim procedure instructions will be sent to your
Beneficiary immediately. We require a certified copy of the death certificate
and may require proof of the Owner's Age. We may require the Beneficiary and
the Owner's next of kin to sign authorizations as part of due proof.
25
<PAGE>
DEFERRAL OF PAYMENT
Withdrawals or other payments from the Variable Account will usually be made
within seven days of receipt of the request at our Customer Service Center.
However, we may be permitted to defer such payment for any of the following
reasons:
1. When the NYSE is closed for trading for other than usual weekends or
holidays, or trading on the NYSE is otherwise restricted;
2. When an emergency exists as determined by the SEC; or
3. When the SEC permits a delay for protection of Contract Owners.
We may defer up to six months the payment of any withdrawal or other payments
from the Guaranteed Interest Account.
TAX QUALIFICATIONS
This Contract is intended to qualify as an annuity contract under the Code. To
that end, all terms and provisions of the Contract shall be interpreted to
ensure or maintain such qualification, notwithstanding any other provisions to
the contrary. Payments and distributions under this Contract shall be made in
the time and manner necessary to maintain such qualification under the
applicable provisions of the Code in existence at the time this Contract is
issued. We reserve the right to amend this Contract, to reflect any
clarifications or changes that may be needed or are appropriate, or to conform
it to any applicable changes in the tax requirements. Such changes will apply
uniformly to all Contracts that are affected. We will send you written notice
of any such changes.
CONTRACT CHANGES
Only the President, a Vice President, or the Secretary of the Company has
authority to agree on behalf of the Company to any alteration of this Contract
or to any waiver of the right or requirements of the company.
COLLATERAL ASSIGNMENT
The Owner may assign this Contract as collateral security upon Written Notice to
us. Once it is recorded with us, the rights of the Owner and Beneficiary are
subject to the assignment. It is your responsibility to make sure the
assignment is valid.
INCONTESTABILITY
We will not contest the statements in an application for this Contract after the
Contract Date.
MISSTATEMENT OF AGE
If the Age has been misstated in an application, the amounts payable or benefits
provided by this Contract will be those that the Purchase Payments made would
have purchased at the actual Age.
PERIODIC REPORTS
Prior to the Annuity Date, we will send you a report within thirty days after
the end of each calendar quarter. This report will show the then current
Subaccount and Guaranteed Interest Account Accumulation Values, total
Accumulation Value, Cash Surrender Value, Enhanced Death Benefit and activity
under the Contract since the last report. During the Annuity Period, we will
send you a report within thirty days after the end of each calendar year showing
any information required by law. The reports will also include any other
information that may be required by the insurance supervisory official of the
jurisdiction in which this Contract is delivered.
Form 15208-95
26
<PAGE>
BASIS OF COMPUTATIONS
Any paid-up annuity Cash Surrender Values or Death Benefits that may be
available under this Contract are not less than the minimums required on the
Contract Date by the state in which this Contract was delivered. A detailed
statement of the method of computation of Accumulation Values under this
Contract has been filed with the insurance department of the state in which the
application was signed, if requested by that state.
TAXES
Taxes relating to this Contract paid by us to any governmental entity will be
deducted from the Purchase Payments or Accumulation Value. We will, at our sole
discretion, determine when taxes have resulted from: the investment experience
of the Subaccounts; receipt by us of the Purchase Payments; Surrenders or
withdrawals; or the start of an Annuity Option. We may, in our sole discretion,
pay taxes when incurred and deduct that amount from the Accumulation Value at a
later date. Payment at an earlier date does not waive any right we may have to
deduct amounts at this later date. We will deduct any withholding taxes
required by applicable law.
NON PARTICIPATING
This Contract does not participate in our surplus earnings.
CUSTOMER SERVICE CENTER
Our Customer Service Center is at the address shown in the Schedule. Unless you
are otherwise notified:
1. All requests and payments should be sent to us at our Customer Service
Center; and
2. All transactions are effective as of the date the required information is
accepted at our Customer Service Center.
Form 15208-95
27
<PAGE>
ANNUITY PAYMENT OPTION TABLES
OPTION I TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
- --------------------------------------------------------------
No. of Years Monthly No. of Years Monthly
Payable Installments Payable Installments
- --------------------------------------------------------------
5 $17.92 20 $5.53
6 15.16 21 5.34
7 13.18 22 5.17
8 11.70 23 5.01
9 10.55 24 4.86
10 9.63 25 4.73
11 8.86 26 4.61
12 8.26 27 4.50
13 7.73 28 4.39
14 7.28 29 4.30
15 6.89 30 4.21
16 6.55
17 6.25
18 5.98
19 5.75
- --------------------------------------------------------------
Form 15208-95
28
<PAGE>
OPTION I TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
- --------------------------------------------------------------------
No. of Years Monthly No. of Years Monthly
Payable Installments Payable Installments
- ---------------------------------------------------------------------
5 $18.79 20 $6.57
6 16.04 21 6.39
7 14.08 22 6.23
8 12.61 23 6.08
9 11.47 24 5.94
10 10.56 25 5.82
11 9.82 26 5.71
12 9.21 27 5.61
13 8.69 28 5.51
14 8.25 29 5.43
15 7.88 30 5.35
16 7.55
17 7.26
18 7.00
19 6.77
- -------------------------------------------------------------------------------
Form 15208-95
29
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Monthly Installment Last Birthday Monthly Installment
when First When First
Installment is Installment is
Payable Payable
- -----------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 2.98 2.98 2.97 2.97 45 3.75 3.74 3.72 3.69
21 2.99 2.99 2.99 2.99 46 3.81 3.79 3.77 3.73
22 3.01 3.01 3.01 3.01 47 3.86 3.85 3.82 3.78
23 3.03 3.03 3.03 3.02 48 3.92 3.91 3.88 3.83
24 3.05 3.05 3.05 3.04 49 3.98 3.96 3.93 3.88
25 3.07 3.07 3.07 3.06 50 4.05 4.03 3.99 3.93
26 3.09 3.09 3.09 3.09 51 4.11 4.09 4.05 3.99
27 3.12 3.12 3.11 3.11 52 4.19 4.16 4.11 4.04
28 3.14 3.14 3.14 3.13 53 4.26 4.23 4.18 4.10
29 3.17 3.16 3.16 3.15 54 4.34 4.31 4.25 4.16
30 3.19 3.19 3.18 3.18 55 4.42 4.39 4.32 4.22
31 3.22 3.22 3.21 3.20 56 4.51 4.47 4.40 4.29
32 3.25 3.24 3.24 3.23 57 4.60 4.56 4.47 4.35
33 3.27 3.27 3.27 3.26 58 4.70 4.65 4.56 4.42
34 3.31 3.30 3.30 3.29 59 4.81 4.75 4.64 4.48
35 3.34 3.33 3.33 3.32 60 4.92 4.85 4.73 4.55
36 3.37 3.37 3.36 3.35 61 5.04 4.96 4.82 4.62
37 3.41 3.40 3.39 3.38 62 5.16 5.07 4.91 4.69
38 3.44 3.44 3.41 3.41 63 5.30 5.19 5.01 4.75
39 3.48 3.48 3.47 3.45 64 5.44 5.32 5.11 4.82
40 3.52 3.52 3.50 3.49 65 5.59 5.45 5.21 4.89
41 3.56 3.56 3.54 3.52 66 5.75 5.59 5.32 4.95
42 3.61 3.60 3.59 3.56 67 5.92 5.73 5.42 5.01
43 3.66 3.65 3.63 3.60 68 6.10 5.89 5.53 5.07
44 3.70 3.69 3.67 3.65 69 6.29 6.04 5.63 5.13
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
30
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
when First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- -----------------------------------------------------------------------------------------------------------------------------
5 Years 10 15 20 5 Years 10 15 20
Unisex Certain Years Years Years Unisex Certain Years Years Years
Certain Certain Certain Certain Certain Certain
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
70 6.50 6.21 5.74 5.18 85 11.33 8.78 6.78 5.51
71 6.72 6.38 5.84 5.23 86 11.75 8.90 6.80 5.51
72 6.95 6.55 5.95 5.27 87 12.16 9.01 6.82 5.51
73 7.20 6.73 6.04 5.31 88 12.58 9.11 6.83 5.51
74 7.46 6.91 6.14 5.35 89 12.98 9.20 6.84 5.51
75 7.74 7.10 6.23 5.38 90 13.39 9.27 6.85 5.51
76 8.03 7.29 6.31 5.40 91 13.78 9.34 6.86 5.51
77 8.34 7.47 6.39 5.43 92 14.16 9.40 6.86 5.51
78 8.67 7.66 6.46 5.45 93 14.52 9.44 6.87 5.51
79 9.01 7.84 6.53 5.46 94 14.88 9.49 6.87 5.51
80 9.37 8.02 6.59 5.47 95 15.22 9.52 6.87 5.51
81 9.74 8.19 6.64 5.48
82 10.12 8.35 6.68 5.49
83 10.52 8.51 6.72 5.50
84 10.92 8.65 6.75 5.50
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
31
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
when First Monthly Installment when First Monthly Installment
Installment is Installment is
Payable Payable
- -----------------------------------------------------------------------------------------------------------------------------
5 Years 10 15 20 5 Years 10 15 20
Unisex Certain Years Years Years Unisex Certain Years Years Years
Certain Certain Certain Certain Certain Certain
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 4.27 4.27 4.27 4.27 40 4.77 4.76 4.75 4.72
16 4.28 4.28 4.28 4.28 41 4.81 4.80 4.78 4.75
17 4.29 4.29 4.29 4.29 42 4.85 4.84 4.82 4.79
18 4.31 4.30 4.30 4.30 43 4.89 4.88 4.85 4.82
19 4.32 4.32 4.31 4.31 44 4.94 4.92 4.89 4.86
20 4.33 4.33 4.32 4.32 45 4.98 4.97 4.93 4.89
21 4.34 4.34 4.34 4.33 46 5.03 5.01 4.98 4.93
22 4.36 4.35 4.35 4.34 47 5.08 5.06 5.02 4.97
23 4.37 4.37 4.36 4.36 48 5.14 5.11 5.07 5.02
24 4.39 4.38 4.38 4.37 49 5.19 5.16 5.12 5.06
25 4.40 4.40 4.39 4.39 50 5.25 5.22 5.17 5.10
26 4.42 4.41 4.41 4.40 51 5.31 5.28 5.23 5.15
27 4.44 4.43 4.43 4.42 52 5.38 5.34 5.28 5.20
28 4.45 4.45 4.44 4.44 53 5.45 5.41 5.34 5.25
29 4.47 4.47 4.46 4.46 54 5.52 5.48 5.40 5.30
30 4.49 4.49 4.48 4.47 55 5.60 5.55 5.47 5.36
31 4.52 4.51 4.50 4.49 56 5.69 5.63 5.54 5.41
32 4.54 4.53 4.53 4.52 57 5.78 5.71 5.61 5.47
33 4.56 4.56 4.55 4.54 58 5.87 5.80 5.68 5.53
34 4.59 4.58 4.57 4.56 59 5.97 5.89 5.76 5.58
35 4.61 4.61 4.60 4.58 60 6.08 5.99 5.84 5.64
36 4.64 4.64 4.63 4.61 61 6.19 6.09 5.92 5.70
37 4.67 4.67 4.65 4.64 62 6.32 6.20 6.01 5.77
38 4.71 4.70 4.68 4.66 63 6.45 6.31 6.10 5.83
39 4.74 4.73 4.71 4.69 64 6.59 6.43 6.19 5.89
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
32
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- -----------------------------------------------------------------------------------------------------------------------------
5 Years 10 15 20 5 Years 10 15 20
Unisex Certain Years Years Years Unisex Certain Years Years Years
Certain Certain Certain Certain Certain Certain
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 6.73 6.56 6.28 5.94 85 12.39 9.72 7.73 6.51
66 6.89 6.69 6.38 6.00 86 12.80 9.83 7.75 6.51
67 7.06 6.83 6.48 6.06 87 13.20 9.94 7.77 6.51
68 7.24 6.97 6.57 6.11 88 13.60 10.03 7.78 6.51
69 7.43 7.12 6.67 6.16 89 13.99 10.11 7.79 6.51
70 7.63 7.28 6.77 6.21 90 14.38 10.18 7.80 6.51
71 7.85 7.44 6.86 6.25 91 14.75 10.24 7.81 6.51
72 8.08 7.60 6.96 6.29 92 15.12 10.30 7.81 6.51
73 8.32 7.78 7.05 6.33 93 15.47 10.34 7.81 6.51
74 8.58 7.95 7.14 6.36 94 15.80 10.38 7.82 6.51
75 8.86 8.13 7.22 6.39 95 16.13 10.42 7.82 6.51
76 9.15 8.30 7.30 6.41
77 9.45 8.48 7.37 6.43
78 9.78 8.66 7.44 6.45
79 10.11 8.83 7.50 6.46
80 10.47 9.00 7.55 6.47
81 10.83 9.16 7.60 6.48
82 11.21 9.31 7.64 6.49
83 11.60 9.46 7.67 6.50
84 11.99 9.59 7.70 6.50
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
33
<PAGE>
THIS CONTRACT IS A FLEXIBLE PREMIUM DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THESE VALUES MAY
INCREASE OR DECREASE BASED ON INVESTMENT EXPERIENCE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. ANNUITY PAYMENTS BEGIN AS OF THE ANNUITY DATE. PURCHASE
PAYMENTS ARE FLEXIBLE AND MAY BE MADE UNTIL THE EARLIER OF THE ANNUITY DATE OR
THE MAXIMUM AGE SHOWN IN THE SCHEDULE. THE ENHANCED DEATH BENEFIT WILL BE PAID
IF THE OWNER DIES PRIOR TO THE ANNUITY DATE.
SOUTHLAND LIFE INSURANCE COMPANY
A Stock Company
- --------------------------------------------------------------------------------
Form 15208-95
34
<PAGE>
EXHIBIT 4(A)(2)
SOUTHLAND LIFE INSURANCE COMPANY
(A TEXAS CORPORATION)
5780 POWERS FERRY ROAD, N. W. ATLANTA, GA 30327-4390
A STOCK COMPANY - ESTABLISHED 1908
[John Q. Doe] [310000004]
AGREEMENT BY SOUTHLAND LIFE INSURANCE COMPANY
Southland Life Insurance Company will pay the benefits described in this
Contract in accordance with the terms of this Contract.
PLEASE READ YOUR CONTRACT CAREFULLY.
This Contract is a legal contract between the Contract Owner and the Company.
FREE LOOK PERIOD
You have the right to examine and return this Contract within ten days after
your receipt. It may be returned by delivering or mailing it to us at our
Customer Service Center. It will then be void from the beginning. Within seven
days after receipt of the Contract at our Customer Service Center, we will
refund the Accumulation Value, in addition to any charges deducted, as of the
date of receipt. If required by state law, we will refund your Purchase
Payment.
This Contract is signed for Southland Life Insurance Company by
/s/ Signature Illegible /s/ Signature Illegible
President Secretary
THIS CONTRACT IS A FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED AND VARIABLE
ANNUITY CONTRACT.
Annuity Payments and other values provided by this Contract, when based on the
investment experience of Southland Separate Account A1 are variable. These
values may increase or decrease based on investment experience and are not
guaranteed as to fixed dollar amount. Annuity Payments begin as of the Annuity
Date. Purchase Payments are flexible and may be made until the earlier of the
Annuity Date or the maximum age shown in the Schedule. The Enhanced Death
Benefit will be paid if the Owner dies prior to the Annuity Date.
CUSTOMER SERVICE CENTER
[P.O. BOX 173789
DENVER, CO 80217-3789
TOLL-FREE NUMBER (800) 224-3035]
Form 15208-95
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
CONTRACT SCHEDULE......................................... 4
Allocation of Initial Purchase Payment.......... 5
Contract Expense Provisions..................... 6
Guaranteed Interest Rate........................ 7
Enhanced Death Benefit Accumulation Rate........ 7
DEFINITIONS............................................... 8
OWNERS, ANNUITANTS AND BENEFICIARIES...................... 11
Owners and Death of Owners...................... 11
Annuitants and Death of Annuitants.............. 11
Beneficiaries and Death of Beneficiaries........ 11
Required Distributions.......................... 12
PURCHASE PAYMENTS......................................... 12
Purchase Payment Allocation..................... 13
VARIABLE ACCOUNT.......................................... 13
GUARANTEED INTEREST ACCOUNT............................... 14
ACCUMULATION VALUES....................................... 14
Accumulation Unit Value......................... 14
Accumulation Experience Factor.................. 15
Subaccount Accumulation Value................... 15
Guaranteed Interest Account Accumulation Value.. 16
TRANSFERS................................................. 16
Transfers and Excess Transfers.................. 16
Transfers from the Guaranteed Interest Account.. 17
Excess Transfer Charge.......................... 17
Dollar Cost Averaging Facility.................. 17
Automatic Rebalancing........................... 18
WITHDRAWALS............................................... 18
Demand Withdrawal Option........................ 18
Withdrawal Transaction Charge................... 19
Systematic Withdrawal Program................... 19
IRA Income Program.............................. 20
SURRENDERS................................................ 20
DEATH BENEFIT............................................. 20
Death Benefit Prior to the Annuity Date......... 20
Enhanced Death Benefit.......................... 20
</TABLE>
Form 15208-95
2
<PAGE>
TABLE OF CONTENTS (cont.)
<TABLE>
<S> <C>
ANNUITY PAYMENTS.......................................... 21
Election and Changes of Annuity Date............ 21
Election and Changes of Annuity Payment Option.. 21
Annuity Payment Options - General............... 22
Variable Annuity Payments....................... 22
Fixed Annuity Payment........................... 23
Combination Annuity Payments.................... 23
Annuity Payment Options......................... 23
Commuting....................................... 24
Excess Interest................................. 24
Minimum Amounts................................. 24
Income Protection............................... 25
Payments Other than Monthly..................... 25
GENERAL CONTRACT PROVISIONS............................... 25
The Contract.................................... 25
Age............................................. 25
Procedures...................................... 25
Deferral of Payment............................. 25
Tax Qualifications.............................. 26
Contract Changes................................ 26
Collateral Assignment........................... 26
Incontestability................................ 26
Misstatement of Age or Sex...................... 26
Periodic Reports................................ 26
Basis of Computations........................... 27
Taxes........................................... 27
Non Participating............................... 27
Customer Service Center......................... 27
ANNUITY PAYMENTS OPTIONS TABLES........................... 28
</TABLE>
Form 15208-95
3
<PAGE>
CONTRACT SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
OWNER: JOHN DOE AGE AND SEX: 35, MALE
- ------------------------------------------------------------
ANNUITANT: JOHN DOE AGE AND SEX: 35, MALE
- ------------------------------------------------------------
CONTRACT DATE: JULY 1, 1995 CONTRACT NUMBER: 310000004
- ------------------------------------------------------------
ANNUITY DATE: AUGUST 1, 2027
- ------------------------------------------------------------
INITIAL PURCHASE PAYMENT: $25,000.00
- ------------------------------------------------------------
MINIMUM FOR EACH SUBSEQUENT $ 500.00
PURCHASE PAYMENT:
- ------------------------------------------------------------
MAXIMUM CUMULATIVE PURCHASE $1,500,000
PAYMENT:
- ------------------------------------------------------------
MAXIMUM DATE TO WHICH PURCHASE OWNER'S AGE 86 OR THE
PAYMENTS MAY BE MADE: ANNUITY DATE, IF EARLIER
- ------------------------------------------------------------
CUSTOMER SERVICE CENTER: CUSTOMER SERVICE CENTER
P.O. BOX 173789
DENVER, CO 80217-3789
- ------------------------------------------------------------
</TABLE>
Form 15208-95
4
<PAGE>
CONTRACT SCHEDULE (CONT.)
ALLOCATION OF INITIAL PURCHASE PAYMENT
<TABLE>
<S> <C>
[Alger American Small Capitalization Subaccount] 0%
[Alger American Growth Subaccount] 0%
[Alger American MidCap Growth Subaccount] 10%
[Alger American Leveraged AllCap Subaccount] 0%
[INVESCO Industrial Income Subaccount] 10%
[INVESCO Utilities Subaccount] 0%
[Janus Growth Subaccount] 5%
[Janus Agressive Growth Subaccount] 15%
[Janus Worldwide Growth Subaccount] 0%
[Janus International Growth Subaccount] 0%
[Janus Balanced Subaccount] 0%
[Janus Short-Term Bond Subaccount] 0%
[Fidelity VIP Money Market Subaccount] 0%
[Fidelity VIP High IncomeSubaccount] 0%
[Fidelity VIP Equity-Income Subaccount] 0%
[Fidelity VIP Growth Subaccount] 0%
[Fidelity VIP Overseas Subaccount] 20%
[Fidelity VIP II Investment Grade Bond Subaccount] 15%
[Fidelity VIP II Asset Manager Subaccount] 15%
[Fidelity VIP II Index 500 Subaccount] 0%
[Fidelity VIP II Contrafund Subaccount] 0%
Guaranteed Interest Account 10%
</TABLE>
If you elect to invest in a particular investment option, at least 1% of your
Purchase Payment must be allocated to that option. All percentage allocations
must be in whole numbers.
Form 15208-95
5
<PAGE>
CONTRACT SCHEDULE (CONT.)
CONTRACT EXPENSE PROVISIONS
OWNER TRANSACTION EXPENSES (Deducted from the Accumulation Value)
1. Excess Transfer Charges: Refer to the Transfer section for details.
2. Withdrawal Charges: Refer to the Withdrawal section for details.
3. Surrender Charge: This charge is deducted upon Surrender or Withdrawal of
Purchase Payments held less than five full Contract Years since the end of
the Contract Year in which the Purchase Payment was made. It is calculated
as a percentage of the Purchase Payments withdrawn or surrendered. The
percentage is based on the number of Contract Anniversaries since the
Contract Year in which each Purchase Payment was made.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CONTRACT ANNIVERSARIES SINCE 0 1 2 3 4 5 6
PURCHASE PAYMENT WAS MADE: and
more
- ------------------------------------------------------------------
PERCENTAGE: 7% 6% 5% 4% 3% 2% 0%
</TABLE>
ANNUAL ADMINISTRATIVE CHARGE (Deducted from the Variable Account Accumulation
Value)
This charge is based on the Purchase Payments paid. If aggregate Purchase
Payments received less aggregate Withdrawals (including any Withdrawal charges
and Surrender charges arising from such Withdrawals) are:
less than $100,000: $30.00 per year
$100,000 or more: $ 0.00 per year
VARIABLE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in each Subaccount)
Mortality And Expense Risk Charge Prior To The Annuity Date: 1.37%
Mortality And Expense Risk Charge During The Annuity Period: 1.25%
Asset-Based Administrative Charge: 0.15%
TAXES ON PURCHASE PAYMENTS
If this Contract has been issued as a taxqualified plan, Pennsylvania does not
impose tax on Purchase Payments. In the event that any such tax becomes
applicable the Contract Owner will be advised of the amount of such tax and its
effect upon any payments to be made.
Form 15208-95
6
<PAGE>
CONTRACT SCHEDULE (CONT.)
GUARANTEED INTEREST RATE
Guaranteed Interest Rate for the Guaranteed Interest Account: 3.00% per year
ENHANCED DEATH BENEFIT ACCUMULATION RATE
Up to Attained Age 75: 4.00% per year
After Attained Age 75: 0.00% per year
Form 15208-95
7
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: An Accumulation Unit is a unit of measure used to calculate
Variable Account Accumulation Value.
ACCUMULATION VALUE: The Accumulation Value is the total value under a Contract.
It is the sum of the Variable Account Accumulation Value and the Guaranteed
Interest Account Accumulation Value.
ANNUITANT: The Annuitant(s) is the person or persons whose life (or lives)
determines the Annuity Payments payable under the Contract and who receives
payments during the Annuity Period. The maximum number of joint Annuitants is
two and provisions referring to the death of an Annuitant mean the death of the
last surviving Annuitant.
ANNUITY DATE: The Annuity Date is the date as of which, if the Annuitant is
still living, the Accumulation Value (less previously undeducted taxes) is
applied under an Annuity Payment Option and Annuity Payments begin.
ANNUITY PAYMENT: An Annuity Payment is one of a number of periodic payments
made by the Company to the Annuitant under a Contract.
ANNUITY PAYMENT OPTION: An Annuity Payment Option specifies the form that
Annuity Payments take or the type of payments. Various Annuity Payment Options
are offered under the Contract.
ANNUITY PERIOD: The Annuity Period is the period after the Annuity Date when
Annuity Payments are made.
ANNUITY UNIT: An Annuity Unit is a unit of measure used to calculate variable
Annuity Payments.
BENCHMARK RATE OF RETURN: The Benchmark Rate of Return is an annual rate of
return used by the Company to determine the amount of variable Annuity Payments
by assuming (among other things) that Subaccounts supporting variable Annuity
Payments will have a net annual investment return over the anticipated Annuity
Period equal to that rate of return.
BENEFICIARY: The Beneficiary is the person designated by the Owner to receive
the Death Benefit, upon the death of the Owner prior to the Annuity Date.
CASH SURRENDER VALUE: The Cash Surrender Value is the Accumulation Value, less
any applicable Surrender charges, premium taxes not previously deducted, and the
annual administrative charge.
CODE: The Code is the Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY: The Contract Anniversary is the same date in each
Contract Year as the Contract Date.
CONTRACT DATE: The Contract Date is the date that the Contract is issued. It
is set forth on the Contract Schedule and is used to determine Contract Years
and Contract Anniversaries.
CONTRACT YEAR: A Contract Year is a twelve-month period beginning on the
Contract Date or on a Contract Anniversary.
Form 15208-95
8
<PAGE>
CUSTOMER SERVICE CENTER: The Customer Service Center is the Company's offices at
P.O. Box 173789, Denver, CO 80217-3789. For overnight delivery, the address is
8515 East Orchard Road -9T2, Englewood, CO 80111.
DEATH BENEFIT: The amount payable to the Beneficiary upon death of the Owner
prior to the Annuity Date.
DEMAND WITHDRAWAL: A withdrawal of Cash Surrender Value made at the Owner's
request.
DUE PROOF OF DEATH: Due Proof of Death is proof of death satisfactory to the
Company. Such proof may consist of the following if acceptable to the Company:
(a) A certified copy of the death record;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FREE LOOK PERIOD: The Free Look Period is the period during which you may
return the Contract and receive a refund.
GENERAL ACCOUNT: The General Account is the assets of the Company other than
those allocated to the Variable Account or any other separate account of the
Company.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE: The Guaranteed Interest Account
Accumulation Value is the value under a Contract in the Guaranteed Interest
Account.
GUARANTEED INTEREST ACCOUNT: The Guaranteed Interest Account is an allocation
option under the Contract supported by the Company's General Account. It is not
part of nor dependent upon the investment performance of the Variable Account.
IRA CONTRACT: A Contract issued as an Individual Retirement Annuity in
connection with sections 408(a) and (b) of the Code.
OWNER: The Owner is the person(s) who owns the Contract and who is entitled to
exercise all rights and privileges provided in the Contract.
PORTFOLIO: A Portfolio is an investment portfolio (sometimes called a series or
a fund) of an open-end management investment company listed in the prospectus or
any other open-end management investment company or unit investment trust in
which a Subaccount invests.
PURCHASE PAYMENT: A payment or payments made by the Owner to purchase the
benefits provided by the Contract.
SEC: The SEC is the U.S. Securities and Exchange Commission.
SUBACCOUNT: A Subaccount is a subdivision of the Variable Account, the assets
of which are invested in a corresponding Portfolio.
SUBACCOUNT ACCUMULATION VALUE: The Subaccount Accumulation Value is the value
under a Contract in a particular Subaccount.
SURRENDER: The termination of the Contract by payment of the Cash Surrender
Value.
VALUATION DAY: For each Subaccount, a Valuation Day is each day on which the
New York Stock Exchange ("NYSE") and Southland's Customer Service Center are
both open for business, except for a day that a Subaccount's corresponding
Portfolio does not value its shares.
Form 15208-95
9
<PAGE>
VALUATION PERIOD: A Valuation Period is a period that starts at 4:00 p.m.
eastern time on one Valuation Day and ends at 4:00 p.m. eastern time on the next
succeeding Valuation Day.
VARIABLE ACCOUNT: The Variable Account is Southland Separate Account A1.
VARIABLE ACCOUNT ACCUMULATION VALUE: The Variable Account Accumulation Value is
the value under a Contract in the Variable Account. It is the sum of the
Subaccount Accumulation Values.
WE, US, OUR AND THE COMPANY: We, us, our and the Company refer to Southland
Life Insurance Company.
WRITTEN NOTICE: A written notice or request in a form satisfactory to the
Company which is signed by the Owner and received at the Customer Service
Center.
YOU AND YOUR: You and your refer to the Owner of this Contract.
Form 15208-95
10
<PAGE>
OWNERS, ANNUITANTS, AND BENEFICIARIES
OWNERS AND DEATH OF OWNERS
The original Owner of this Contract is the person named as the Owner in the
application. Consistent with the terms of any Beneficiary designation and any
assignment, the Owner may, prior to the Annuity Date:
1. Assign this Contract or Surrender it in whole or in part;
2. Amend or change this Contract with the consent of the Company;
3. Exercise any right and receive any benefit; or
4. Change the ownership.
Subject to the applicable provisions of the Required Distributions section, if
the Owner (or Deemed Owner as defined in the Required Distributions section)
dies prior to the Annuity Date, and:
1. If the deceased Owner's spouse is the joint Owner, then the spouse
becomes the new Owner and no Death Benefit is payable; or
2. If the Owner's spouse is the Beneficiary, then the spouse may elect to
become the Owner (in which case there is no Death Benefit payable) by so
electing within 60 days of the death; if there is no such election, the
Death Benefit is payable to the Beneficiary; or
3. If the Owner's spouse is not the joint Owner or the Beneficiary, then the
Death Benefit is payable to the Beneficiary.
ANNUITANTS AND DEATH OF ANNUITANTS
The original Annuitant and any contingent Annuitant are named in the
application. The Annuitant will receive the Annuity Payments of the Contract
if, on the Annuity Date, the Annuitant is living. You may name a new Annuitant
prior to the Annuity Date. Any Annuitant or contingent Annuitant must be
younger than age 86 when named. Any Annuitant or contingent Annuitant that is
not an individual may not be named without our consent.
If the Annuitant dies before the Annuity Date, and a contingent Annuitant has
been named, the contingent Annuitant becomes the Annuitant. If no contingent
Annuitant has been named, you must designate a new Annuitant. If no designation
is made within 30 days of the Annuitant's death, the Owner will become the
Annuitant.
If any Owner is not an individual, the death of the Annuitant will be treated as
the death of the Owner.
Upon the death of the Annuitant after the Annuity Date, any remaining payments
will be continued to any contingent Annuitant. Upon the death of both the
Annuitant and any contingent Annuitant, any remaining payments will be paid to
the estate of the last to die of the Annuitant and contingent Annuitant.
Payments may be made in one sum if the Owner's election allows. See the Annuity
Payments section.
BENEFICIARIES AND DEATH OF BENEFICIARIES
The original Beneficiary and any contingent Beneficiaries are named in the
application. Surviving contingent Beneficiaries are paid the Death Benefit only
if no Beneficiary survives. If more than one Beneficiary in a class survives,
they will share the Death Benefit equally, unless the Owner's designation
provides otherwise. If there is no designated Beneficiary or contingent
Beneficiary surviving, we will pay the Death Benefit to the Owner's estate. We
will pay the Death Benefit in accordance with the most recent Beneficiary
designation on file. The Owner may name a new Beneficiary unless an irrevocable
Beneficiary has been named. When an irrevocable Beneficiary has been designated,
the Owner and the irrevocable Beneficiary must act together to make any
Beneficiary changes.
REQUIRED DISTRIBUTIONS
Form 15208-95
11
<PAGE>
The following required distribution rules shall apply if and to the extent
required under section 72(s) of the Code:
1. Subject to the alternative election or spousal beneficiary provisions in
subsection (2) or (3) below,
a) If an Owner dies on or after the Annuity Date and before the entire
interest in this Contract has been distributed, the remaining portion
of such interest shall be distributed at least as rapidly as under the
method of distribution being used as of the date of such death;
b) If an Owner dies before the Annuity Date, the entire interest in
this Contract will be distributed within five years after such death;
and
c) If any Owner is not an individual, then for purposes of this
subsection (1), the primary Annuitant under this Contract shall be
treated as the Owner (the "Deemed Owner"), and any change in the
primary Annuitant shall be treated as the death of the Owner. The
primary Annuitant is the individual, the events in the life of whom
are of primary importance in affecting the timing or amount of the
payment under the Contract.
2. If any portion of the interest of an Owner (or a Deemed Owner) in
subsection (1) is payable to or for the benefit of a designated
beneficiary, and such beneficiary elects to have such portion distributed
under an Annuity Payment Option over a period that: (A) does not extend
beyond such beneficiary's life or life expectancy and (B) starts within
one year after such death, or such later date as Treasury Regulation may
proscribe (a "Qualifying Distribution Period"); then for purposes of
satisfying the requirements of subsection (1), such portion shall be
treated as distributed entirely on the date such periodic distributions
begin. Such beneficiary may elect any Annuity Payment Option for a
Qualifying Distribution Period, subject to any restrictions imposed by
any regulations under section 72(s) of the Code.
3. If any portion of the interest of an Owner (or a Deemed Owner) described
in subsection (1) is payable to or for the benefit of such Owner's
spouse, or is co-owned by such spouse, then such spouse shall be treated
as the Owner of such portion for purposes of the requirements of
subsection (1).
PURCHASE PAYMENTS
This Contract will not be issued until the initial Purchase Payment shown on the
Schedule is received by us and accepted at our Customer Service Center. The
initial Purchase Payment is due on the issue date. A receipt will be furnished
upon request. Any subsequent Purchase Payments may be made at any time prior to
the Annuity Date subject to our requirements at the time the Purchase Payment is
made. We reserve the right to modify the requirements. The requirements in
effect on the issue date are shown on the Schedule. No benefit associated with
any Purchase Payment will be provided until the Purchase Payment is accepted by
us at our Customer Service Center.
We reserve the right to refuse to accept additional Purchase Payments at any
time for any reason.
PURCHASE PAYMENT ALLOCATION
The initial Purchase Payment will be allocated to the Subaccounts and to the
Guaranteed Interest Account as you directed in the application and as indicated
on the Schedule. We allocate any subsequent Purchase Payment among the
Subaccounts and the Guaranteed Interest Account on the same basis as the initial
Purchase Payment unless we receive a Written Notice with new instructions.
In states where we are required to refund Purchase Payments during the Free Look
Period, that portion of the initial Purchase Payment to be allocated to any
Subaccount is allocated to the Fidelity VIP Money Market Subaccount for a period
of 15 days from the date that the Contract is mailed from the Customer Service
Center. At the expiration of this period, such portion of the Purchase Payment,
as adjusted to reflect the investment performance of the Fidelity VIP Money
Market Subaccount during this period, is then allocated to the Subaccounts as
described above.
Form 15208-95
12
<PAGE>
VARIABLE ACCOUNT
The Variable Account is an account established by us pursuant to the laws of the
State of Texas, to separate the assets funding the variable benefits for the
class of Contracts to which this Contract belongs from the other assets of the
Company.
The Variable Account is registered as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). All income, gains and losses,
realized or unrealized, from assets allocated to the Variable Account are
credited to or charged against the Variable Account without regard to other
income, gains or losses of the Company. The assets of the Variable Account are
our property, but are separate from our General Account and any other separate
account maintained by us. That portion of the assets of the Variable Account
which is equal to the reserves and other Contract liabilities with respect to
the Variable Account is not chargeable with liabilities arising out of any other
business we may conduct. We have the right to transfer to our General Account
any assets of the Variable Account that are in excess of such reserves and other
liabilities.
The Variable Account is divided into Subaccounts, each of which invests in a
corresponding Portfolio designed to meet the objectives of the Subaccount. The
current Subaccounts are shown on the Schedule. We may, from time to time,
subject to review by the SEC and other regulatory authorities:
(1) Make additional subaccounts available to such classes of Contracts as we
may determine. These subaccounts will invest in portfolios we find
suitable for the Contract;
(2) Eliminate Subaccounts from the Variable Account, combine two or more
Subaccounts or substitute a new portfolio for the Portfolio in which a
Subaccount invests;
(3) Transfer assets of the Variable Account, which we determine to be
associated with the class of contracts to which your Contract belongs, to
another variable account;
(4) Withdraw the Variable Account from registration under the 1940 Act;
(5) Operate the Variable Account as an investment management company under
the 1940 Act or in any other form permitted by law;
(6) Cause one or more Subaccounts to invest in new portfolios;
(7) Create new separate accounts or combine separate accounts, including the
Variable Account;
(8) Restrict or eliminate any voting rights as to the Variable Account, as
permitted by applicable laws and regulations; and
(9) Make any changes required by the 1940 Act or the rules or regulations
thereunder or other applicable laws or regulations.
GUARANTEED INTEREST ACCOUNT
The Guaranteed Interest Account is another account to which you may allocate
Purchase Payments or make transfers. We pay a declared interest rate on all
amounts that you have in the Guaranteed Interest Account. Interest is credited
at the guaranteed annual effective interest rate shown on the Schedule or may be
credited at a higher rate. Any higher rate in effect on the date a Purchase
Payment is paid or an amount is transferred to the Guaranteed Interest Account
is guaranteed to apply to that payment or transfer amount for at least 12
months. After 12 months, we may apply an interest rate higher than the
guaranteed rate in a manner we determine. Any such higher rate shall be in
effect for at least 12 months.
Form 15208-95
13
<PAGE>
ACCUMULATION VALUES
ACCUMULATION UNIT VALUE
Purchase Payments allocated to a Subaccount or amounts transferred to a
Subaccount are converted into Accumulation Units. For any Subaccount, the
number of Accumulation Units credited is determined by dividing the dollar
amount directed to the Subaccount by the value of the Accumulation Unit for that
Subaccount for the Valuation Period on which the Purchase Payment is received or
the transfer is effective. In this manner, an increase in Subaccount
Accumulation Value under a Contract occurs by the addition of Accumulation Units
of that Subaccount.
The Accumulation Unit Value for each Subaccount was arbitrarily set initially at
$10 when the Subaccount was established. Thereafter, for any Subaccount, the
Accumulation Unit Value for a Valuation Period equals the Accumulation Unit
Value for the preceding Valuation Period multiplied by the "Accumulation
Experience Factor" (defined below) for the current Valuation Period.
Decreases in Subaccount Accumulation Value under a Contract are effected by the
cancellation of an appropriate number of Accumulation Units of a Subaccount.
Therefore, Surrenders, withdrawals, transfers out of a Subaccount, payment of a
Death Benefit, the application of the Accumulation Value to an Annuity Payment
Option and the deduction of the annual administrative charge all result in the
cancellation of an appropriate number of Accumulation Units of one or more
Subaccounts. Accumulation Units are cancelled as of the end of the Valuation
Period in which the Company received notice of or instructions regarding the
event.
Form 15208-95
14
<PAGE>
ACCUMULATION EXPERIENCE FACTOR
For each Subaccount of the Variable Account, the Accumulation Experience Factor
reflects the investment experience of the Portfolio in which that Subaccount
invests and the charges assessed against that Subaccount for a Valuation Period.
The Accumulation Experience Factor is calculated by dividing (1) by (2) and
subtracting (3) from the result, where:
(1) is the result of:
a. the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the current Valuation Period;
plus
b. the per share amount of any dividend or capital gains distributions
made by the Portfolio held in the Subaccount, if the "ex-dividend"
date occurs during the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the operations of the
Subaccount.
(2) is the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the last prior Valuation Period.
(3) is the daily factor representing the mortality and expense risk charge
and the administrative charge deducted from the Subaccount adjusted for
the number of days in the Valuation Period.
SUBACCOUNT ACCUMULATION VALUE
The Subaccount Accumulation Value as of the Contract Date is equal to the amount
of the initial Purchase Payment allocated to that Subaccount.
On subsequent Valuation Days, the Subaccount Accumulation Value equals:
1. The number of Accumulation Units in that Subaccount as of the end of the
preceding Valuation Period multiplied by that Subaccount's Accumulation
Unit value for the current Valuation Period; plus
2. Any additional Purchase Payments allocated to that Subaccount during the
current Valuation Period; plus
3. Any Accumulation Value transferred to such Subaccount during the current
Valuation Period; minus
4. Any Accumulation Value transferred from such Subaccount during the
current Valuation Period; minus
5. Any excess transfer charge allocated to such Subaccount during the
current Valuation Period; minus
6. Any Withdrawals (and any withdrawal transaction charges and Surrender
charges arising from such withdrawals) allocated to that Subaccount
during the current Valuation Period; minus
7. The portion of the annual administrative charge applicable to that
Subaccount if a Contract Anniversary occurs during the Valuation Period.
The annual administrative charge is deducted proportionately from your
Subaccount Accumulation Values immediately prior to the deduction.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE
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The Guaranteed Interest Account Accumulation Value as of the Contract Date is
equal to the amount of the initial Purchase Payment allocated to the Guaranteed
Interest Account.
On subsequent Valuation Days, the Guaranteed Interest Account Accumulation Value
equals:
1. The Guaranteed Interest Account Accumulation Value as of the end of the
preceding Valuation Period plus any interest earned during the current
Valuation Period; plus
2. Any additional Purchase Payments allocated to the Guaranteed Interest
Account during the current Valuation Period; plus
3. Any Accumulation Value transferred to the Guaranteed Interest Account
during the current Valuation Period; minus
4. Any Accumulation Value transferred from the Guaranteed Interest Account
during the current Valuation Period; minus
5. Any excess transfer charge allocated to the Guaranteed Interest Account
during the current Valuation Period; minus
6. Any withdrawals (and any withdrawal transaction charges and Surrender
charges) allocated to the Guaranteed Interest Account during the current
Valuation Period.
TRANSFERS
After the Free Look Period, the Accumulation Value in each Subaccount or the
Guaranteed Interest Account may be transferred, upon written request, to any
other Subaccount or the Guaranteed Interest Account subject to the limitations
on transfers involving the Guaranteed Interest Account as detailed in the
following section. The number of free transfers permitted in any one Contract
Year without an excess transfer charge, the total number of transfers permitted
and the excess transfer charge are shown in the table below. Any transfers made
due to the operation of Dollar Cost Averaging or Automatic Rebalancing will not
count toward the limit on the number of transfers allowed free of charge. The
minimum amount that may be transferred from each Subaccount or the Guaranteed
Interest Account is the lesser of $100 or the Accumulation Value of that
Subaccount or the Guaranteed Interest Account.
The table below summarizes the number of transfers available and the associated
charges during any Contract Year.
TRANSFERS AND EXCESS TRANSFERS
<TABLE>
<CAPTION>
PRIOR TO ANNUITY DATE ANNUITY PERIOD
- -------------------------------------------------------------------------------
<S> <C> <C>
FREE TRANSFERS 12 4
TOTAL NUMBER OF TRANSFERS Unlimited 4
PERMITTED
EXCESS TRANSFER CHARGE $25 for each transfer in excess of Not Applicable
12 during any Contract Year
</TABLE>
We reserve the right to limit the number of transfers per Contract Year to
twelve and to limit, modify or eliminate the transfer privilege.
Form 15208-95
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TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT
Once during the first 30 days of each Contract Year, you may transfer amounts
from the Guaranteed Interest Account. Transfer requests received within 30 days
prior to the Contract Anniversary will be deemed requests to transfer on the
Contract Anniversary. A request to transfer from the Guaranteed Interest
Account that is received on the Contract Anniversary or during the next 30 days
will be processed if it is the first such transfer received during the 30-day
period. Transfer requests received at any other time will not be processed.
The maximum transfer amount from the Guaranteed Interest Account in any Contract
Year is the greatest of:
1. 25% of the Guaranteed Interest Account Accumulation Value immediately
prior to the transfer;
2. $100; or
3. the sum of the amounts that were transferred out of and withdrawn from
the Guaranteed Interest Account in the prior Contract Year. (For purposes
of calculating this sum, all withdrawals, including those made under the
Systematic Withdrawal Program are included.)
EXCESS TRANSFER CHARGE
If you exceed the number of free transfers allowed, you will be assessed an
excess transfer charge as shown in the above table. This charge will be
deducted proportionately from your Subaccount Accumulation Values and your
Guaranteed Interest Account Accumulation Value immediately prior to the
deduction.
DOLLAR COST AVERAGING
Prior to the Annuity Date, if you have at least $10,000 of Accumulation Value in
either the [Fidelity VIP Money Market] Subaccount or the [Janus Short-Term Bond]
Subaccount, you may choose to transfer a specified dollar amount each month from
one of these Subaccounts and have a percentage of that amount transferred to
other Subaccounts of the Variable Account ("Dollar Cost Averaging"). You may
elect the Dollar Cost Averaging transfer option at any time prior to the Annuity
Date by Written Notice.
The minimum amount that you may elect to transfer each month is $100. The
maximum amount that you may transfer is equal to the Subaccount Accumulation
Value (when the election is made) of the Subaccount from which the transfer is
taken divided by twelve.
The percentages to be transferred to the other Subaccounts must be designated in
whole numbers. No specific dollar designation may be made to the Subaccounts.
If you elect to transfer to a particular Subaccount, the minimum percentage that
may be transferred to that Subaccount is 1% of the total amount transferred.
The transfer date will be the same calendar day each month as the Contract Date.
If this calendar day is not a Valuation Day, the next Valuation Day will be
used. If, on any transfer date, the Accumulation Value in the selected
Subaccount is equal to or less than the amount you have elected to have
transferred, the entire amount will be transferred, and this option will end.
Dollar Cost Averaging will end as of the Valuation Day immediately preceding the
Annuity Date.
You may change the transfer amount or the Subaccount to which transfers are to
be made once each Contract Year. You may cancel this election by Written Notice
at least seven days before the next transfer date. Any transfer under this
option will not be included for purposes of computing the excess transfer
charge.
AUTOMATIC REBALANCING
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You may choose to automatically transfer, on a quarterly basis, between and
among specified Subaccounts, in order to achieve a particular percentage
allocation among such Subaccounts ("Automatic Rebalancing"). Percentage
allocations must be in whole numbers. Once elected, Automatic Rebalancing
transfers begin on the first Valuation Day of the next calendar quarter (or, if
later, the next calendar quarter after expiration of the Free Look Period).
Automatic Rebalancing transfers do not count as one of the 12 free transfers
available during any Contract Year.
You may change your Automatic Rebalancing allocations at any time. Such
allocation changes will take effect as of the Valuation Day that we receive your
instructions. You may stop Automatic Rebalancing at least seven calendar days
before the first Valuation Day in a new calendar quarter.
If Automatic Rebalancing is elected at the same time as Dollar Cost Averaging or
when Dollar Cost Averaging is in effect, Automatic Rebalancing will be postponed
until the first Valuation Day in the calendar quarter following the termination
of Dollar Cost Averaging.
WITHDRAWALS
After the Free Look Period and prior to the Annuity Date, you may by written
request withdraw all or part of the Cash Surrender Value of this Contract. A
withdrawal may incur withdrawal transaction charges and may incur Surrender
charges. Withdrawals may be subject to a 10% penalty tax.
In no case will you be allowed to withdraw more than your Cash Surrender Value.
A withdrawal will result in a decrease in the Accumulation Value of this
Contract as described in the Accumulation Values section above.
There are three withdrawal options available:
1. "Demand Withdrawal Option";
2. "Systematic Withdrawal Program"; and
3. "IRA Income Program".
DEMAND WITHDRAWAL OPTION
After the Free Look Period and prior to the Annuity Date, you may make a Demand
Withdrawal. The minimum Demand Withdrawal amount is $100. The maximum Demand
Withdrawal amount is the Cash Surrender Value minus $500. If the amount of
Demand Withdrawal you specify exceeds the maximum, the amount of the withdrawal
will automatically be lowered to the maximum.
Demand Withdrawals are deemed to be withdrawn in the following order:
1. Accumulation Value in excess of aggregate Purchase Payments;
2. Purchase Payments held more than five full Contract Years since the end
of the Contract Year in which the Purchase Payment was made;
Form 15208-95
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3. The amount by which 15% of the Accumulation Value as of the last Contract
Anniversary, minus any withdrawals (including any withdrawal transaction
charges and Surrender charges arising from such withdrawals) already made
during the Contract Year, which are not considered withdrawals of
Purchase Payments, exceeds earnings, if any;
4. Purchase Payments held less than five full Contract Years since the
Contract Anniversary at the end of the Contract Year in which the
Purchase Payment was made, withdrawn on a first-in, first-out basis.
Unless you specify otherwise, the amount of the withdrawal will be taken from
each Subaccount and the Guaranteed Interest Account in which you are invested in
the same proportion that the amount of Accumulation Value in that Subaccount or
the Guaranteed Interest Account bears to the total Accumulation Value
immediately prior to the withdrawal. You may not withdraw from the Guaranteed
Interest Account an amount that is greater than the total withdrawal amount
requested multiplied by the ratio of the Guaranteed Interest Account
Accumulation Value to the total Accumulation Value immediately prior to the
withdrawal.
WITHDRAWAL TRANSACTION CHARGE
After the Free Look Period and prior to the Annuity Date, you may make one
Demand Withdrawal each Contract Year without a withdrawal transaction charge.
If you take more than one Demand Withdrawal in a Contract Year, we will impose a
withdrawal transaction charge. This charge is equal to the lesser of $25 or 2%
of the amount withdrawn.
SYSTEMATIC WITHDRAWAL PROGRAM
You may elect this option by Written Notice at any time prior to the Annuity
Date. You may choose to receive systematic withdrawals on a monthly or
quarterly basis from the Accumulation Value ("Systematic Withdrawal Program").
Withdrawals will be deducted proportionately from your Subaccount Accumulation
Values and your Guaranteed Interest Account Accumulation Value immediately prior
to the withdrawal. The withdrawals under this option may not start sooner than
one month after the Contract Date. You may select the day of the month when the
withdrawals will be made. If no day is selected, the withdrawals will be made
on the same day of the month as the Contract Date. If this day is not a
Valuation Day, the withdrawal will be made on the next Valuation Day. You may
select a dollar amount or a percentage amount for your withdrawal subject to the
following maximums:
MONTHLY 1.25% of the Accumulation Value on the date of withdrawal
QUARTERLY 3.75% of the Accumulation Value on the date of withdrawal
Except as described in the following sections, payments may not be less than
$100.
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage listed above, the amount
withdrawn will be reduced to equal such percentage. If a percentage amount is
selected that exceeds the maximum applicable percentage listed above, the amount
withdrawn will be reduced to equal such percentage. In either case, if the
amount to be withdrawn is then less than $100, the withdrawal will be made and
systematic withdrawals will be ended.
If systematic withdrawals are ended due to an insufficient Accumulation Value,
any remaining Cash Surrender Value will be paid to you. This will result in the
termination of the Contract.
You may change the amount or percentage of your systematic withdrawals once each
Contract Year. You may cancel your election at any time by Written Notice at
least seven days prior to the next scheduled withdrawal date.
If a Demand Withdrawal is made during a Contract Year when the Systematic
Withdrawal Program is in effect, the remaining payments to be made under the
Systematic Withdrawal Program for that Contract Year will be considered Demand
Withdrawals for purposes of calculating withdrawal transaction charges
Form 15208-95
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and any applicable Surrender charges. Otherwise, systematic withdrawals will not
be assessed a Surrender Charge. However, the amount available for systematic
withdrawals is never greater than the Cash Surrender Value.
IRA INCOME PROGRAM
If you have an IRA Contract, we will send you withdrawals to accommodate IRS
required minimum distribution rules. These withdrawals will begin automatically
if the minimum distributions are not otherwise satisfied.
SURRENDERS
You may Surrender this Contract for its Cash Surrender Value at any time prior
to the Annuity Date. The Surrender charge shown on the Schedule will be
deducted upon Surrender. The Surrender charge is applicable only to the
Surrender of Purchase Payments held less than five full Contract Years since end
of the Contract Year in which the Purchase Payment was made.
Surrenders may be subject to a 10% penalty tax.
No Surrender may be made on or after the Annuity Date or with respect to any
amounts applied to an Annuity Option.
DEATH BENEFIT
DEATH BENEFIT PRIOR TO THE ANNUITY DATE
Upon the death of an Owner prior to the Annuity Date, any Enhanced Death
Benefit (as defined below) will be paid according to the provisions in the
Owners and Death of Owners and the Required Distributions sections. We will pay
the Enhanced Death Benefit in one lump sum unless the Beneficiary elects an
Annuity Payment Option within 60 days of our receiving Due Proof of Death. If a
one sum payment is made, it will be paid within seven days of determination of
the amount of the payment unless we are authorized by appropriate regulatory
authorities to defer payment. If the Enhanced Death Benefit is paid under an
Annuity Payment Option, the Beneficiary becomes the Annuitant and the contingent
Beneficiary becomes the contingent Annuitant. The available Annuity Payment
Options are described in the Annuity Payment Option section. Contact our
Customer Service Center or your agent for more information.
ENHANCED DEATH BENEFIT
The Enhanced Death Benefit is calculated as of the Valuation Day on which we
receive Due Proof of Death and all information necessary to process the Death
Benefit claim. The Enhanced Death Benefit is the greatest of the following
amounts:
1. Purchase Payments made, less withdrawals (and charges associated with
such withdrawals) accumulated at the Enhanced Death Benefit Accumulation
Rate shown in the Schedule, up to a maximum of two times (A - B), where
A = the sum of all Purchase Payments, and B = the sum of all withdrawals
(and charges associated with such withdrawals)
2. The Accumulation Value.
3. The Step-Up Benefit (as defined below), plus Purchase Payments made, less
withdrawals (and charges associated with such withdrawals) since the last
Step-Up Anniversary (as defined below).
Form 15208-95
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The Step-Up Benefit at issue is the initial Purchase Payment. As of
each Step-Up Anniversary, the then current Accumulation Value is compared
to the prior Step-Up Benefit increased by Purchase Payments made, less
withdrawals (and charges associated with such withdrawals) since the last
Step-Up Anniversary. The greater of these becomes the new Step-Up
Benefit.
The Step-Up Anniversaries are every 6th Contract Anniversary for the
duration of the Contract (i.e., the 6th, 12th, 18th, etc.).
The amount payable to the Beneficiary is the Enhanced Death Benefit as
calculated above minus any taxes incurred but not deducted.
ANNUITY PAYMENTS
ELECTION AND CHANGES OF ANNUITY DATE
The Annuity Date may be elected on your application, but may not be earlier than
the second Contract Anniversary. If no Annuity Date is elected in the
application, the Annuity Date will be the first day of the month following the
Annuitant's 85th birthday or on the first day of the month following the tenth
Contract Anniversary, whichever occurs later but not later than the maximum age
in the state in which this Contract is delivered. You may change the Annuity
Date at any time prior to 60 days prior to the Annuity Date currently elected by
Written Notice.
ELECTION AND CHANGES OF ANNUITY PAYMENT OPTION
The Owner elects the Annuity Payment Option. Once elected, the Owner may change
the Annuity Payment Option at any time prior to the Annuity Date. In selecting
an Annuity Payment Option, the Owner must determine whether the payments will be
variable or fixed in amount. If variable, the Owner must determine from which
Subaccounts variable Annuity Payments are to be made. The Owner may select a
combination of fixed and variable payments as described below. If the Owner has
not chosen an Annuity Payment Option and if the Annuitant is living on the
Annuity Date, then:
1. Any Guaranteed Interest Account Accumulation Value will be applied to
purchase fixed Annuity Payments and proceeds from each Subaccount
Accumulation Value will be applied to purchase variable Annuity Payments
from each such Subaccount; and
2. The Annuity Payment Option will be Annuity Payment Option II (with a
Benchmark Rate of Return of 3% for any variable Annuity Payments) with a
designated period of 20 years.
The Owner must specifically elect that the Annuitant have the right to commute
payments as provided in the Commuting section.
Any Death Benefit proceeds to be applied under an Annuity Option will be
allocated to the Subaccounts and/or the Guaranteed Interest Account as
instructed by the Beneficiary.
ANNUITY PAYMENT OPTIONS - GENERAL
The Annuity Payment Option becomes effective on the Annuity Date. The Annuity
Payment Option utilizes the Accumulation Value under the Contract on the Annuity
Date, less the amount of any taxes incurred by the Company but not yet
deducted, to activate the Annuity Payment Option selected by the Owner. If such
taxes are deducted at this time, the taxes will be deducted proportionately from
your Subaccount Accumulation Values and your Guaranteed Interest Account
Accumulation Value immediately prior to the deduction.
Form 15208-95
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VARIABLE ANNUITY PAYMENTS
Variable Annuity Payments are Annuity Payments that:
1. Are not pre-determined or guaranteed as to dollar amount; and
2. Vary in amount with the investment experience of the Subaccount(s) which
you select.
The dollar amount of an initial variable Annuity Payment attributable to a
Subaccount is determined from the attached Annuity Payment Option Tables using
that portion of the Accumulation Value applied to that Subaccount as of the
Annuity Date. Each Table reflects a different Annuity Payment Option, including
the selection of either a 3% or 5% Benchmark Rate of Return.
The dollar amount of each subsequent variable Annuity Payment attributable to a
Subaccount is determined by multiplying the number of Annuity Units of that
Subaccount credited under a Contract by the Annuity Unit value for that
Subaccount for the Valuation Period as of which the Annuity Payment is made.
The number of Annuity Units of a Subaccount credited under a Contract is
determined by dividing the dollar amount of the initial variable Annuity Payment
attributable to that Subaccount by the Annuity Unit value for that Subaccount
for the Valuation Period ending on the Annuity Date or during which the Annuity
Date falls. The number of Annuity Units attributable to each Subaccount under a
Contract remains fixed unless there is an exchange of Annuity Units, as provided
below.
ANNUITY UNIT VALUE
The Annuity Unit value of each Subaccount for any Valuation Period is calculated
by dividing (2) by (3), and then multiplying the result by (1), where:
(1) is the Annuity Unit value for the immediately preceding Valuation
Period;
(2) is the Annuity Experience Factor for the current Valuation Period; and
(3) is a special factor designed to compensate for the Benchmark Rate of
Return of 3% or 5% (as applicable) built into the Table used to compute
the first variable Annuity Payment.
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BENCHMARK RATE OF RETURN
You must elect either a 3% or 5% Benchmark Rate of Return. Your election may
not be changed after the Annuity Date. Electing the 5% Benchmark Rate of Return
would mean a higher initial payment but more slowly rising or more rapidly
falling subsequent payments if actual investment experience varied from 5%. The
3% Benchmark Rate of Return assumption would have the opposite effect. If the
actual annual rate of return is 3% or 5%, the Annuity Payments will be level if
you elected either the 3% or 5% respectively.
EXCHANGE OF ANNUITY UNITS
The Annuitant may exchange the dollar value of all or a portion of the Annuity
Units in a Subaccount for an equivalent dollar amount of Annuity Units of
another Subaccount. The limit on exchanges of Annuity Units is shown in the
table in the Transfer section. After the exchanges, the number of Annuity
Units in the Subaccount from which you are transferring will be reduced by the
number of Annuity Units exchanged. The number of Annuity Units in the
Subaccount to which the exchange is made will be increased by the number of
Annuity Units acquired in the exchange.
FIXED ANNUITY PAYMENTS
Fixed Annuity Payments are Annuity Payments which remain fixed as to dollar
amount throughout the Annuity Period. As of the Annuity Date, any Subaccount
Accumulation Value applied to purchase fixed Annuity Payments will be allocated
to the Guaranteed Interest Account. The fixed Annuity Payment will be that
amount shown in the attached Tables. If the fixed Annuity Payment is credited
at an interest rate above the guaranteed minimum rate, the dollar amount of each
payment will be greater than the guaranteed dollar amount for the time period
that the higher rate is declared.
COMBINATION ANNUITY PAYMENTS
Combination Annuity Payments are Annuity Payments where a portion of the payment
is variable and a portion of the payment is fixed as to dollar amount. If a
combination Annuity Payment is elected, at least 25% of the proceeds must be
allocated to each elected option. As of the Annuity Date, we will allocate
proceeds between the Guaranteed Interest Account and the Subaccounts to meet the
proportions selected. Any amount of Accumulation Value to be transferred to or
from the Guaranteed Interest Account will be allocated among the Subaccounts in
which you are invested in the same proportion that each Subaccount Accumulation
Value bears to your Variable Account Accumulation Value. Once a combination
Annuity Payment is selected, the Annuitant may subsequently increase the
allocation to a fixed Annuity Payment, but may not increase the allocation to a
variable Annuity Payment.
ANNUITY PAYMENT OPTIONS
Under each Annuity Payment Option, the payment period is elected from one of the
following:
OPTION I. PAYMENTS FOR A DESIGNATED PERIOD. Payments will be made in 1, 2, 4,
or 12 installments per year as elected for a designated period, which may be 5
to 30 years. If the Annuitant dies before the end of the designated period,
payments will be continued to the contingent Annuitant (or to the Annuitant's
estate, if no contingent Annuitant has been named) until the end of the
designated period. If variable Annuity Payments are elected, the dollar amount
of each payment will vary, based on the Annuity Unit value(s) of the
Subaccount(s) selected. Variable Annuity Payments may only be elected if prior
to the Annuity Date, the Owner has made an irrevocable election to give the
Annuitant the right to commute any remaining designated period installments
under this option. If fixed Annuity Payments are elected, the dollar amount of
each payment will depend upon the designated period elected and will be equal
unless one or more payments are based on an interest rate in excess of the
guaranteed minimum rate. The amount of the first monthly payment for each $1,000
of proceeds applied is shown in Annuity Payment Option Table I.
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OPTION II. LIFE INCOME WITH PAYMENTS FOR A DESIGNATED PERIOD. Payments will be
made in 1, 2, 4, or 12 installments per year throughout the Annuitant's
lifetime, or if longer, for a period of 5, 10, 15, or 20 years as elected. If
the Annuitant dies before the end of the designated period, payments will be
continued to the contingent Annuitant (or to the Annuitant's estate, if no
contingent Annuitant has been named) until the end of the designated period.
The amount of each payment will depend upon the Annuitant's sex, age at the time
the first payment is due and the designated period elected. If variable Annuity
Payments are elected, the dollar amount of each payment will vary based on the
Annuity Unit value(s) of the selected Subaccount(s). If fixed Annuity Payments
are elected, the dollar amount will be equal unless one or more payments are
based on an interest rate in excess of the guaranteed minimum rate. The amount
of the first monthly payout for each $1,000 of proceeds applied is shown in
Annuity Payment Option Table II. This option is only available for ages shown in
these Tables.
OPTION III. JOINT AND LAST SURVIVOR. Payments will be made in 1, 2, 4, or 12
installments per year as elected while both Annuitants are living. Upon the
death of one Annuitant, the survivor's Annuity Payment will be paid throughout
the lifetime of the surviving Annuitant. If variable Annuity Payments are
elected, the number of Annuity Units supporting each payment will be level while
both Annuitants are living and upon the death of one Annuitant will be reduced
to 2/3rds of the number of Annuity Units supporting each payment while both
Annuitants were living. The dollar amounts of each payment will vary based on
the Annuity Unit Value(s) of the selected Subaccount(s). If fixed Annuity
Payments are elected, the dollar amount of each payment will be level while both
Annuitants are living and upon the death of one Annuitant will be reduced to
2/3rds of the installment dollar amount while both Annuitants were living.
OPTION IV. OTHER. Payments will be made in any other manner as agreed upon in
writing between you or the Beneficiary and us.
If you have elected to have payments made less frequently than monthly, the
payment amount is adjusted according to the factors in Payments Other Than
Monthly section.
COMMUTING
If the Owner elects, the Annuitant may commute remaining designated period
payments under Annuity Payment Option I. If the election allows, the contingent
Annuitant may commute remaining designated period payments after the death of
the Annuitant under Annuity Payment Options I or II. If no contingent Annuitant
is named, any remaining designated period payments after the death of the
Annuitant may be commuted by the estate. Any computation shall be at the
appropriate Benchmark Rate of Return.
EXCESS INTEREST
We may declare that fixed Annuity Payments will be computed based on an interest
rate above the guaranteed minimum rate. We guarantee that any higher rate, once
declared effective, will remain in effect for a 12-month period.
Form 15208-95
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MINIMUM AMOUNTS
The minimum amount that may be applied under any Annuity Payment Option is
$2,000. If the proceeds to be applied are less than $2,000, or, if Annuity
Payments are ever less than $20, we may change the frequency of Annuity Payments
to result in payments of at least that amount or require a one sum payment, in
which case the Contract would be terminated.
INCOME PROTECTION
Unless elected by the Owner, an Annuitant or contingent Annuitant does not have
the right to commute, assign, transfer to a third party or encumber amounts held
or future Annuity Payments to become payable pursuant to this Contract. To the
extent provided by law, such proceeds and Annuity Payments are not subject to
any Annuitant's debts, contracts, or engagements.
PAYMENTS OTHER THAN MONTHLY
Tables at the end of the Contract show initial monthly payments for Annuity
Payment Options I and II. To arrive at annual, semiannual, or quarterly
payments, multiply the appropriate figures by 11.839, 5.963, or 2.993
respectively for a Guaranteed Interest Rate or Benchmark Rate of Return of 3%,
and, by 11.736, 5.939 or 2.988 respectively if the Benchmark Rate of Return is
5%. Factors for other designated periods or for other options that may be
provided by mutual agreement will be provided upon reasonable request.
GENERAL CONTRACT PROVISIONS
THE CONTRACT
This Contract, the application, riders and endorsements, make up the entire
Contract between you and us. A copy of the initial application will be attached
to this Contract at issue. In the absence of fraud, all statements made in an
application will be considered representations and not warranties. No statement
will be used to void this Contract or to deny a claim unless it is contained in
the application.
AGE
The Owner's Age is shown on the Schedule. This is defined as the Owner's Age as
of last birthday on the Contract Date. The Annuitant's attained age on any date
for which age is to be determined is the Annuitant's age as of last birthday.
PROCEDURES
We must receive any election, designation, assignment or any other change
request you make in writing, except those specified on the application. We may
require a return of this Contract for any Contract change or for paying its Cash
Surrender Value. Any change will not affect payments made or action taken by us
before the change is recorded at our Customer Service Center.
In the event of the Owner's death before the Annuity Date, we should be informed
as soon as possible. Claim procedure instructions will be sent to your
Beneficiary immediately. We require a certified copy of the death certificate
and may require proof of the Owner's Age. We may require the Beneficiary and
the Owner's next of kin to sign authorizations as part of due proof.
DEFERRAL OF PAYMENT
Withdrawals or other payments from the Variable Account will usually be made
within seven days of receipt of the request at our Customer Service Center.
However, we may be permitted to defer such payment for any of the following
reasons:
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1. When the NYSE is closed for trading for other than usual weekends or
holidays, or trading on the NYSE is otherwise restricted;
2. When an emergency exists as determined by the SEC; or
3. When the SEC permits a delay for protection of Contract Owners.
We may defer up to six months the payment of any withdrawal or other payments
from the Guaranteed Interest Account.
TAX QUALIFICATIONS
This Contract is intended to qualify as an annuity contract under the Code. To
that end, all terms and provisions of the Contract shall be interpreted to
ensure or maintain such qualification, notwithstanding any other provisions to
the contrary. Payments and distributions under this Contract shall be made in
the time and manner necessary to maintain such qualification under the
applicable provisions of the Code in existence at the time this Contract is
issued. We reserve the right to amend this Contract, to reflect any
clarifications or changes that may be needed or are appropriate, or to conform
it to any applicable changes in the tax requirements. Such changes will apply
uniformly to all Contracts that are affected. We will send you written notice
of any such changes.
CONTRACT CHANGES
Only the President, a Vice President, or the Secretary of the Company has
authority to agree on behalf of the Company to any alteration of this Contract
or to any waiver of the right or requirements of the company.
COLLATERAL ASSIGNMENT
The Owner may assign this Contract as collateral security upon Written Notice to
us. Once it is recorded with us, the rights of the Owner and Beneficiary are
subject to the assignment. It is your responsibility to make sure the
assignment is valid.
INCONTESTABILITY
We will not contest the statements in an application for this Contract after the
Contract Date.
MISSTATEMENT OF AGE OR SEX
If the Age or sex has been misstated in an application, the amounts payable or
benefits provided by this Contract will be those that the Purchase Payments made
would have purchased at the actual Age or sex.
PERIODIC REPORTS
Prior to the Annuity Date, we will send you a report within thirty days after
the end of each calendar quarter. This report will show the then current
Subaccount and Guaranteed Interest Account Accumulation Values, total
Accumulation Value, Cash Surrender Value, Enhanced Death Benefit and activity
under the Contract since the last report. During the Annuity Period, we will
send you a report within thirty days after the end of each calendar year showing
any information required by law. The reports will also include any other
information that may be required by the insurance supervisory official of the
jurisdiction in which this Contract is delivered.
BASIS OF COMPUTATIONS
Any paid-up annuity Cash Surrender Values or Death Benefits that may be
available under this Contract are not less than the minimums required on the
Contract Date by the state in which this Contract was delivered. A detailed
statement of the method of computation of Accumulation Values under this
Contract
Form 15208-95
26
<PAGE>
has been filed with the insurance department of the state in which the
application was signed, if requested by that state.
TAXES
Taxes relating to this Contract paid by us to any governmental entity will be
deducted from the Purchase Payments or Accumulation Value. We will, at our sole
discretion, determine when taxes have resulted from: the investment experience
of the Subaccounts; receipt by us of the Purchase Payments; Surrenders or
withdrawals; or the start of an Annuity Option. We may, in our sole discretion,
pay taxes when incurred and deduct that amount from the Accumulation Value at a
later date. Payment at an earlier date does not waive any right we may have to
deduct amounts at this later date. We will deduct any withholding taxes
required by applicable law.
NON PARTICIPATING
This Contract does not participate in our surplus earnings.
CUSTOMER SERVICE CENTER
Our Customer Service Center is at the address shown in the Schedule. Unless you
are otherwise notified:
1. All requests and payments should be sent to us at our Customer Service
Center; and
2. All transactions are effective as of the date the required information is
accepted at our Customer Service Center.
Form 15208-95
27
<PAGE>
ANNUITY PAYMENT OPTION TABLES
OPTION I TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate
is 3% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
No. of Years Monthly No. of Years Monthly
Payable Installments Payable Installments
- -------------------------------------------------------------
<S> <C> <C> <C>
5 $17.92 20 $5.53
6 15.16 21 5.34
7 13.18 22 5.17
8 11.70 23 5.01
9 10.55 24 4.86
10 9.63 25 4.73
11 8.86 26 4.61
12 8.26 27 4.50
13 7.73 28 4.39
14 7.28 29 4.30
15 6.89 30 4.21
16 6.55
17 6.25
18 5.98
19 5.75
</TABLE>
Form 15208-95
28
<PAGE>
OPTION I TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
No. of Years Monthly No. of Years Monthly
Payable Installments Payable Installments
- ------------------------------------------------------------
<S> <C> <C> <C>
5 $18.79 20 $6.57
6 16.04 21 6.39
7 14.08 22 6.23
8 12.61 23 6.08
9 11.47 24 5.94
10 10.56 25 5.82
11 9.82 26 5.71
12 9.21 27 5.61
13 8.69 28 5.51
14 8.25 29 5.43
15 7.88 30 5.35
16 7.55
17 7.26
18 7.00
19 6.77
</TABLE>
Form 15208-95
29
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate
is 3% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
when First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- ---------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 2.94 2.94 2.94 2.93 40 3.63 3.62 3.61 3.58
16 2.96 2.95 2.95 2.95 41 3.68 3.67 3.65 3.62
17 2.97 2.97 2.97 2.96 42 3.73 3.72 3.70 3.66
18 2.99 2.99 2.99 2.98 43 3.78 3.77 3.74 3.71
19 3.01 3.01 3.00 3.00 44 3.84 3.82 3.79 3.75
20 3.03 3.02 3.02 3.02 45 3.89 3.88 3.84 3.80
21 3.05 3.04 3.04 3.04 46 3.95 3.93 3.90 3.85
22 3.07 3.06 3.06 3.06 47 4.01 3.99 3.95 3.90
23 3.09 3.08 3.08 3.08 48 4.08 4.05 4.01 3.95
24 3.11 3.11 3.10 3.10 49 4.15 4.12 4.07 4.00
25 3.13 3.13 3.13 3.12 50 4.22 4.19 4.13 4.06
26 3.16 3.15 3.15 3.14 51 4.29 4.26 4.20 4.11
27 3.18 3.18 3.17 3.17 52 4.37 4.33 4.27 4.17
28 3.21 3.20 3.20 3.19 53 4.45 4.41 4.34 4.23
29 3.23 3.23 3.23 3.22 54 4.54 4.49 4.41 4.29
30 3.26 3.26 3.25 3.25 55 4.63 4.58 4.49 4.36
31 3.29 3.29 3.28 3.27 56 4.73 4.67 4.57 4.42
32 3.32 3.32 3.31 3.30 57 4.83 4.76 4.65 4.48
33 3.36 3.35 3.34 3.33 58 4.94 4.87 4.74 4.55
34 3.39 3.39 3.38 3.36 59 5.05 4.97 4.82 4.61
35 3.43 3.42 3.41 3.40 60 5.18 5.08 4.92 4.68
36 3.46 3.46 3.45 3.43 61 5.31 5.20 5.01 4.75
37 3.50 3.50 3.48 3.47 62 5.45 5.32 5.11 4.81
38 3.54 3.54 3.52 3.50 63 5.60 5.45 5.21 4.87
39 3.59 3.58 3.56 3.54 64 5.76 5.59 5.31 4.94
</TABLE>
Form 15208-95
30
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 5.92 5.73 5.41 5.00 85 11.79 8.90 6.80 5.51
66 6.10 5.88 5.51 5.05 86 12.18 9.00 6.81 5.51
67 6.29 6.03 5.61 5.11 87 12.56 9.10 6.83 5.51
68 6.49 6.19 5.71 5.16 88 12.94 9.18 6.84 5.51
69 6.70 6.35 5.81 5.21 89 13.32 9.26 6.85 5.51
70 6.93 6.52 5.91 5.25 90 13.69 9.32 6.86 5.51
71 7.16 6.69 6.01 5.29 91 14.06 9.38 6.86 5.51
72 7.41 6.86 6.10 5.33 92 14.43 9.43 6.87 5.51
73 7.67 7.04 6.19 5.36 93 14.79 9.48 6.87 5.51
74 7.95 7.22 6.27 5.38 94 15.13 9.51 6.87 5.51
75 8.24 7.39 6.34 5.41 95 15.47 9.54 6.87 5.51
76 8.55 7.57 6.42 5.43
77 8.87 7.74 6.48 5.45
78 9.20 7.91 6.54 5.46
79 9.54 8.08 6.59 5.47
80 9.90 8.24 6.64 5.48
81 10.27 8.39 6.68 5.49
82 10.64 8.53 6.72 5.50
83 11.02 8.66 6.75 5.50
84 11.41 8.79 6.77 5.51
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
31
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 4.31 4.30 4.30 4.30 40 4.88 4.87 4.84 4.81
16 4.32 4.32 4.31 4.31 41 4.92 4.91 4.88 4.84
17 4.33 4.33 4.32 4.32 42 4.97 4.95 4.92 4.88
18 4.34 4.34 4.34 4.33 43 5.02 5.00 4.96 4.92
19 4.36 4.35 4.35 4.34 44 5.07 5.04 5.01 4.95
20 4.37 4.37 4.36 4.36 45 5.12 5.09 5.05 5.00
21 4.38 4.38 4.38 4.37 46 5.17 5.15 5.10 5.04
22 4.40 4.40 4.39 4.39 47 5.23 5.20 5.15 5.08
23 4.42 4.41 4.41 4.40 48 5.29 5.26 5.20 5.13
24 4.43 4.43 4.42 4.42 49 5.35 5.32 5.25 5.17
25 4.45 4.45 4.44 4.43 50 5.42 5.38 5.31 5.22
26 4.47 4.47 4.46 4.45 51 5.49 5.44 5.37 5.27
27 4.49 4.49 4.48 4.47 52 5.57 5.51 5.43 5.32
28 4.51 4.51 4.50. 4.49 53 5.64 5.59 5.49 5.37
29 4.53 4.53 4.52 4.51 54 5.73 5.66 5.56 5.43
30 4.56 4.55 4.54 4.53 55 5.81 5.74 5.63 5.48
31 4.58 4.58 4.57 4.55 56 5.91 5.83 5.71 5.54
32 4.61 4.60 4.59 4.58 57 6.01 5.92 5.78 5.60
33 4.64 4.63 4.62 4.60 58 6.11 6.01 5.86 5.65
34 4.67 4.66 4.65 4.63 59 6.22 6.12 5.94 5.71
35 4.70 4.69 4.68 4.65 60 6.34 6.22 6.03 5.77
36 4.73 4.72 4.71 4.68 61 6.47 6.33 6.11 5.83
37 4.76 4.75 4.74 4.71 62 6.61 6.45 6.20 5.89
38 4.80 4.79 4.77 4.74 63 6.76 6.58 6.29 5.94
39 4.84 4.83 4.81 4.77 64 6.91 6.70 6.38 6.00
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
32
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 7.08 6.84 6.48 6.05 85 12.84 9.83 7.75 6.51
66 7.25 6.98 6.57 6.10 86 13.21 9.93 7.77 6.51
67 7.44 7.13 6.67 6.15 87 13.58 10.02 7.78 6.51
68 7.64 7.28 6.67 6.19 88 13.95 10.10 7.79 6.51
69 7.85 7.43 6.85 6.24 89 14.32 10.17 7.80 6.51
70 8.07 7.59 6.94 6.28 90 14.68 10.23 7.81 6.51
71 8.30 7.75 7.03 6.31 91 15.03 10.29 7.81 6.51
72 8.55 7.92 7.11 6.34 92 15.39 10.34 7.81 6.51
73 8.81 8.08 7.19 6.37 93 15.73 10.38 7.82 6.51
74 9.08 8.25 7.27 6.40 94 16.06 10.41 7.82 6.51
75 9.37 8.42 7.34 6.42 95 16.39 10.44 7.82 6.51
76 9.67 8.59 7.40 6.44
77 9.98 8.75 7.46 6.45
78 10.31 8.91 7.51 6.47
79 10.65 9.06 7.56 6.48
80 11.00 9.21 7.61 6.49
81 11.36 9.35 7.64 6.49
82 11.72 9.49 7.68 6.50
83 12.09 9.61 7.71 6.50
84 12.47 9.73 7.73 6.51
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
33
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 2.85 2.85 2.85 2.85 40 3.41 3.40 3.40 3.38
16 2.87 2.87 2.86 2.86 41 3.44 3.44 3.43 3.42
17 2.88 2.88 2.88 2.88 42 3.48 3.48 3.47 3.45
18 2.89 2.89 2.89 2.89 43 3.52 3.52 3.51 3.49
19 2.91 2.91 2.91 2.91 44 3.57 3.56 3.55 3.53
20 2.92 2.92 2.92 2.92 45 3.61 3.60 3.59 3.57
21 2.94 2.94 2.94 2.94 46 3.66 3.65 3.64 3.61
22 2.96 2.96 2.95 2.95 47 3.71 3.70 3.68 3.66
23 2.97 2.97 2.97 2.97 48 3.76 3.75 3.73 3.70
24 2.99 2.99 2.99 2.99 49 3.81 3.80 3.78 3.75
25 3.01 3.01 3.01 3.01 50 3.87 3.86 3.84 3.80
26 3.03 3.03 3.03 3.03 51 3.93 3.92 3.89 3.85
27 3.05 3.05 3.05 3.05 52 4.00 3.98 3.95 3.90
28 3.07 3.07 3.07 3.07 53 4.06 4.04 4.01 3.96
29 3.09 3.09 3.09 3.09 54 4.13 4.11 4.08 4.02
30 3.12 3.11 3.11 3.11 55 4.21 4.18 4.14 4.08
31 3.14 3.14 3.13 3.13 56 4.29 4.26 4.21 4.14
32 3.16 3.16 3.16 3.15 57 4.37 4.34 4.29 4.20
33 3.19 3.19 3.18 3.18 58 4.46 4.42 4.36 4.27
34 3.22 3.21 3.21 3.20 59 4.55 4.51 4.44 4.33
35 3.24 3.24 3.24 3.23 60 4.65 4.61 4.53 4.40
36 3.27 3.27 3.27 3.26 61 4.76 4.71 4.61 4.47
37 3.30 3.30 3.30 3.29 62 4.87 4.80 4.71 4.54
38 3.34 3.33 3.33 3.32 63 4.99 4.92 4.80 4.62
39 3.37 3.37 3.36 3.35 64 5.11 5.04 4.90 4.69
</TABLE>
Form 15208-95
34
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 5.25 5.16 5.00 4.76 85 10.88 8.65 6.75 5.50
66 5.39 5.29 5.10 4.83 86 11.32 8.79 6.78 5.51
67 5.54 5.43 5.21 4.90 87 11.77 8.92 6.80 5.51
68 5.71 5.57 5.32 4.97 88 12.21 9.03 6.82 5.51
69 5.88 5.72 5.43 5.03 89 12.65 9.13 6.83 5.51
70 6.07 5.88 5.55 5.10 90 13.07 9.21 6.84 5.51
71 6.27 6.05 5.66 5.15 91 13.48 9.28 6.85 5.51
72 6.49 6.22 5.77 5.21 92 13.87 9.35 6.86 5.51
73 6.72 6.40 5.88 5.26 93 14.24 9.40 6.86 5.51
74 6.97 6.59 5.99 5.30 94 14.59 9.45 6.87 5.51
75 7.23 6.78 6.09 5.34 95 14.94 9.49 6.87 5.51
76 7.52 6.98 6.19 5.37
77 7.82 7.18 6.29 5.40
78 8.14 7.38 6.37 5.42
79 8.48 7.58 6.45 5.44
80 8.83 7.78 6.52 5.46
81 9.21 7.98 6.58 5.47
82 9.61 8.16 6.63 5.48
83 10.02 8.34 6.68 5.49
84 10.44 8.50 6.72 5.50
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
35
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 4.24 4.24 4.24 4.24 40 4.67 4.66 4.65 4.64
16 4.25 4.25 4.25 4.24 41 4.70 4.69 4.68 4.66
17 4.26 4.26 4.26 4.25 42 4.73 4.73 4.71 4.69
18 4.27 4.27 4.26 4.26 43 4.77 4.76 4.75 4.73
19 4.28 4.28 4.27 4.27 44 4.81 4.80 4.78 4.76
20 4.29 4.29 4.28 4.28 45 4.85 4.84 4.82 4.79
21 4.30 4.30 4.30 4.29 46 4.89 4.88 4.86 4.83
22 4.31 4.31 4.31 4.30 47 4.93 4.92 4.90 4.87
23 4.32 4.32 4.32 4.32 48 4.98 4.97 4.94 4.90
24 4.34 4.34 4.33 4.33 49 5.03 5.01 4.99 4.95
25 4.35 4.35 4.35 4.34 50 5.08 5.06 5.03 4.99
26 4.37 4.36 4.36 4.35 51 5.14 5.12 5.08 5.03
27 4.38 4.38 4.37 4.37 52 5.20 5.17 5.13 5.08
28 4.40 4.39 4.39 4.38 53 5.26 5.23 5.19 5.13
29 4.41 4.41 4.41 4.40 54 5.32 5.30 5.25 5.18
30 4.43 4.43 4.42 4.42 55 5.39 5.36 5.31 5.23
31 4.45 4.45 4.44 4.43 56 5.47 5.43 5.37 5.28
32 4.47 4.46 4.46 4.45 57 5.55 5.51 5.44 5.34
33 4.49 4.49 4.48 4.47 58 5.63 5.58 5.51 5.40
34 4.51 4.51 4.50 4.49 59 5.72 5.67 5.58 5.46
35 4.53 4.53 4.52 4.51 60 5.81 5.76 5.66 5.52
36 4.56 4.55 4.55 4.54 61 5.92 5.85 5.74 5.58
37 4.58 4.58 4.57 4.56 62 6.02 5.95 5.82 5.64
38 4.61 4.60 4.60 4.58 63 6.14 6.05 5.91 5.71
39 4.64 4.63 4.62 4.61 64 6.26 6.16 6.00 5.77
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
36
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 6.39 6.28 6.09 5.84 85 11.95 9.60 7.71 6.50
66 6.53 6.40 6.19 5.90 86 12.38 9.73 7.73 6.51
67 6.68 6.53 6.29 5.96 87 12.81 9.85 7.75 6.51
68 6.84 6.67 6.39 6.02 88 13.25 9.95 7.77 6.51
69 7.01 6.81 6.49 6.08 89 13.76 10.05 7.78 6.51
70 7.20 6.97 6.60 6.14 90 14.08 10.13 7.79 6.51
71 7.40 7.13 6.70 6.19 91 14.47 10.20 7.80 6.51
72 7.61 7.29 6.81 6.24 92 14.85 10.26 7.81 6.51
73 7.84 7.47 6.91 6.28 93 15.20 10.31 7.81 6.51
74 8.08 7.65 7.01 6.32 94 15.55 10.35 7.81 6.51
75 8.35 7.83 7.10 6.35 95 15.87 10.39 7.82 6.51
76 8.63 8.02 7.19 6.38
77 8.92 8.21 7.28 6.41
78 9.24 8.40 7.36 6.43
79 9.58 8.59 7.43 6.45
80 9.93 8.78 7.49 6.46
81 10.30 8.96 7.55 6.48
82 10.69 9.14 7.60 6.49
83 11.10 9.31 7.64 6.49
84 11.52 9.46 7.68 6.50
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
37
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 2.98 2.98 2.97 2.97 45 3.75 3.74 3.72 3.69
21 2.99 2.99 2.99 2.99 46 3.81 3.79 3.77 3.73
22 3.01 3.01 3.01 3.01 47 3.86 3.85 3.82 3.78
23 3.03 3.03 3.03 3.02 48 3.92 3.91 3.88 3.83
24 3.05 3.05 3.05 3.04 49 3.98 3.96 3.93 3.88
25 3.07 3.07 3.07 3.06 50 4.05 4.03 3.99 3.93
26 3.09 3.09 3.09 3.09 51 4.11 4.09 4.05 3.99
27 3.12 3.12 3.11 3.11 52 4.19 4.16 4.11 4.04
28 3.14 3.14 3.14 3.13 53 4.26 4.23 4.18 4.10
29 3.17 3.16 3.16 3.15 54 4.34 4.31 4.25 4.16
30 3.19 3.19 3.18 3.18 55 4.42 4.39 4.32 4.22
31 3.22 3.22 3.21 3.20 56 4.51 4.47 4.40 4.29
32 3.25 3.24 3.24 3.23 57 4.60 4.56 4.47 4.35
33 3.27 3.27 3.27 3.26 58 4.70 4.65 4.56 4.42
34 3.31 3.30 3.30 3.29 59 4.81 4.75 4.64 4.48
35 3.34 3.33 3.33 3.32 60 4.92 4.85 4.73 4.55
36 3.37 3.37 3.36 3.35 61 5.04 4.96 4.82 4.62
37 3.41 3.40 3.39 3.38 62 5.16 5.07 4.91 4.69
38 3.44 3.44 3.41 3.41 63 5.30 5.19 5.01 4.75
39 3.48 3.48 3.47 3.45 64 5.44 5.32 5.11 4.82
40 3.52 3.52 3.50 3.49 65 5.59 5.45 5.21 4.89
41 3.56 3.56 3.54 3.52 66 5.75 5.59 5.32 4.95
42 3.61 3.60 3.59 3.56 67 5.92 5.73 5.42 5.01
43 3.66 3.65 3.63 3.60 68 6.10 5.89 5.53 5.07
44 3.70 3.69 3.67 3.65 69 6.29 6.04 5.63 5.13
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
38
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
70 6.50 6.21 5.74 5.18 85 11.33 8.78 6.78 5.51
71 6.72 6.38 5.84 5.23 86 11.75 8.90 6.80 5.51
72 6.95 6.55 5.95 5.27 87 12.16 9.01 6.82 5.51
73 7.20 6.73 6.04 5.31 88 12.58 9.11 6.83 5.51
74 7.46 6.91 6.14 5.35 89 12.98 9.20 6.84 5.51
75 7.74 7.10 6.23 5.38 90 13.39 9.27 6.85 5.51
76 8.03 7.29 6.31 5.40 91 13.78 9.34 6.86 5.51
77 8.34 7.47 6.39 5.43 92 14.16 9.40 6.86 5.51
78 8.67 7.66 6.46 5.45 93 14.52 9.44 6.87 5.51
79 9.01 7.84 6.53 5.46 94 14.88 9.49 6.87 5.51
80 9.37 8.02 6.59 5.47 95 15.22 9.52 6.87 5.51
81 9.74 8.19 6.64 5.48
82 10.12 8.35 6.68 5.49
83 10.52 8.51 6.72 5.50
84 10.92 8.65 6.75 5.50
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
39
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 4.27 4.27 4.27 4.27 40 4.77 4.76 4.75 4.72
16 4.28 4.28 4.28 4.28 41 4.81 4.80 4.78 4.75
17 4.29 4.29 4.29 4.29 42 4.85 4.84 4.82 4.79
18 4.31 4.30 4.30 4.30 43 4.89 4.88 4.85 4.82
19 4.32 4.32 4.31 4.31 44 4.94 4.92 4.89 4.86
20 4.33 4.33 4.32 4.32 45 4.98 4.97 4.93 4.89
21 4.34 4.34 4.34 4.33 46 5.03 5.01 4.98 4.93
22 4.36 4.35 4.35 4.34 47 5.08 5.06 5.02 4.97
23 4.37 4.37 4.36 4.36 48 5.14 5.11 5.07 5.02
24 4.39 4.38 4.38 4.37 49 5.19 5.16 5.12 5.06
25 4.40 4.40 4.39 4.39 50 5.25 5.22 5.17 5.10
26 4.42 4.41 4.41 4.40 51 5.31 5.28 5.23 5.15
27 4.44 4.43 4.43 4.42 52 5.38 5.34 5.28 5.20
28 4.45 4.45 4.44 4.44 53 5.45 5.41 5.34 5.25
29 4.47 4.47 4.46 4.46 54 5.52 5.48 5.40 5.30
30 4.49 4.49 4.48 4.47 55 5.60 5.55 5.47 5.36
31 4.52 4.51 4.50 4.49 56 5.69 5.63 5.54 5.41
32 4.54 4.53 4.53 4.52 57 5.78 5.71 5.61 5.47
33 4.56 4.56 4.55 4.54 58 5.87 5.80 5.68 5.53
34 4.59 4.58 4.57 4.56 59 5.97 5.89 5.76 5.58
35 4.61 4.61 4.60 4.58 60 6.08 5.99 5.84 5.64
36 4.64 4.64 4.63 4.61 61 6.19 6.09 5.92 5.70
37 4.67 4.67 4.65 4.64 62 6.32 6.20 6.01 5.77
38 4.71 4.70 4.68 4.66 63 6.45 6.31 6.10 5.83
39 4.74 4.73 4.71 4.69 64 6.59 6.43 6.19 5.89
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
40
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 6.73 6.56 6.28 5.94 85 12.39 9.72 7.73 6.51
66 6.89 6.69 6.38 6.00 86 12.80 9.83 7.75 6.51
67 7.06 6.83 6.48 6.06 87 13.20 9.94 7.77 6.51
68 7.24 6.97 6.57 6.11 88 13.60 10.03 7.78 6.51
69 7.43 7.12 6.67 6.16 89 13.99 10.11 7.79 6.51
70 7.63 7.28 6.77 6.21 90 14.38 10.18 7.80 6.51
71 7.85 7.44 6.86 6.25 91 14.75 10.24 7.81 6.51
72 8.08 7.60 6.96 6.29 92 15.12 10.30 7.81 6.51
73 8.32 7.78 7.05 6.33 93 15.47 10.34 7.81 6.51
74 8.58 7.95 7.14 6.36 94 15.80 10.38 7.82 6.51
75 8.86 8.13 7.22 6.39 95 16.13 10.42 7.82 6.51
76 9.15 8.30 7.30 6.41
77 9.45 8.48 7.37 6.43
78 9.78 8.66 7.44 6.45
79 10.11 8.83 7.50 6.46
80 10.47 9.00 7.55 6.47
81 10.83 9.16 7.60 6.48
82 11.21 9.31 7.64 6.49
83 11.60 9.46 7.67 6.50
84 11.99 9.59 7.70 6.50
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
41
<PAGE>
THIS CONTRACT IS A FLEXIBLE PREMIUM DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THESE VALUES MAY
INCREASE OR DECREASE BASED ON INVESTMENT EXPERIENCE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. ANNUITY PAYMENTS BEGIN AS OF THE ANNUITY DATE. PURCHASE
PAYMENTS ARE FLEXIBLE AND MAY BE MADE UNTIL THE EARLIER OF THE ANNUITY DATE OR
THE MAXIMUM AGE SHOWN IN THE SCHEDULE. THE ENHANCED DEATH BENEFIT WILL BE PAID
IF THE OWNER DIES PRIOR TO THE ANNUITY DATE.
SOUTHLAND LIFE INSURANCE COMPANY
A Stock Company
- ------------------------------------------------------------------------------
42
<PAGE>
EXHIBIT 4(A)(3)
SOUTHLAND LIFE INSURANCE COMPANY
(A TEXAS CORPORATION)
5780 POWERS FERRY ROAD, N. W. ATLANTA, GA 30327-4390
A STOCK COMPANY - ESTABLISHED 1908
[John Q. Doe] [310000004]
AGREEMENT BY SOUTHLAND LIFE INSURANCE COMPANY
Southland Life Insurance Company will pay the benefits described in this
Contract in accordance with the terms of this Contract.
PLEASE READ YOUR CONTRACT CAREFULLY.
This Contract is a legal contract between the Contract Owner and the Company.
FREE LOOK PERIOD
You have the right to examine and return this Contract within ten days after
your receipt. It may be returned by delivering or mailing it to us at our
Customer Service Center. It will then be void from the beginning. Within seven
days after receipt of the Contract at our Customer Service Center, we will
refund the purchase payments, in addition to any charges deducted, as of the
date of receipt.
This Contract is signed for Southland Life Insurance Company by
/s/ Signature Illegible /s/ Signature Illegible
President Secretary
THIS CONTRACT IS A FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED AND VARIABLE
ANNUITY CONTRACT.
Annuity Payments and other values provided by this Contract, when based on the
investment experience of Southland Separate Account A1 are variable. These
values may increase or decrease based on investment experience and are not
guaranteed as to fixed dollar amount. Annuity Payments begin as of the Annuity
Date. Purchase Payments are flexible and may be made until the earlier of the
Annuity Date or the maximum age shown in the Schedule. The Enhanced Death
Benefit will be paid if the Owner dies prior to the Annuity Date.
CUSTOMER SERVICE CENTER
[P.O. BOX 173789
DENVER, CO 80217-3789
TOLL-FREE NUMBER (800) 224-3035]
Form 15208-95
1
<PAGE>
TABLE OF CONTENTS
CONTRACT SCHEDULE......................................................... 4
Allocation of Initial Purchase Payment.......................... 5
Contract Expense Provisions..................................... 6
Guaranteed Interest Rate........................................ 7
Enhanced Death Benefit Accumulation Rate........................ 7
DEFINITIONS............................................................... 8
OWNERS, ANNUITANTS AND BENEFICIARIES...................................... 11
Owners and Death of Owners...................................... 11
Annuitants and Death of Annuitants.............................. 11
Beneficiaries and Death of Beneficiaries........................ 11
Required Distributions.......................................... 12
PURCHASE PAYMENTS......................................................... 12
Purchase Payment Allocation..................................... 13
VARIABLE ACCOUNT.......................................................... 13
GUARANTEED INTEREST ACCOUNT............................................... 14
ACCUMULATION VALUES....................................................... 14
Accumulation Unit Value......................................... 14
Accumulation Experience Factor.................................. 15
Subaccount Accumulation Value................................... 15
Guaranteed Interest Account Accumulation Value.................. 16
TRANSFERS................................................................. 16
Transfers and Excess Transfers.................................. 16
Transfers from the Guaranteed Interest Account.................. 17
Excess Transfer Charge.......................................... 17
Dollar Cost Averaging Facility.................................. 17
Automatic Rebalancing........................................... 18
WITHDRAWALS............................................................... 18
Demand Withdrawal Option........................................ 18
Withdrawal Transaction Charge................................... 19
Systematic Withdrawal Program................................... 19
IRA Income Program.............................................. 20
SURRENDERS................................................................ 20
DEATH BENEFIT............................................................. 20
Death Benefit Prior to the Annuity Date......................... 20
Enhanced Death Benefit.......................................... 20
Form 15208-95
2
<PAGE>
TABLE OF CONTENTS (cont.)
ANNUITY PAYMENTS.......................................................... 21
Election and Changes of Annuity Date............................ 21
Election and Changes of Annuity Payment Option.................. 21
Annuity Payment Options - General............................... 22
Variable Annuity Payments....................................... 22
Fixed Annuity Payment........................................... 23
Combination Annuity Payments.................................... 23
Annuity Payment Options......................................... 23
Commuting....................................................... 24
Excess Interest................................................. 24
Minimum Amounts................................................. 24
Income Protection............................................... 25
Payments Other than Monthly..................................... 25
GENERAL CONTRACT PROVISIONS............................................... 25
The Contract.................................................... 25
Age............................................................. 25
Procedures...................................................... 25
Deferral of Payment............................................. 25
Tax Qualifications.............................................. 26
Contract Changes................................................ 26
Collateral Assignment........................................... 26
Incontestability................................................ 26
Misstatement of Age or Sex...................................... 26
Periodic Reports................................................ 26
Basis of Computations........................................... 27
Taxes........................................................... 27
Non Participating............................................... 27
Customer Service Center......................................... 27
ANNUITY PAYMENTS OPTIONS TABLES........................................... 28
Form 15208-95
3
<PAGE>
CONTRACT SCHEDULE
- --------------------------------------------------------------------------------
OWNER: JOHN DOE AGE AND SEX: 35, MALE
- --------------------------------------------------------------------------------
ANNUITANT: JOHN DOE AGE AND SEX: 35, MALE
- --------------------------------------------------------------------------------
CONTRACT DATE: JULY 1, 1995 CONTRACT NUMBER: 310000004
- --------------------------------------------------------------------------------
ANNUITY DATE: AUGUST 1, 2027
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT: $25,000.00
- --------------------------------------------------------------------------------
MINIMUM FOR EACH SUBSEQUENT $500.00
PURCHASE PAYMENT:
- --------------------------------------------------------------------------------
MAXIMUM CUMULATIVE PURCHASE $1,500,000
PAYMENT:
- --------------------------------------------------------------------------------
MAXIMUM OWNER'S AGE TO WHICH 86
PURCHASE PAYMENTS MAY BE MADE:
- --------------------------------------------------------------------------------
CUSTOMER SERVICE CENTER: CUSTOMER SERVICE CENTER
P.O. BOX 173789
DENVER, CO 80217-3789
- --------------------------------------------------------------------------------
Form 15208-95
4
<PAGE>
CONTRACT SCHEDULE (CONT.)
ALLOCATION OF INITIAL PURCHASE PAYMENT
[Alger American Small Capitalization Subaccount] 0%
[Alger American Growth Subaccount] 0%
[Alger American MidCap Growth Subaccount] 10%
[Alger American Leveraged AllCap Subaccount] 0%
[INVESCO Industrial Income Subaccount] 10%
[INVESCO Utilities Subaccount] 0%
[Janus Growth Subaccount] 5%
[Janus Agressive Growth Subaccount] 15%
[Janus Worldwide Growth Subaccount] 0%
[Janus International Growth Subaccount] 0%
[Janus Balanced Subaccount] 0%
[Janus Short-Term Bond Subaccount] 0%
[Fidelity VIP Money Market Subaccount] 0%
[Fidelity VIP High Income Subaccount] 0%
[Fidelity VIP Equity-Income Subaccount] 0%
[Fidelity VIP Growth Subaccount] 0%
[Fidelity VIP Overseas Subaccount] 20%
[Fidelity VIP II Investment Grade Bond Subaccount] 15%
[Fidelity VIP II Asset Manager Subaccount] 15%
[Fidelity VIP II Index 500 Subaccount] 0%
[Fidelity VIP II Contrafund Subaccount] 0%
Guaranteed Interest Account 10%
If you elect to invest in a particular investment option, at least 1% of your
Purchase Payment must be allocated to that option. All percentage allocations
must be in whole numbers.
Form 15208-95
5
<PAGE>
CONTRACT SCHEDULE (CONT.)
CONTRACT EXPENSE PROVISIONS
OWNER TRANSACTION EXPENSES (Deducted from the Accumulation Value)
1. Excess Transfer Charges: Refer to the Transfer section for details.
2. Withdrawal Charges: Refer to the Withdrawal section for details.
3. Surrender Charge: This charge is deducted upon Surrender or Withdrawal of
Purchase Payments held less than five full Contract Years since the
Contract Anniversary at the end of the Contract Year in which the Purchase
Payment was made. It is calculated as a percentage of the Purchase
Payments withdrawn or surrendered. The percentage is based on the number
of Contract Anniversaries since the Contract Year in which each Purchase
Payment was made.
CONTRACT ANNIVERSARIES SINCE 0 1 2 3 4 5 6 and
PURCHASE PAYMENT WAS MADE: more
- ---------------------------------------------------------------------------
PERCENTAGE: 7% 6% 5% 4% 3% 2% 0%
- ---------------------------------------------------------------------------
ANNUAL ADMINISTRATIVE CHARGE (Deducted from the Variable Account Accumulation
Value at the end of the Contract Year.)
This charge is based on the Purchase Payments paid. If aggregate Purchase
Payments received less aggregate Withdrawals (including any Withdrawal charges
and Surrender charges arising from such Withdrawals) are:
less than $100,000: $30.00 per year
$100,000 or more: $ 0.00 per year
VARIABLE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in each Subaccount)
Mortality And Expense Risk Charge Prior To The Annuity Date: 1.37%
Mortality And Expense Risk Charge During The Annuity Period: 1.25%
Asset-Based Administrative Charge: 0.15%
Form 15208-95
6
<PAGE>
CONTRACT SCHEDULE (CONT.)
GUARANTEED INTEREST RATE
Guaranteed Interest Rate for the Guaranteed Interest Account: 3.00% per year
Form 15208-95
7
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: An Accumulation Unit is a unit of measure used to calculate
Variable Account Accumulation Value.
ACCUMULATION VALUE: The Accumulation Value is the total value under a Contract.
It is the sum of the Variable Account Accumulation Value and the Guaranteed
Interest Account Accumulation Value.
ANNUITANT: The Annuitant(s) is the person or persons whose life (or lives)
determines the Annuity Payments payable under the Contract and who receives
payments during the Annuity Period. The maximum number of joint Annuitants is
two and provisions referring to the death of an Annuitant mean the death of the
last surviving Annuitant.
ANNUITY DATE: The Annuity Date is the date as of which, if the Annuitant is
still living, the Accumulation Value (less previously undeducted taxes) is
applied under an Annuity Payment Option and Annuity Payments begin.
ANNUITY PAYMENT: An Annuity Payment is one of a number of periodic payments
made by the Company to the Annuitant under a Contract.
ANNUITY PAYMENT OPTION: An Annuity Payment Option specifies the form that
Annuity Payments take or the type of payments. Various Annuity Payment Options
are offered under the Contract.
ANNUITY PERIOD: The Annuity Period is the period after the Annuity Date when
Annuity Payments are made.
ANNUITY UNIT: An Annuity Unit is a unit of measure used to calculate variable
Annuity Payments.
BENCHMARK RATE OF RETURN: The Benchmark Rate of Return is an annual rate of
return used by the Company to determine the amount of variable Annuity Payments
by assuming (among other things) that Subaccounts supporting variable Annuity
Payments will have a net annual investment return over the anticipated Annuity
Period equal to that rate of return.
BENEFICIARY: The Beneficiary is the person designated by the Owner to receive
the Death Benefit, upon the death of the Owner prior to the Annuity Date.
CASH SURRENDER VALUE: The Cash Surrender Value is the Accumulation Value, less
any applicable Surrender charges, premium taxes not previously deducted, and the
annual administrative charge.
CODE: The Code is the Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY: The Contract Anniversary is the same date in each
Contract Year as the Contract Date.
CONTRACT DATE: The Contract Date is the date that the Contract is issued. It
is set forth on the Contract Schedule and is used to determine Contract Years
and Contract Anniversaries.
CONTRACT YEAR: A Contract Year is a twelve-month period beginning on the
Contract Date or on a Contract Anniversary.
Form 15208-95
8
<PAGE>
CUSTOMER SERVICE CENTER: The Customer Service Center is the Company's offices at
P.O. Box 173789, Denver, CO 80217-3789. For overnight delivery, the address is
8515 East Orchard Road -9T2, Englewood, CO 80111.
DEATH BENEFIT: The amount payable to the Beneficiary upon death of the Owner
prior to the Annuity Date.
DEMAND WITHDRAWAL: A withdrawal of Cash Surrender Value made at the Owner's
request.
DUE PROOF OF DEATH: Due Proof of Death is proof of death satisfactory to the
Company. Such proof may consist of the following if acceptable to the Company:
(a) A certified copy of the death record;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FREE LOOK PERIOD: The Free Look Period is the period during which you may
return the Contract and receive a refund.
GENERAL ACCOUNT: The General Account is the assets of the Company other than
those allocated to the Variable Account or any other separate account of the
Company.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE: The Guaranteed Interest Account
Accumulation Value is the value under a Contract in the Guaranteed Interest
Account.
GUARANTEED INTEREST ACCOUNT: The Guaranteed Interest Account is an allocation
option under the Contract supported by the Company's General Account. It is not
part of nor dependent upon the investment performance of the Variable Account.
IRA CONTRACT: A Contract issued as an Individual Retirement Annuity in
connection with sections 408(a) and (b) of the Code.
OWNER: The Owner is the person(s) who owns the Contract and who is entitled to
exercise all rights and privileges provided in the Contract.
PORTFOLIO: A Portfolio is an investment portfolio (sometimes called a series or
a fund) of an open-end management investment company listed in the prospectus or
any other open-end management investment company or unit investment trust in
which a Subaccount invests.
PURCHASE PAYMENT: A payment or payments made by the Owner to purchase the
benefits provided by the Contract.
SEC: The SEC is the U.S. Securities and Exchange Commission.
SUBACCOUNT: A Subaccount is a subdivision of the Variable Account, the assets
of which are invested in a corresponding Portfolio.
SUBACCOUNT ACCUMULATION VALUE: The Subaccount Accumulation Value is the value
under a Contract in a particular Subaccount.
SURRENDER: The termination of the Contract by payment of the Cash Surrender
Value.
VALUATION DAY: For each Subaccount, a Valuation Day is each day on which the
New York Stock Exchange ("NYSE") and Southland's Customer Service Center are
both open for business, except for a day that a Subaccount's corresponding
Portfolio does not value its shares.
Form 15208-95
9
<PAGE>
VALUATION PERIOD: A Valuation Period is a period that starts at 4:00 p.m.
eastern time on one Valuation Day and ends at 4:00 p.m. eastern time on the next
succeeding Valuation Day.
VARIABLE ACCOUNT: The Variable Account is Southland Separate Account A1.
VARIABLE ACCOUNT ACCUMULATION VALUE: The Variable Account Accumulation Value is
the value under a Contract in the Variable Account. It is the sum of the
Subaccount Accumulation Values.
WE, US, OUR AND THE COMPANY: We, us, our and the Company refer to Southland
Life Insurance Company.
WRITTEN NOTICE: A written notice or request in a form satisfactory to the
Company which is signed by the Owner and received at the Customer Service
Center.
YOU AND YOUR: You and your refer to the Owner of this Contract.
Form 15208-95
10
<PAGE>
OWNERS, ANNUITANTS, AND BENEFICIARIES
OWNERS AND DEATH OF OWNERS
The original Owner of this Contract is the person named as the Owner in the
application. Consistent with the terms of any Beneficiary designation and any
assignment, the Owner may, prior to the Annuity Date:
1. Assign this Contract or Surrender it in whole or in part;
2. Amend or change this Contract with the consent of the Company;
3. Exercise any right and receive any benefit; or
4. Change the ownership.
Subject to the applicable provisions of the Required Distributions section, if
the Owner (or Deemed Owner as defined in the Required Distributions section)
dies prior to the Annuity Date, and:
1. If the deceased Owner's spouse is the joint Owner, then the spouse
becomes the new Owner and no Death Benefit is payable; or
2. If the Owner's spouse is the Beneficiary, then the spouse may elect to
become the Owner (in which case there is no Death Benefit payable) by so
electing within 60 days of the death; if there is no such election, the
Death Benefit is payable to the Beneficiary; or
3. If the Owner's spouse is not the joint Owner or the Beneficiary, then
the Death Benefit is payable to the Beneficiary.
ANNUITANTS AND DEATH OF ANNUITANTS
The original Annuitant and any contingent Annuitant are named in the
application. The Annuitant will receive the Annuity Payments of the Contract
if, on the Annuity Date, the Annuitant is living. You may name a new Annuitant
prior to the Annuity Date. Any Annuitant or contingent Annuitant must be
younger than age 86 when named. Any Annuitant or contingent Annuitant that is
not an individual may not be named without our consent.
If the Annuitant dies before the Annuity Date, and a contingent Annuitant has
been named, the contingent Annuitant becomes the Annuitant. If no contingent
Annuitant has been named, you must designate a new Annuitant. If no designation
is made within 30 days of the Annuitant's death, the Owner will become the
Annuitant.
If any Owner is not an individual, the death of the Annuitant will be treated as
the death of the Owner.
Upon the death of the Annuitant after the Annuity Date, any remaining payments
will be continued to any contingent Annuitant. Upon the death of both the
Annuitant and any contingent Annuitant, any remaining payments will be paid to
the estate of the last to die of the Annuitant and contingent Annuitant.
Payments may be made in one sum if the Owner's election allows. See the Annuity
Payments section.
BENEFICIARIES AND DEATH OF BENEFICIARIES
The original Beneficiary and any contingent Beneficiaries are named in the
application. Surviving contingent Beneficiaries are paid the Death Benefit only
if no Beneficiary survives. If more than one Beneficiary in a class survives,
they will share the Death Benefit equally, unless the Owner's designation
provides otherwise. If there is no designated Beneficiary or contingent
Beneficiary surviving, we will pay the Death Benefit to the Owner's estate. We
will pay the Death Benefit in accordance with the most recent Beneficiary
designation on file. The Owner may name a new Beneficiary unless an irrevocable
Beneficiary has been named. When an irrevocable Beneficiary has been designated,
the Owner and the irrevocable Beneficiary must act together to make any
Beneficiary changes.
REQUIRED DISTRIBUTIONS
Form 15208-95
11
<PAGE>
The following required distribution rules shall apply if and to the extent
required under section 72(s) of the Code:
1. Subject to the alternative election or spousal beneficiary provisions in
subsection (2) or (3) below,
a) If an Owner dies on or after the Annuity Date and before the entire
interest in this Contract has been distributed, the remaining portion
of such interest shall be distributed at least as rapidly as under
the method of distribution being used as of the date of such death;
b) If an Owner dies before the Annuity Date, the entire interest in
this Contract will be distributed within five years after such death;
and
c) If any Owner is not an individual, then for purposes of this
subsection (1), the primary Annuitant under this Contract shall be
treated as the Owner (the "Deemed Owner"), and any change in the
primary Annuitant shall be treated as the death of the Owner. The
primary Annuitant is the individual, the events in the life of whom
are of primary importance in affecting the timing or amount of the
payment under the Contract.
2. If any portion of the interest of an Owner (or a Deemed Owner) in
subsection (1) is payable to or for the benefit of a designated
beneficiary, and such beneficiary elects to have such portion
distributed under an Annuity Payment Option over a period that: (A) does
not extend beyond such beneficiary's life or life expectancy and (B)
starts within one year after such death, or such later date as Treasury
Regulation may proscribe (a "Qualifying Distribution Period"); then for
purposes of satisfying the requirements of subsection (1), such portion
shall be treated as distributed entirely on the date such periodic
distributions begin. Such beneficiary may elect any Annuity Payment
Option for a Qualifying Distribution Period, subject to any restrictions
imposed by any regulations under section 72(s) of the Code.
3. If any portion of the interest of an Owner (or a Deemed Owner) described
in subsection (1) is payable to or for the benefit of such Owner's
spouse, or is co-owned by such spouse, then such spouse shall be treated
as the Owner of such portion for purposes of the requirements of
subsection (1).
PURCHASE PAYMENTS
This Contract will not be issued until the initial Purchase Payment shown on the
Schedule is received by us and accepted at our Customer Service Center. The
initial Purchase Payment is due on the issue date. A receipt will be furnished
upon request. Any subsequent Purchase Payments may be made at any time prior to
the Annuity Date subject to our requirements at the time the Purchase Payment is
made. We reserve the right to modify the requirements. The requirements in
effect on the issue date are shown on the Schedule. No benefit associated with
any Purchase Payment will be provided until the Purchase Payment is accepted by
us at our Customer Service Center.
We reserve the right to refuse to accept additional Purchase Payments at any
time for any reason.
PURCHASE PAYMENT ALLOCATION
The initial Purchase Payment will be allocated to the Subaccounts and to the
Guaranteed Interest Account as you directed in the application and as indicated
on the Schedule. We allocate any subsequent Purchase Payment among the
Subaccounts and the Guaranteed Interest Account on the same basis as the initial
Purchase Payment unless we receive a Written Notice with new instructions.
In states where we are required to refund Purchase Payments during the Free Look
Period, that portion of the initial Purchase Payment to be allocated to any
Subaccount is allocated to the Fidelity VIP Money Market Subaccount for a period
of 15 days from the date that the Contract is mailed from the Customer Service
Center. At the expiration of this period, such portion of the Purchase Payment,
as adjusted to reflect the investment performance of the Fidelity VIP Money
Market Subaccount during this period, is then allocated to the Subaccounts as
described above.
Form 15208-95
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VARIABLE ACCOUNT
The Variable Account is an account established by us pursuant to the laws of the
State of Texas, to separate the assets funding the variable benefits for the
class of Contracts to which this Contract belongs from the other assets of the
Company.
The Variable Account is registered as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). All income, gains and losses,
realized or unrealized, from assets allocated to the Variable Account are
credited to or charged against the Variable Account without regard to other
income, gains or losses of the Company. The assets of the Variable Account are
our property, but are separate from our General Account and any other separate
account maintained by us. That portion of the assets of the Variable Account
which is equal to the reserves and other Contract liabilities with respect to
the Variable Account is not chargeable with liabilities arising out of any other
business we may conduct. We have the right to transfer to our General Account
any assets of the Variable Account that are in excess of such reserves and other
liabilities.
The Variable Account is divided into Subaccounts, each of which invests in a
corresponding Portfolio designed to meet the objectives of the Subaccount. The
current Subaccounts are shown on the Schedule. We may, from time to time,
subject to review by the SEC and other regulatory authorities:
(1) Make additional subaccounts available to such classes of Contracts as
we may determine. These subaccounts will invest in portfolios we find
suitable for the Contract;
(2) Eliminate Subaccounts from the Variable Account, combine two or more
Subaccounts or substitute a new portfolio for the Portfolio in which a
Subaccount invests;
(3) Transfer assets of the Variable Account, which we determine to be
associated with the class of contracts to which your Contract belongs,
to another variable account;
(4) Withdraw the Variable Account from registration under the 1940 Act;
(5) Operate the Variable Account as an investment management company under
the 1940 Act or in any other form permitted by law;
(6) Cause one or more Subaccounts to invest in new portfolios;
(7) Create new separate accounts or combine separate accounts, including
the Variable Account;
(8) Restrict or eliminate any voting rights as to the Variable Account, as
permitted by applicable laws and regulations; and
(9) Make any changes required by the 1940 Act or the rules or regulations
thereunder or other applicable laws or regulations.
GUARANTEED INTEREST ACCOUNT
The Guaranteed Interest Account is another account to which you may allocate
Purchase Payments or make transfers. We pay a declared interest rate on all
amounts that you have in the Guaranteed Interest Account. Interest is credited
at the guaranteed annual effective interest rate shown on the Schedule or may be
credited at a higher rate. Any higher rate in effect on the date a Purchase
Payment is paid or an amount is transferred to the Guaranteed Interest Account
is guaranteed to apply to that payment or transfer amount for at least 12
months. After 12 months, we may apply an interest rate higher than the
guaranteed rate in a manner we determine. Any such higher rate shall be in
effect for at least 12 months.
Form 15208-95
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ACCUMULATION VALUES
ACCUMULATION UNIT VALUE
Purchase Payments allocated to a Subaccount or amounts transferred to a
Subaccount are converted into Accumulation Units. For any Subaccount, the
number of Accumulation Units credited is determined by dividing the dollar
amount directed to the Subaccount by the value of the Accumulation Unit for that
Subaccount for the Valuation Period on which the Purchase Payment is received or
the transfer is effective. In this manner, an increase in Subaccount
Accumulation Value under a Contract occurs by the addition of Accumulation Units
of that Subaccount.
The Accumulation Unit Value for each Subaccount was arbitrarily set initially at
$10 when the Subaccount was established. Thereafter, for any Subaccount, the
Accumulation Unit Value for a Valuation Period equals the Accumulation Unit
Value for the preceding Valuation Period multiplied by the "Accumulation
Experience Factor" (defined below) for the current Valuation Period.
Decreases in Subaccount Accumulation Value under a Contract are effected by the
cancellation of an appropriate number of Accumulation Units of a Subaccount.
Therefore, Surrenders, withdrawals, transfers out of a Subaccount, payment of a
Death Benefit, the application of the Accumulation Value to an Annuity Payment
Option and the deduction of the annual administrative charge all result in the
cancellation of an appropriate number of Accumulation Units of one or more
Subaccounts. Accumulation Units are cancelled as of the end of the Valuation
Period in which the Company received notice of or instructions regarding the
event.
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ACCUMULATION EXPERIENCE FACTOR
For each Subaccount of the Variable Account, the Accumulation Experience Factor
reflects the investment experience of the Portfolio in which that Subaccount
invests and the charges assessed against that Subaccount for a Valuation Period.
The Accumulation Experience Factor is calculated by dividing (1) by (2) and
subtracting (3) from the result, where:
(1) is the result of:
a. the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the current Valuation Period;
plus
b. the per share amount of any dividend or capital gains distributions
made by the Portfolio held in the Subaccount, if the "ex-dividend"
date occurs during the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the operations of
the Subaccount.
(2) is the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the last prior Valuation Period.
(3) is the daily factor representing the mortality and expense risk charge
and the administrative charge deducted from the Subaccount adjusted for
the number of days in the Valuation Period.
SUBACCOUNT ACCUMULATION VALUE
The Subaccount Accumulation Value as of the Contract Date is equal to the amount
of the initial Purchase Payment allocated to that Subaccount.
On subsequent Valuation Days, the Subaccount Accumulation Value equals:
1. The number of Accumulation Units in that Subaccount as of the end of the
preceding Valuation Period multiplied by that Subaccount's Accumulation
Unit value for the current Valuation Period; plus
2. Any additional Purchase Payments allocated to that Subaccount during the
current Valuation Period; plus
3. Any Accumulation Value transferred to such Subaccount during the current
Valuation Period; minus
4. Any Accumulation Value transferred from such Subaccount during the
current Valuation Period; minus
5. Any excess transfer charge allocated to such Subaccount during the
current Valuation Period; minus
6. Any Withdrawals (and any withdrawal transaction charges and Surrender
charges arising from such withdrawals) allocated to that Subaccount
during the current Valuation Period; minus
7. The portion of the annual administrative charge applicable to that
Subaccount if a Contract Anniversary occurs during the Valuation Period.
The annual administrative charge is deducted proportionately from your Variable
Account Accumulation Values immediately prior to the deduction.
GUARANTEED INTEREST ACCOUNT ACCUMULATION VALUE
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The Guaranteed Interest Account Accumulation Value as of the Contract Date is
equal to the amount of the initial Purchase Payment allocated to the Guaranteed
Interest Account.
On subsequent Valuation Days, the Guaranteed Interest Account Accumulation Value
equals:
1. The Guaranteed Interest Account Accumulation Value as of the end of the
preceding Valuation Period plus any interest earned during the current
Valuation Period; plus
2. Any additional Purchase Payments allocated to the Guaranteed Interest
Account during the current Valuation Period; plus
3. Any Accumulation Value transferred to the Guaranteed Interest Account
during the current Valuation Period; minus
4. Any Accumulation Value transferred from the Guaranteed Interest Account
during the current Valuation Period; minus
5. Any excess transfer charge allocated to the Guaranteed Interest Account
during the current Valuation Period; minus
6. Any withdrawals (and any withdrawal transaction charges and Surrender
charges) allocated to the Guaranteed Interest Account during the current
Valuation Period.
TRANSFERS
After the Free Look Period, the Accumulation Value in each Subaccount or the
Guaranteed Interest Account may be transferred, upon written request, to any
other Subaccount or the Guaranteed Interest Account subject to the limitations
on transfers involving the Guaranteed Interest Account as detailed in the
following section. The number of free transfers permitted in any one Contract
Year without an excess transfer charge, the total number of transfers permitted
and the excess transfer charge are shown in the table below. Any transfers made
due to the operation of Dollar Cost Averaging or Automatic Rebalancing will not
count toward the limit on the number of transfers allowed free of charge. The
minimum amount that may be transferred from each Subaccount or the Guaranteed
Interest Account is the lesser of $100 or the Accumulation Value of that
Subaccount or the Guaranteed Interest Account.
The table below summarizes the number of transfers available and the associated
charges during any Contract Year.
TRANSFERS AND EXCESS TRANSFERS
PRIOR TO ANNUITY DATE ANNUITY PERIOD
- -------------------------------------------------------------------------------
FREE TRANSFERS 12 4
- -------------------------------------------------------------------------------
TOTAL NUMBER OF TRANSFERS Unlimited 4
PERMITTED
- -------------------------------------------------------------------------------
EXCESS TRANSFER CHARGE $25 for each transfer in excess of Not Applicable
12 during any Contract Year
- -------------------------------------------------------------------------------
We reserve the right to limit the number of transfers per Contract Year to
twelve and to limit, modify or eliminate the transfer privilege.
Form 15208-95
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TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT
Once during the first 30 days of each Contract Year, you may transfer amounts
from the Guaranteed Interest Account. Transfer requests received within 30 days
prior to the Contract Anniversary will be deemed requests to transfer on the
Contract Anniversary. A request to transfer from the Guaranteed Interest
Account that is received on the Contract Anniversary or during the next 30 days
will be processed if it is the first such transfer received during the 30-day
period. Transfer requests received at any other time will not be processed.
The maximum transfer amount from the Guaranteed Interest Account in any Contract
Year is the greatest of:
1. 25% of the Guaranteed Interest Account Accumulation Value immediately
prior to the transfer;
2. $100; or
3. the sum of the amounts that were transferred out of and withdrawn from
the Guaranteed Interest Account in the prior Contract Year. (For
purposes of calculating this sum, all withdrawals, including those made
under the Systematic Withdrawal Program are included.)
EXCESS TRANSFER CHARGE
If you exceed the number of free transfers allowed, you will be assessed an
excess transfer charge as shown in the above table. This charge will be
deducted proportionately from your Subaccount Accumulation Values and your
Guaranteed Interest Account Accumulation Value immediately prior to the
deduction.
DOLLAR COST AVERAGING
Prior to the Annuity Date, if you have at least $10,000 of Accumulation Value in
either the [Fidelity VIP Money Market] Subaccount or the [Janus Short-Term Bond]
Subaccount, you may choose to transfer a specified dollar amount each month from
one of these Subaccounts and have a percentage of that amount transferred to
other Subaccounts of the Variable Account ("Dollar Cost Averaging"). You may
elect the Dollar Cost Averaging transfer option at any time prior to the Annuity
Date by Written Notice.
The minimum amount that you may elect to transfer each month is $100. The
maximum amount that you may transfer is equal to the Subaccount Accumulation
Value (when the election is made) of the Subaccount from which the transfer is
taken divided by twelve.
The percentages to be transferred to the other Subaccounts must be designated in
whole numbers. No specific dollar designation may be made to the Subaccounts.
If you elect to transfer to a particular Subaccount, the minimum percentage that
may be transferred to that Subaccount is 1% of the total amount transferred.
The transfer date will be the same calendar day each month as the Contract Date.
If this calendar day is not a Valuation Day, the next Valuation Day will be
used. If, on any transfer date, the Accumulation Value in the selected
Subaccount is equal to or less than the amount you have elected to have
transferred, the entire amount will be transferred, and this option will end.
Dollar Cost Averaging will end as of the Valuation Day immediately preceding the
Annuity Date.
You may change the transfer amount or the Subaccount to which transfers are to
be made once each Contract Year. You may cancel this election by Written Notice
at least seven days before the next transfer date. Any transfer under this
option will not be included for purposes of computing the Excess Transfer
Charge.
AUTOMATIC REBALANCING
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You may choose to automatically transfer, on a quarterly basis, between and
among specified Subaccounts, in order to achieve a particular percentage
allocation among such Subaccounts ("Automatic Rebalancing"). Percentage
allocations must be in whole numbers. Once elected, Automatic Rebalancing
transfers begin on the first Valuation Day of the next calendar quarter (or, if
later, the next calendar quarter after expiration of the Free Look Period).
Automatic Rebalancing transfers do not count as one of the 12 free transfers
available during any Contract Year.
You may change your Automatic Rebalancing allocations at any time. Such
allocation changes will take effect as of the Valuation Day that we receive your
instructions. You may stop Automatic Rebalancing at least seven calendar days
before the first Valuation Day in a new calendar quarter.
If Automatic Rebalancing is elected at the same time as Dollar Cost Averaging or
when Dollar Cost Averaging is in effect, Automatic Rebalancing will be postponed
until the first Valuation Day in the calendar quarter following the termination
of Dollar Cost Averaging.
WITHDRAWALS
After the Free Look Period and at or before the commencement of the Annuity
Date, you may by written request withdraw all or part of the Cash Surrender
Value of this Contract. A withdrawal may incur withdrawal transaction charges
and may incur Surrender charges. Withdrawals may be subject to a 10% penalty
tax imposed by either the Internal Revenue Service, Federal Government or other
entity.
In no case will you be allowed to withdraw more than your Cash Surrender Value.
A withdrawal will result in a decrease in the Accumulation Value of this
Contract as described in the Accumulation Values section above.
There are three withdrawal options available:
1. "Demand Withdrawal Option";
2. "Systematic Withdrawal Program"; and
3. "IRA Income Program".
DEMAND WITHDRAWAL OPTION
After the Free Look Period and at or before the commencement of the Annuity
Date, you may make a Demand Withdrawal. The minimum Demand Withdrawal amount is
$100. The maximum Demand Withdrawal amount is the Cash Surrender Value minus
$500. If the amount of Demand Withdrawal you specify exceeds the maximum, the
amount of the withdrawal will automatically be lowered to the maximum.
Demand Withdrawals are deemed to be withdrawn in the following order:
1. Accumulation Value in excess of aggregate Purchase Payments;
2. Purchase Payments held more than five full Contract Years since the
Contract Anniversary immediately following the end of the Contract Year
in which the Purchase Payment was made;
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3. The amount by which 15% of the Accumulation Value as of the last
Contract Anniversary, minus any withdrawals (including any withdrawal
transaction charges and Surrender charges arising from such withdrawals)
already made during the Contract Year, which are not considered
withdrawals of Purchase Payments, exceeds earnings, if any;
4. Purchase Payments held less than five full Contract Years since the
Contract Anniversary at the end of the Contract Year in which the
Purchase Payment was made, withdrawn on a first-in, first-out basis.
Unless you specify otherwise, the amount of the withdrawal will be taken from
each Subaccount and the Guaranteed Interest Account in which you are invested in
the same proportion that the amount of Accumulation Value in that Subaccount or
the Guaranteed Interest Account bears to the total Accumulation Value
immediately prior to the withdrawal. You may not withdraw from the Guaranteed
Interest Account an amount that is greater than the total withdrawal amount
requested multiplied by the ratio of the Guaranteed Interest Account
Accumulation Value to the total Accumulation Value immediately prior to the
withdrawal.
WITHDRAWAL TRANSACTION CHARGE
After the Free Look Period and prior to the Annuity Date, you may make one
Demand Withdrawal each Contract Year without a withdrawal transaction charge.
If you take more than one Demand Withdrawal in a Contract Year, we will impose a
withdrawal transaction charge. This charge is equal to the lesser of $25 or 2%
of the amount withdrawn.
SYSTEMATIC WITHDRAWAL PROGRAM
You may elect this option by Written Notice at any time prior to the Annuity
Date. You may choose to receive systematic withdrawals on a monthly or
quarterly basis from the Accumulation Value ("Systematic Withdrawal Program").
Withdrawals will be deducted proportionately from your Subaccount Accumulation
Values and your Guaranteed Interest Account Accumulation Value immediately prior
to the withdrawal. The withdrawals under this option may not start sooner than
one month after the Contract Date. You may select the day of the month when the
withdrawals will be made. If no day is selected, the withdrawals will be made
on the same day of the month as the Contract Date. If this day is not a
Valuation Day, the withdrawal will be made on the next Valuation Day. You may
select a dollar amount or a percentage amount for your withdrawal subject to the
following maximums:
MONTHLY 1.25% of the Accumulation Value on the date of withdrawal
QUARTERLY 3.75% of the Accumulation Value on the date of withdrawal
Except as described in the following sections, payments may not be less than
$100.
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage listed above, the amount
withdrawn will be reduced to equal such percentage. If a percentage amount is
selected that exceeds the maximum applicable percentage listed above, the amount
withdrawn will be reduced to equal such percentage. In either case, if the
amount to be withdrawn is then less than $100, the withdrawal will be made and
systematic withdrawals will be ended.
If systematic withdrawals are ended due to an insufficient Accumulation Value,
any remaining Cash Surrender Value will be paid to you. This will result in the
termination of the Contract.
You may change the amount or percentage of your systematic withdrawals once each
Contract Year. You may cancel your election at any time by Written Notice at
least seven days prior to the next scheduled withdrawal date.
If a Demand Withdrawal is made during a Contract Year when the Systematic
Withdrawal Program is in effect, the remaining payments to be made under the
Systematic Withdrawal Program for that Contract Year will be considered Demand
Withdrawals for purposes of calculating withdrawal transaction charges
Form 15208-95
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and any applicable Surrender charges. Otherwise, systematic withdrawals will not
be assessed a Surrender Charge. However, the amount available for systematic
withdrawals is never greater than the Cash Surrender Value.
IRA INCOME PROGRAM
If you have an IRA Contract, we will send you withdrawals to accommodate IRS
required minimum distribution rules. These withdrawals will begin automatically
if the minimum distributions are not otherwise satisfied.
SURRENDERS
You may Surrender this Contract for its Cash Surrender Value at any time at or
before the commencement of the Annuity Date. The Surrender charge shown on the
Schedule will be deducted upon Surrender. The Surrender charge is applicable
only to the Surrender of Purchase Payments held less than five full Contract
Years since the Contract Anniversary at the end of the Contract Year in which
the Purchase Payment was made.
Surrenders may be subject to a 10% penalty tax imposed by either the Internal
Revenue Service, Federal Government or other entity.
No Surrender may be made on or after the Annuity Date or with respect to any
amounts applied to an Annuity Option.
DEATH BENEFIT
DEATH BENEFIT PRIOR TO THE ANNUITY DATE
Upon the death of an Owner prior to the Annuity Date, any Enhanced Death
Benefit (as defined below) will be paid according to the provisions in the
Owners and Death of Owners and the Required Distributions sections. We will pay
the Enhanced Death Benefit in one lump sum unless the Beneficiary elects an
Annuity Payment Option prior to the date on which we pay the Death Benefit. If
a one sum payment is made, it will be paid within seven days of determination of
the amount of the payment unless we are authorized by appropriate regulatory
authorities to defer payment. If the Enhanced Death Benefit is paid under an
Annuity Payment Option, the Beneficiary becomes the Annuitant and the contingent
Beneficiary becomes the contingent Annuitant. The available Annuity Payment
Options are described in the Annuity Payment Option section. Contact our
Customer Service Center or your agent for more information.
ENHANCED DEATH BENEFIT
The Enhanced Death Benefit is calculated as of the Valuation Day on which we
receive Due Proof of Death and all information necessary to process the Death
Benefit claim. The Enhanced Death Benefit is the greatest of the following
amounts:
1. Purchase Payments made, less withdrawals (and charges associated with
such withdrawals).
2. The Accumulation Value.
3. The Step-Up Benefit (as defined below), plus Purchase Payments made,
less withdrawals (and charges associated with such withdrawals) since
the last Step-Up Anniversary (as defined below).
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The Step-Up Benefit at issue is the initial Purchase Payment. As of each
Step-Up Anniversary, the then current Accumulation Value is compared to
the prior Step-Up Benefit increased by Purchase Payments made, less
withdrawals (and charges associated with such withdrawals) since the
last Step-Up Anniversary. The greater of these becomes the new Step-Up
Benefit.
The Step-Up Anniversaries are every 6th Contract Anniversary for the
duration of the Contract (i.e., the 6th, 12th, 18th, etc.).
The amount payable to the Beneficiary is the Enhanced Death Benefit as
calculated above minus any taxes incurred but not deducted.
ANNUITY PAYMENTS
ELECTION AND CHANGES OF ANNUITY DATE
The Annuity Date may be elected on your application, but may not be earlier than
the second Contract Anniversary. If no Annuity Date is elected in the
application, the Annuity Date will be the first day of the month following the
Annuitant's 85th birthday or on the first day of the month following the tenth
Contract Anniversary, whichever occurs later. You may change the Annuity Date
at any time prior to 60 days prior to the Annuity Date currently elected by
Written Notice.
ELECTION AND CHANGES OF ANNUITY PAYMENT OPTION
The Owner elects the Annuity Payment Option. Once elected, the Owner may change
the Annuity Payment Option at any time prior to the Annuity Date. In selecting
an Annuity Payment Option, the Owner must determine whether the payments will be
variable or fixed in amount. If variable, the Owner must determine from which
Subaccounts variable Annuity Payments are to be made. The Owner may select a
combination of fixed and variable payments as described below. If the Owner has
not chosen an Annuity Payment Option and if the Annuitant is living on the
Annuity Date, then:
1. Any Guaranteed Interest Account Accumulation Value will be applied to
purchase fixed Annuity Payments and proceeds from each Subaccount
Accumulation Value will be applied to purchase variable Annuity Payments
from each such Subaccount; and
2. The Annuity Payment Option will be Annuity Payment Option II (with a
Benchmark Rate of Return of 3% for any variable Annuity Payments) with a
designated period of 20 years.
The Owner must specifically elect that the Annuitant have the right to commute
payments as provided in the Commuting section.
Any Death Benefit proceeds to be applied under an Annuity Option will be
allocated to the Subaccounts and/or the Guaranteed Interest Account as
instructed by the Beneficiary.
ANNUITY PAYMENT OPTIONS - GENERAL
The Annuity Payment Option becomes effective on the Annuity Date. The Annuity
Payment Option utilizes the Accumulation Value under the Contract on the Annuity
Date, less the amount of any taxes incurred by the Company but not yet
deducted, to activate the Annuity Payment Option selected by the Owner. If such
taxes are deducted at this time, the taxes will be deducted proportionately from
your Subaccount Accumulation Values and your Guaranteed Interest Account
Accumulation Value immediately prior to the deduction.
VARIABLE ANNUITY PAYMENTS
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Variable Annuity Payments are Annuity Payments that:
1. Are not pre-determined or guaranteed as to dollar amount; and
2. Vary in amount with the investment experience of the Subaccount(s) which
you select.
The dollar amount of an initial variable Annuity Payment attributable to a
Subaccount is determined from the attached Annuity Payment Option Tables using
that portion of the Accumulation Value applied to that Subaccount as of the
Annuity Date. Each Table reflects a different Annuity Payment Option, including
the selection of either a 3% or 5% Benchmark Rate of Return.
The dollar amount of each subsequent variable Annuity Payment attributable to a
Subaccount is determined by multiplying the number of Annuity Units of that
Subaccount credited under a Contract by the Annuity Unit value for that
Subaccount for the Valuation Period as of which the Annuity Payment is made.
The number of Annuity Units of a Subaccount credited under a Contract is
determined by dividing the dollar amount of the initial variable Annuity Payment
attributable to that Subaccount by the Annuity Unit value for that Subaccount
for the Valuation Period ending on the Annuity Date or during which the Annuity
Date falls. The number of Annuity Units attributable to each Subaccount under a
Contract remains fixed unless there is an exchange of Annuity Units, as provided
below.
ANNUITY UNIT VALUE
The Annuity Unit value of each Subaccount for any Valuation Period is calculated
by dividing (2) by (3), and then multiplying the result by (1), where:
(1) is the Annuity Unit value for the immediately preceding Valuation
Period;
(2) is the Annuity Experience Factor for the current Valuation Period; and
(3) is a special factor designed to compensate for the Benchmark Rate of
Return of 3% or 5% (as applicable) built into the Table used to compute
the first variable Annuity Payment.
BENCHMARK RATE OF RETURN
You must elect either a 3% or 5% Benchmark Rate of Return. Your election may
not be changed after the Annuity Date. Electing the 5% Benchmark Rate of Return
would mean a higher initial payment but more slowly rising or more rapidly
falling subsequent payments if actual investment experience varied from 5%. The
3% Benchmark Rate of Return assumption would have the opposite effect. If the
actual annual rate of return is 3% or 5%, the Annuity Payments will be level if
you elected either the 3% or 5% respectively.
EXCHANGE OF ANNUITY UNITS
The Annuitant may exchange the dollar value of all or a portion of the Annuity
Units in a Subaccount for an equivalent dollar amount of Annuity Units of
another Subaccount. The limit on exchanges of Annuity Units is shown in the
table in the Transfer section. After the exchanges, the number of Annuity
Units in the Subaccount from which you are transferring will be reduced by the
number of Annuity Units exchanged. The number of Annuity Units in the
Subaccount to which the exchange is made will be increased by the number of
Annuity Units acquired in the exchange.
FIXED ANNUITY PAYMENTS
Fixed Annuity Payments are Annuity Payments which remain fixed as to dollar
amount throughout the Annuity Period. As of the Annuity Date, any Subaccount
Accumulation Value applied to purchase fixed Annuity Payments will be allocated
to the Guaranteed Interest Account. The fixed Annuity Payment will, based on
the 1983A Individual Annuity Mortality Table at 3% Benchmark Rate of Return, be
that amount shown in the attached Tables. If the fixed Annuity Payment is
credited at an interest rate above the
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guaranteed minimum rate, the dollar amount of each payment will be greater than
the guaranteed dollar amount for the time period that the higher rate is
declared.
COMBINATION ANNUITY PAYMENTS
Combination Annuity Payments are Annuity Payments where a portion of the payment
is variable and a portion of the payment is fixed as to dollar amount. If a
combination Annuity Payment is elected, at least 25% of the proceeds must be
allocated to each elected option. As of the Annuity Date, we will allocate
proceeds between the Guaranteed Interest Account and the Subaccounts to meet the
proportions selected. Any amount of Accumulation Value to be transferred to or
from the Guaranteed Interest Account will be allocated among the Subaccounts in
which you are invested in the same proportion that each Subaccount Accumulation
Value bears to your Variable Account Accumulation Value. Once a combination
Annuity Payment is selected, the Annuitant may subsequently increase the
allocation to a fixed Annuity Payment, but may not increase the allocation to a
variable Annuity Payment.
ANNUITY PAYMENT OPTIONS
Under each Annuity Payment Option, the payment period is elected from one of the
following:
OPTION I. PAYMENTS FOR A DESIGNATED PERIOD. Payments will be made in 1, 2, 4,
or 12 installments per year as elected for a designated period, which may be 5
to 30 years. If the Annuitant dies before the end of the designated period,
payments will be continued to the contingent Annuitant (or to the Annuitant's
estate, if no contingent Annuitant has been named) until the end of the
designated period. If variable Annuity Payments are elected, the dollar amount
of each payment will vary, based on the Annuity Unit value(s) of the
Subaccount(s) selected. Variable Annuity Payments may only be elected if prior
to the Annuity Date, the Owner has made an irrevocable election to give the
Annuitant the right to commute any remaining designated period installments
under this option. If fixed Annuity Payments are elected, the dollar amount of
each payment will depend upon the designated period elected and will be equal
unless one or more payments are based on an interest rate in excess of the
guaranteed minimum rate. The amount of the first monthly payment for each $1,000
of proceeds applied is shown in Annuity Payment Option Table I.
OPTION II. LIFE INCOME WITH PAYMENTS FOR A DESIGNATED PERIOD. Payments will be
made in 1, 2, 4, or 12 installments per year throughout the Annuitant's
lifetime, or if longer, for a period of 5, 10, 15, or 20 years as elected. If
the Annuitant dies before the end of the designated period, payments will be
continued to the contingent Annuitant (or to the Annuitant's estate, if no
contingent Annuitant has been named) until the end of the designated period. The
amount of each payment will depend upon the Annuitant's sex, age at the time the
first payment is due and the designated period elected. If variable Annuity
Payments are elected, the dollar amount of each payment will vary based on the
Annuity Unit value(s) of the selected Subaccount(s). If fixed Annuity Payments
are elected, the dollar amount will be equal unless one or more payments are
based on an interest rate in excess of the guaranteed minimum rate. The amount
of the first monthly payout for each $1,000 of proceeds applied is shown in
Annuity Payment Option Table II. This option is only available for ages shown in
these Tables.
OPTION III. JOINT AND LAST SURVIVOR. Payments will be made in 1, 2, 4, or 12
installments per year as elected while both Annuitants are living. Upon the
death of one Annuitant, the survivor's Annuity Payment will be paid throughout
the lifetime of the surviving Annuitant. If variable Annuity Payments are
elected, the number of Annuity Units supporting each payment will be level while
both Annuitants are living and upon the death of one Annuitant will be reduced
to 2/3rds of the number of Annuity Units supporting each payment while both
Annuitants were living. The dollar amounts of each payment will vary based on
the Annuity Unit Value(s) of the selected Subaccount(s). If fixed Annuity
Payments are elected, the dollar amount of each payment will be level while both
Annuitants are living and upon the death of one Annuitant will be reduced to
2/3rds of the installment dollar amount while both Annuitants were living.
OPTION IV. OTHER. Payments will be made in any other manner as agreed upon in
writing between you or the Beneficiary and us.
Form 15208-95
23
<PAGE>
If you have elected to have payments made less frequently than monthly, the
payment amount is adjusted according to the factors in Payments Other Than
Monthly section.
COMMUTING
If the Owner elects, the Annuitant may commute remaining designated period
payments under Annuity Payment Option I. If the election allows, the contingent
Annuitant may commute remaining designated period payments after the death of
the Annuitant under Annuity Payment Options I or II. If no contingent Annuitant
is named, any remaining designated period payments after the death of the
Annuitant may be commuted by the estate. Any computation shall be at the
appropriate Benchmark Rate of Return.
EXCESS INTEREST
We may declare that fixed Annuity Payments will be computed based on an interest
rate above the guaranteed minimum rate. We guarantee that any higher rate, once
declared effective, will remain in effect for a 12-month period.
MINIMUM AMOUNTS
The minimum amount that may be applied under any Annuity Payment Option is
$2,000. If the proceeds to be applied are less than $2,000, or, if Annuity
Payments are ever less than $20, we may change the frequency of Annuity Payments
to result in payments of at least that amount or require a one sum payment, in
which case the Contract would be terminated.
Form 15208-95
24
<PAGE>
INCOME PROTECTION
Unless elected by the Owner, an Annuitant or contingent Annuitant does not have
the right to commute, assign, transfer to a third party or encumber amounts held
or future Annuity Payments to become payable pursuant to this Contract. To the
extent provided by law, such proceeds and Annuity Payments are not subject to
any Annuitant's debts, contracts, or engagements.
PAYMENTS OTHER THAN MONTHLY
Tables at the end of the Contract show initial monthly payments for Annuity
Payment Options I and II. To arrive at annual, semiannual, or quarterly
payments, multiply the appropriate figures by 11.839, 5.963, or 2.993
respectively for a Guaranteed Interest Rate or Benchmark Rate of Return of 3%,
and, by 11.736, 5.939 or 2.988 respectively if the Benchmark Rate of Return is
5%. Factors for other designated periods or for other options that may be
provided by mutual agreement will be provided upon reasonable request.
GENERAL CONTRACT PROVISIONS
THE CONTRACT
This Contract, the application, riders and endorsements, make up the entire
Contract between you and us. A copy of the initial application will be attached
to this Contract at issue. In the absence of fraud, all statements made in an
application will be considered representations and not warranties. No statement
will be used to void this Contract or to deny a claim unless it is contained in
the application.
AGE
The Owner's Age is shown on the Schedule. This is defined as the Owner's Age as
of last birthday on the Contract Date. The Annuitant's attained age on any date
for which age is to be determined is the Annuitant's age as of last birthday.
PROCEDURES
We must receive any election, designation, assignment or any other change
request you make in writing, except those specified on the application. We may
require a return of this Contract for any Contract change or for paying its Cash
Surrender Value. Any change will not affect payments made or action taken by us
before the change is recorded at our Customer Service Center.
In the event of the Owner's death before the Annuity Date, we should be informed
as soon as possible. Claim procedure instructions will be sent to your
Beneficiary immediately. We require a certified copy of the death certificate
and may require proof of the Owner's Age. We may require the Beneficiary and
the Owner's next of kin to sign authorizations as part of due proof.
DEFERRAL OF PAYMENT
Withdrawals or other payments from the Variable Account will usually be made
within seven days of receipt of the request at our Customer Service Center.
However, we may be permitted to defer such payment for any of the following
reasons:
1. When the NYSE is closed for trading for other than usual weekends or
holidays, or trading on the NYSE is otherwise restricted;
2. When an emergency exists as determined by the SEC; or
3. When the SEC permits a delay for protection of Contract Owners.
Form 15208-95
25
<PAGE>
We may defer up to six months the payment of any withdrawal or other payments
from the Guaranteed Interest Account.
TAX QUALIFICATIONS
This Contract is intended to qualify as an annuity contract under the Code. To
that end, all terms and provisions of the Contract shall be interpreted to
ensure or maintain such qualification, notwithstanding any other provisions to
the contrary. Payments and distributions under this Contract shall be made in
the time and manner necessary to maintain such qualification under the
applicable provisions of the Code in existence at the time this Contract is
issued. We reserve the right to amend this Contract, to reflect any
clarifications or changes that may be needed or are appropriate, or to conform
it to any applicable changes in the tax requirements. Such changes will apply
uniformly to all Contracts that are affected. We will send you written notice
of any such changes.
CONTRACT CHANGES
Only the President, a Vice President, or the Secretary of the Company has
authority to agree on behalf of the Company to any alteration of this Contract
or to any waiver of the right or requirements of the company.
COLLATERAL ASSIGNMENT
The Owner may assign this Contract as collateral security upon Written Notice to
us. Once it is recorded with us, the rights of the Owner and Beneficiary are
subject to the assignment. It is your responsibility to make sure the
assignment is valid.
INCONTESTABILITY
We will not contest the statements in an application for this Contract after the
Contract Date.
MISSTATEMENT OF AGE OR SEX
If the Age or sex has been misstated in an application, the amounts payable or
benefits provided by this Contract will be those that the Purchase Payments made
would have purchased at the correct Age or sex. Interest will be paid at a rate
not exceeding 6% (six percent) per year to be paid to the Annuitant on the
amount of the underpayment, and to the Insurer from the Insured on the amount of
the over payment.
PERIODIC REPORTS
Prior to the Annuity Date, we will send you a report within thirty days after
the end of each calendar quarter. This report will show the then current
Subaccount and Guaranteed Interest Account Accumulation Values, total
Accumulation Value, Cash Surrender Value, Enhanced Death Benefit and activity
under the Contract since the last report. During the Annuity Period, we will
send you a report within thirty days after the end of each calendar year showing
any information required by law. The reports will also include any other
information that may be required by the insurance supervisory official of the
jurisdiction in which this Contract is delivered.
Form 15208-95
26
<PAGE>
BASIS OF COMPUTATIONS
Any paid-up annuity Cash Surrender Values or Death Benefits that may be
available under this Contract are not less than the minimums required on the
Contract Date by the state in which this Contract was delivered. A detailed
statement of the method of computation of Accumulation Values under this
Contract has been filed with the insurance department of the state in which the
application was signed, if requested by that state.
TAXES
Taxes relating to this Contract paid by us to either the Internal Revenue
Service, Federal Government or other entity will be deducted from the Purchase
Payments or Accumulation Value. We will, at our sole discretion, determine when
taxes have resulted from: the investment experience of the Subaccounts; receipt
by us of the Purchase Payments; Surrenders or withdrawals; or the start of an
Annuity Option. We may, in our sole discretion, pay taxes when incurred and
deduct that amount from the Accumulation Value at a later date. Payment at an
earlier date does not waive any right we may have to deduct amounts at this
later date. We will deduct any withholding taxes required by applicable law.
NON PARTICIPATING
This Contract does not participate in our surplus earnings.
CUSTOMER SERVICE CENTER
Our Customer Service Center is at the address shown in the Schedule. Unless you
are otherwise notified:
1. All requests and payments should be sent to us at our Customer Service
Center; and
2. All transactions are effective as of the date the required information
is accepted at our Customer Service Center.
Form 15208-95
27
<PAGE>
ANNUITY PAYMENT OPTION TABLES
OPTION I TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
----------------------------------------------------------
No. of Years Monthly No. of Years Monthly
Payable Installments Payable Installments
----------------------------------------------------------
5 $17.92 20 $5.53
6 15.16 21 5.34
7 13.18 22 5.17
8 11.70 23 5.01
9 10.55 24 4.86
10 9.63 25 4.73
11 8.86 26 4.61
12 8.26 27 4.50
13 7.73 28 4.39
14 7.28 29 4.30
15 6.89 30 4.21
16 6.55
17 6.25
18 5.98
19 5.75
--------------------------------------------------------
Form 15208-95
28
<PAGE>
OPTION I TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
-----------------------------------------------------------
No. of Years Monthly No. of Years Monthly
Payable Installments Payable Installments
-----------------------------------------------------------
5 $18.79 20 $6.57
6 16.04 21 6.39
7 14.08 22 6.23
8 12.61 23 6.08
9 11.47 24 5.94
10 10.56 25 5.82
11 9.82 26 5.71
12 9.21 27 5.61
13 8.69 28 5.51
14 8.25 29 5.43
15 7.88 30 5.35
16 7.55
17 7.26
18 7.00
19 6.77
----------------------------------------------------------
Form 15208-95
29
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 2.94 2.94 2.94 2.93 40 3.63 3.62 3.61 3.58
16 2.96 2.95 2.95 2.95 41 3.68 3.67 3.65 3.62
17 2.97 2.97 2.97 2.96 42 3.73 3.72 3.70 3.66
18 2.99 2.99 2.99 2.98 43 3.78 3.77 3.74 3.71
19 3.01 3.01 3.00 3.00 44 3.84 3.82 3.79 3.75
20 3.03 3.02 3.02 3.02 45 3.89 3.88 3.84 3.80
21 3.05 3.04 3.04 3.04 46 3.95 3.93 3.90 3.85
22 3.07 3.06 3.06 3.06 47 4.01 3.99 3.95 3.90
23 3.09 3.08 3.08 3.08 48 4.08 4.05 4.01 3.95
24 3.11 3.11 3.10 3.10 49 4.15 4.12 4.07 4.00
25 3.13 3.13 3.13 3.12 50 4.22 4.19 4.13 4.06
26 3.16 3.15 3.15 3.14 51 4.29 4.26 4.20 4.11
27 3.18 3.18 3.17 3.17 52 4.37 4.33 4.27 4.17
28 3.21 3.20 3.20 3.19 53 4.45 4.41 4.34 4.23
29 3.23 3.23 3.23 3.22 54 4.54 4.49 4.41 4.29
30 3.26 3.26 3.25 3.25 55 4.63 4.58 4.49 4.36
31 3.29 3.29 3.28 3.27 56 4.73 4.67 4.57 4.42
32 3.32 3.32 3.31 3.30 57 4.83 4.76 4.65 4.48
33 3.36 3.35 3.34 3.33 58 4.94 4.87 4.74 4.55
34 3.39 3.39 3.38 3.36 59 5.05 4.97 4.82 4.61
35 3.43 3.42 3.41 3.40 60 5.18 5.08 4.92 4.68
36 3.46 3.46 3.45 3.43 61 5.31 5.20 5.01 4.75
37 3.50 3.50 3.48 3.47 62 5.45 5.32 5.11 4.81
38 3.54 3.54 3.52 3.50 63 5.60 5.45 5.21 4.87
39 3.59 3.58 3.56 3.54 64 5.76 5.59 5.31 4.94
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
30
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 5.92 5.73 5.41 5.00 85 11.79 8.90 6.80 5.51
66 6.10 5.88 5.51 5.05 86 12.18 9.00 6.81 5.51
67 6.29 6.03 5.61 5.11 87 12.56 9.10 6.83 5.51
68 6.49 6.19 5.71 5.16 88 12.94 9.18 6.84 5.51
69 6.70 6.35 5.81 5.21 89 13.32 9.26 6.85 5.51
70 6.93 6.52 5.91 5.25 90 13.69 9.32 6.86 5.51
71 7.16 6.69 6.01 5.29 91 14.06 9.38 6.86 5.51
72 7.41 6.86 6.10 5.33 92 14.43 9.43 6.87 5.51
73 7.67 7.04 6.19 5.36 93 14.79 9.48 6.87 5.51
74 7.95 7.22 6.27 5.38 94 15.13 9.51 6.87 5.51
75 8.24 7.39 6.34 5.41 95 15.47 9.54 6.87 5.51
76 8.55 7.57 6.42 5.43
77 8.87 7.74 6.48 5.45
78 9.20 7.91 6.54 5.46
79 9.54 8.08 6.59 5.47
80 9.90 8.24 6.64 5.48
81 10.27 8.39 6.68 5.49
82 10.64 8.53 6.72 5.50
83 11.02 8.66 6.75 5.50
84 11.41 8.79 6.77 5.51
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
31
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 4.31 4.30 4.30 4.30 40 4.88 4.87 4.84 4.81
16 4.32 4.32 4.31 4.31 41 4.92 4.91 4.88 4.84
17 4.33 4.33 4.32 4.32 42 4.97 4.95 4.92 4.88
18 4.34 4.34 4.34 4.33 43 5.02 5.00 4.96 4.92
19 4.36 4.35 4.35 4.34 44 5.07 5.04 5.01 4.95
20 4.37 4.37 4.36 4.36 45 5.12 5.09 5.05 5.00
21 4.38 4.38 4.38 4.37 46 5.17 5.15 5.10 5.04
22 4.40 4.40 4.39 4.39 47 5.23 5.20 5.15 5.08
23 4.42 4.41 4.41 4.40 48 5.29 5.26 5.20 5.13
24 4.43 4.43 4.42 4.42 49 5.35 5.32 5.25 5.17
25 4.45 4.45 4.44 4.43 50 5.42 5.38 5.31 5.22
26 4.47 4.47 4.46 4.45 51 5.49 5.44 5.37 5.27
27 4.49 4.49 4.48 4.47 52 5.57 5.51 5.43 5.32
28 4.51 4.51 4.50 4.49 53 5.64 5.59 5.49 5.37
29 4.53 4.53 4.52 4.51 54 5.73 5.66 5.56 5.43
30 4.56 4.55 4.54 4.53 55 5.81 5.74 5.63 5.48
31 4.58 4.58 4.57 4.55 56 5.91 5.83 5.71 5.54
32 4.61 4.60 4.59 4.58 57 6.01 5.92 5.78 5.60
33 4.64 4.63 4.62 4.60 58 6.11 6.01 5.86 5.65
34 4.67 4.66 4.65 4.63 59 6.22 6.12 5.94 5.71
35 4.70 4.69 4.68 4.65 60 6.34 6.22 6.03 5.77
36 4.73 4.72 4.71 4.68 61 6.47 6.33 6.11 5.83
37 4.76 4.75 4.74 4.71 62 6.61 6.45 6.20 5.89
38 4.80 4.79 4.77 4.74 63 6.76 6.58 6.29 5.94
39 4.84 4.83 4.81 4.77 64 6.91 6.70 6.38 6.00
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
32
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Male Years Years Years Years Male Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 7.08 6.84 6.48 6.05 85 12.84 9.83 7.75 6.51
66 7.25 6.98 6.57 6.10 86 13.21 9.93 7.77 6.51
67 7.44 7.13 6.67 6.15 87 13.58 10.02 7.78 6.51
68 7.64 7.28 6.67 6.19 88 13.95 10.10 7.79 6.51
69 7.85 7.43 6.85 6.24 89 14.32 10.17 7.80 6.51
70 8.07 7.59 6.94 6.28 90 14.68 10.23 7.81 6.51
71 8.30 7.75 7.03 6.31 91 15.03 10.29 7.81 6.51
72 8.55 7.92 7.11 6.34 92 15.39 10.34 7.81 6.51
73 8.81 8.08 7.19 6.37 93 15.73 10.38 7.82 6.51
74 9.08 8.25 7.27 6.40 94 16.06 10.41 7.82 6.51
75 9.37 8.42 7.34 6.42 95 16.39 10.44 7.82 6.51
76 9.67 8.59 7.40 6.44
77 9.98 8.75 7.46 6.45
78 10.31 8.91 7.51 6.47
79 10.65 9.06 7.56 6.48
80 11.00 9.21 7.61 6.49
81 11.36 9.35 7.64 6.49
82 11.72 9.49 7.68 6.50
83 12.09 9.61 7.71 6.50
84 12.47 9.73 7.73 6.51
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
33
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 2.85 2.85 2.85 2.85 40 3.41 3.40 3.40 3.38
16 2.87 2.87 2.86 2.86 41 3.44 3.44 3.43 3.42
17 2.88 2.88 2.88 2.88 42 3.48 3.48 3.47 3.45
18 2.89 2.89 2.89 2.89 43 3.52 3.52 3.51 3.49
19 2.91 2.91 2.91 2.91 44 3.57 3.56 3.55 3.53
20 2.92 2.92 2.92 2.92 45 3.61 3.60 3.59 3.57
21 2.94 2.94 2.94 2.94 46 3.66 3.65 3.64 3.61
22 2.96 2.96 2.95 2.95 47 3.71 3.70 3.68 3.66
23 2.97 2.97 2.97 2.97 48 3.76 3.75 3.73 3.70
24 2.99 2.99 2.99 2.99 49 3.81 3.80 3.78 3.75
25 3.01 3.01 3.01 3.01 50 3.87 3.86 3.84 3.80
26 3.03 3.03 3.03 3.03 51 3.93 3.92 3.89 3.85
27 3.05 3.05 3.05 3.05 52 4.00 3.98 3.95 3.90
28 3.07 3.07 3.07 3.07 53 4.06 4.04 4.01 3.96
29 3.09 3.09 3.09 3.09 54 4.13 4.11 4.08 4.02
30 3.12 3.11 3.11 3.11 55 4.21 4.18 4.14 4.08
31 3.14 3.14 3.13 3.13 56 4.29 4.26 4.21 4.14
32 3.16 3.16 3.16 3.15 57 4.37 4.34 4.29 4.20
33 3.19 3.19 3.18 3.18 58 4.46 4.42 4.36 4.27
34 3.22 3.21 3.21 3.20 59 4.55 4.51 4.44 4.33
35 3.24 3.24 3.24 3.23 60 4.65 4.61 4.53 4.40
36 3.27 3.27 3.27 3.26 61 4.76 4.71 4.61 4.47
37 3.30 3.30 3.30 3.29 62 4.87 4.80 4.71 4.54
38 3.34 3.33 3.33 3.32 63 4.99 4.92 4.80 4.62
39 3.37 3.37 3.36 3.35 64 5.11 5.04 4.90 4.69
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
34
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 5.25 5.16 5.00 4.76 85 10.88 8.65 6.75 5.50
66 5.39 5.29 5.10 4.83 86 11.32 8.79 6.78 5.51
67 5.54 5.43 5.21 4.90 87 11.77 8.92 6.80 5.51
68 5.71 5.57 5.32 4.97 88 12.21 9.03 6.82 5.51
69 5.88 5.72 5.43 5.03 89 12.65 9.13 6.83 5.51
70 6.07 5.88 5.55 5.10 90 13.07 9.21 6.84 5.51
71 6.27 6.05 5.66 5.15 91 13.48 9.28 6.85 5.51
72 6.49 6.22 5.77 5.21 92 13.87 9.35 6.86 5.51
73 6.72 6.40 5.88 5.26 93 14.24 9.40 6.86 5.51
74 6.97 6.59 5.99 5.30 94 14.59 9.45 6.87 5.51
75 7.23 6.78 6.09 5.34 95 14.94 9.49 6.87 5.51
76 7.52 6.98 6.19 5.37
77 7.82 7.18 6.29 5.40
78 8.14 7.38 6.37 5.42
79 8.48 7.58 6.45 5.44
80 8.83 7.78 6.52 5.46
81 9.21 7.98 6.58 5.47
82 9.61 8.16 6.63 5.48
83 10.02 8.34 6.68 5.49
84 10.44 8.50 6.72 5.50
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
35
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 4.24 4.24 4.24 4.24 40 4.67 4.66 4.65 4.64
16 4.25 4.25 4.25 4.24 41 4.70 4.69 4.68 4.66
17 4.26 4.26 4.26 4.25 42 4.73 4.73 4.71 4.69
18 4.27 4.27 4.26 4.26 43 4.77 4.76 4.75 4.73
19 4.28 4.28 4.27 4.27 44 4.81 4.80 4.78 4.76
20 4.29 4.29 4.28 4.28 45 4.85 4.84 4.82 4.79
21 4.30 4.30 4.30 4.29 46 4.89 4.88 4.86 4.83
22 4.31 4.31 4.31 4.30 47 4.93 4.92 4.90 4.87
23 4.32 4.32 4.32 4.32 48 4.98 4.97 4.94 4.90
24 4.34 4.34 4.33 4.33 49 5.03 5.01 4.99 4.95
25 4.35 4.35 4.35 4.34 50 5.08 5.06 5.03 4.99
26 4.37 4.36 4.36 4.35 51 5.14 5.12 5.08 5.03
27 4.38 4.38 4.37 4.37 52 5.20 5.17 5.13 5.08
28 4.40 4.39 4.39 4.38 53 5.26 5.23 5.19 5.13
29 4.41 4.41 4.41 4.40 54 5.32 5.30 5.25 5.18
30 4.43 4.43 4.42 4.42 55 5.39 5.36 5.31 5.23
31 4.45 4.45 4.44 4.43 56 5.47 5.43 5.37 5.28
32 4.47 4.46 4.46 4.45 57 5.55 5.51 5.44 5.34
33 4.49 4.49 4.48 4.47 58 5.63 5.58 5.51 5.40
34 4.51 4.51 4.50 4.49 59 5.72 5.67 5.58 5.46
35 4.53 4.53 4.52 4.51 60 5.81 5.76 5.66 5.52
36 4.56 4.55 4.55 4.54 61 5.92 5.85 5.74 5.58
37 4.58 4.58 4.57 4.56 62 6.02 5.95 5.82 5.64
38 4.61 4.60 4.60 4.58 63 6.14 6.05 5.91 5.71
39 4.64 4.63 4.62 4.61 64 6.26 6.16 6.00 5.77
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
36
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Female Years Years Years Years Female Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 6.39 6.28 6.09 5.84 85 11.95 9.60 7.71 6.50
66 6.53 6.40 6.19 5.90 86 12.38 9.73 7.73 6.51
67 6.68 6.53 6.29 5.96 87 12.81 9.85 7.75 6.51
68 6.84 6.67 6.39 6.02 88 13.25 9.95 7.77 6.51
69 7.01 6.81 6.49 6.08 89 13.76 10.05 7.78 6.51
70 7.20 6.97 6.60 6.14 90 14.08 10.13 7.79 6.51
71 7.40 7.13 6.70 6.19 91 14.47 10.20 7.80 6.51
72 7.61 7.29 6.81 6.24 92 14.85 10.26 7.81 6.51
73 7.84 7.47 6.91 6.28 93 15.20 10.31 7.81 6.51
74 8.08 7.65 7.01 6.32 94 15.55 10.35 7.81 6.51
75 8.35 7.83 7.10 6.35 95 15.87 10.39 7.82 6.51
76 8.63 8.02 7.19 6.38
77 8.92 8.21 7.28 6.41
78 9.24 8.40 7.36 6.43
79 9.58 8.59 7.43 6.45
80 9.93 8.78 7.49 6.46
81 10.30 8.96 7.55 6.48
82 10.69 9.14 7.60 6.49
83 11.10 9.31 7.64 6.49
84 11.52 9.46 7.68 6.50
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
37
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 2.98 2.98 2.97 2.97 45 3.75 3.74 3.72 3.69
21 2.99 2.99 2.99 2.99 46 3.81 3.79 3.77 3.73
22 3.01 3.01 3.01 3.01 47 3.86 3.85 3.82 3.78
23 3.03 3.03 3.03 3.02 48 3.92 3.91 3.88 3.83
24 3.05 3.05 3.05 3.04 49 3.98 3.96 3.93 3.88
25 3.07 3.07 3.07 3.06 50 4.05 4.03 3.99 3.93
26 3.09 3.09 3.09 3.09 51 4.11 4.09 4.05 3.99
27 3.12 3.12 3.11 3.11 52 4.19 4.16 4.11 4.04
28 3.14 3.14 3.14 3.13 53 4.26 4.23 4.18 4.10
29 3.17 3.16 3.16 3.15 54 4.34 4.31 4.25 4.16
30 3.19 3.19 3.18 3.18 55 4.42 4.39 4.32 4.22
31 3.22 3.22 3.21 3.20 56 4.51 4.47 4.40 4.29
32 3.25 3.24 3.24 3.23 57 4.60 4.56 4.47 4.35
33 3.27 3.27 3.27 3.26 58 4.70 4.65 4.56 4.42
34 3.31 3.30 3.30 3.29 59 4.81 4.75 4.64 4.48
35 3.34 3.33 3.33 3.32 60 4.92 4.85 4.73 4.55
36 3.37 3.37 3.36 3.35 61 5.04 4.96 4.82 4.62
37 3.41 3.40 3.39 3.38 62 5.16 5.07 4.91 4.69
38 3.44 3.44 3.41 3.41 63 5.30 5.19 5.01 4.75
39 3.48 3.48 3.47 3.45 64 5.44 5.32 5.11 4.82
40 3.52 3.52 3.50 3.49 65 5.59 5.45 5.21 4.89
41 3.56 3.56 3.54 3.52 66 5.75 5.59 5.32 4.95
42 3.61 3.60 3.59 3.56 67 5.92 5.73 5.42 5.01
43 3.66 3.65 3.63 3.60 68 6.10 5.89 5.53 5.07
44 3.70 3.69 3.67 3.65 69 6.29 6.04 5.63 5.13
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
38
<PAGE>
OPTION II TABLE
(Benchmark Rate of Return or Guaranteed Interest Rate is 3% - Per $1,000 of
Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
70 6.50 6.21 5.74 5.18 85 11.33 8.78 6.78 5.51
71 6.72 6.38 5.84 5.23 86 11.75 8.90 6.80 5.51
72 6.95 6.55 5.95 5.27 87 12.16 9.01 6.82 5.51
73 7.20 6.73 6.04 5.31 88 12.58 9.11 6.83 5.51
74 7.46 6.91 6.14 5.35 89 12.98 9.20 6.84 5.51
75 7.74 7.10 6.23 5.38 90 13.39 9.27 6.85 5.51
76 8.03 7.29 6.31 5.40 91 13.78 9.34 6.86 5.51
77 8.34 7.47 6.39 5.43 92 14.16 9.40 6.86 5.51
78 8.67 7.66 6.46 5.45 93 14.52 9.44 6.87 5.51
79 9.01 7.84 6.53 5.46 94 14.88 9.49 6.87 5.51
80 9.37 8.02 6.59 5.47 95 15.22 9.52 6.87 5.51
81 9.74 8.19 6.64 5.48
82 10.12 8.35 6.68 5.49
83 10.52 8.51 6.72 5.50
84 10.92 8.65 6.75 5.50
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
39
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 4.27 4.27 4.27 4.27 40 4.77 4.76 4.75 4.72
16 4.28 4.28 4.28 4.28 41 4.81 4.80 4.78 4.75
17 4.29 4.29 4.29 4.29 42 4.85 4.84 4.82 4.79
18 4.31 4.30 4.30 4.30 43 4.89 4.88 4.85 4.82
19 4.32 4.32 4.31 4.31 44 4.94 4.92 4.89 4.86
20 4.33 4.33 4.32 4.32 45 4.98 4.97 4.93 4.89
21 4.34 4.34 4.34 4.33 46 5.03 5.01 4.98 4.93
22 4.36 4.35 4.35 4.34 47 5.08 5.06 5.02 4.97
23 4.37 4.37 4.36 4.36 48 5.14 5.11 5.07 5.02
24 4.39 4.38 4.38 4.37 49 5.19 5.16 5.12 5.06
25 4.40 4.40 4.39 4.39 50 5.25 5.22 5.17 5.10
26 4.42 4.41 4.41 4.40 51 5.31 5.28 5.23 5.15
27 4.44 4.43 4.43 4.42 52 5.38 5.34 5.28 5.20
28 4.45 4.45 4.44 4.44 53 5.45 5.41 5.34 5.25
29 4.47 4.47 4.46 4.46 54 5.52 5.48 5.40 5.30
30 4.49 4.49 4.48 4.47 55 5.60 5.55 5.47 5.36
31 4.52 4.51 4.50 4.49 56 5.69 5.63 5.54 5.41
32 4.54 4.53 4.53 4.52 57 5.78 5.71 5.61 5.47
33 4.56 4.56 4.55 4.54 58 5.87 5.80 5.68 5.53
34 4.59 4.58 4.57 4.56 59 5.97 5.89 5.76 5.58
35 4.61 4.61 4.60 4.58 60 6.08 5.99 5.84 5.64
36 4.64 4.64 4.63 4.61 61 6.19 6.09 5.92 5.70
37 4.67 4.67 4.65 4.64 62 6.32 6.20 6.01 5.77
38 4.71 4.70 4.68 4.66 63 6.45 6.31 6.10 5.83
39 4.74 4.73 4.71 4.69 64 6.59 6.43 6.19 5.89
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 15208-95
40
<PAGE>
OPTION II TABLE - VARIABLE ANNUITY ONLY
(Benchmark Rate of Return is 5% - Per $1,000 of Proceeds)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Annuitant Age of Annuitant
Last Birthday Last Birthday
When First Monthly Installment When First Monthly Installment
Installment is Installment is
Payable Payable
- --------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20
Unisex Years Years Years Years Unisex Years Years Years Years
Certain Certain Certain Certain Certain Certain Certain Certain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 6.73 6.56 6.28 5.94 85 12.39 9.72 7.73 6.51
66 6.89 6.69 6.38 6.00 86 12.80 9.83 7.75 6.51
67 7.06 6.83 6.48 6.06 87 13.20 9.94 7.77 6.51
68 7.24 6.97 6.57 6.11 88 13.60 10.03 7.78 6.51
69 7.43 7.12 6.67 6.16 89 13.99 10.11 7.79 6.51
70 7.63 7.28 6.77 6.21 90 14.38 10.18 7.80 6.51
71 7.85 7.44 6.86 6.25 91 14.75 10.24 7.81 6.51
72 8.08 7.60 6.96 6.29 92 15.12 10.30 7.81 6.51
73 8.32 7.78 7.05 6.33 93 15.47 10.34 7.81 6.51
74 8.58 7.95 7.14 6.36 94 15.80 10.38 7.82 6.51
75 8.86 8.13 7.22 6.39 95 16.13 10.42 7.82 6.51
76 9.15 8.30 7.30 6.41
77 9.45 8.48 7.37 6.43
78 9.78 8.66 7.44 6.45
79 10.11 8.83 7.50 6.46
80 10.47 9.00 7.55 6.47
81 10.83 9.16 7.60 6.48
82 11.21 9.31 7.64 6.49
83 11.60 9.46 7.67 6.50
84 11.99 9.59 7.70 6.50
</TABLE>
Form 15208-95
41
<PAGE>
THIS CONTRACT IS A FLEXIBLE PREMIUM DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THESE VALUES MAY
INCREASE OR DECREASE BASED ON INVESTMENT EXPERIENCE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. ANNUITY PAYMENTS BEGIN AS OF THE ANNUITY DATE. PURCHASE
PAYMENTS ARE FLEXIBLE AND MAY BE MADE UNTIL THE EARLIER OF THE ANNUITY DATE OR
THE MAXIMUM AGE SHOWN IN THE SCHEDULE. THE ENHANCED DEATH BENEFIT WILL BE PAID
IF THE OWNER DIES PRIOR TO THE ANNUITY DATE.
SOUTHLAND LIFE INSURANCE COMPANY
A Stock Company
- --------------------------------------------------------------------------------
Form 15208-95
42
<PAGE>
EXHIBIT 9
[Southland Letterhead]
April 25, 1997
Southland Life Insurance Company
5780 Powers Ferry Road, N.W.
Atlanta, Georgia 30327-4390
Dear Sir or Madam:
This opinion is furnished in connection with Post-Effective Amendment Number 2
to the Form N-4 Registration Statement being filed by Southland Life Insurance
Company ("Southland") under the Securities Act of 1933, as amended (the "Act"),
for the offering of interests ("Interests") in Southland Separate Account A1
("Separate Account A1") under the Flexible Premium Individual Deferred
Combination Fixed and Variable Annuity Contracts ("Contracts") to be issued by
Southland. The securities being registered under the Act are to be offered in
the manner described in the Registration Statement.
I have examined or supervised the examination of all such corporate records of
Southland Life and such other documents and such laws as I consider appropriate
as a basis for the opinion hereinafter expressed. On the basis of such
examination, it is my opinion that:
1. Southland is a corporation duly organized and validly existing under the
laws of the State of Texas.
2. Separate Account A1 was duly created as a separate investment account of
Southland pursuant to the laws of the State of Texas.
3. The assets of Separate Account A1 will be owned by Southland. Under Texas
law and the provisions of the Contracts, the income, gains and losses,
whether or not realized, from assets allocated to Separate Account A1 must
be credited to or charged against such Account, without regard to the other
income, gains or losses of Southland.
4. The Contracts provide that the assets of Separate Account A1 may not be
charged with liabilities arising out of any other business Southland may
conduct, except to the extent that assets of Separate Account A1 exceed its
liabilities arising under the Contracts.
5. The Contracts and the Interests in Separate Account A1 to be issued under
the Contracts have been duly authorized by Southland; and the Contracts,
including the Interests therein, when issued and delivered, will constitute
validly issued and binding obligations of Southland in accordance with
their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters" in the
Prospectus contained in the Registration Statement.
Sincerely,
/s/ B. Scott Burton
Vice President & General Counsel
<PAGE>
EXHIBIT 10(A)
[Sutherland, Asbill & Brennan, L.L.P. Letterhead]
April 24, 1997
Board of Directors
Southland Life Insurance Company
5780 Powers Ferry Road, N.W.
Atlanta, Georgia 30327-4390
Directors:
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 number 2 to the Registration Statement on Form N-4 (File No. 33-89574)
filed by Southland Life Insurance Company and Southland Separate Account A1 with
the Securities and Exchange Commission. 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, L.L.P.
By: /s/ Stephen E. Roth
-----------------------------
Stephen E. Roth
<PAGE>
EXHIBIT 10(B)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated April 4, 1997 and April 11, 1997, in Post-Effective
Amendment No. 2 to the Registration Statement (Form N-4 No. 33-89574) and
related Prospectus of Southland Separate Account A1 (dated May 1, 1997).
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
April 23, 1997
<PAGE>
EXHIBIT 13
PERFORMANCE DATA COMPUTATIONS
<PAGE>
Alger American Fund - American Growth Portfolio
December 31, 1996
Assuming Contract Surrendered
Period: 1
<TABLE>
<CAPTION>
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.51901500 10.62734641 1116.43
12/31/96 -70.00 10.62734641 10.62734641 -70.00
12/31/96 -1.00 10.62734641 10.62734641 -1.00
Avg Annual Return: 4.54% ERV: 1045.43
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 5.31187845 10.62734641 2000.68
12/31/92 -1.00 5.87918992 10.62734641 -1.81
12/31/93 -1.00 7.09146842 10.62734641 -1.50
12/31/94 -1.00 7.08580351 10.62734641 -1.50
12/31/95 -1.00 9.51901500 10.62734641 -1.12
12/31/96 -30.00 10.62734641 10.62734641 -30.00
12/31/96 -1.00 10.62734641 10.62734641 -1.00
Avg Annual Return: 14.44% ERV: 1963.75
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/06/89 1000.00 3.06360579 10.62734641 3468.90
01/06/90 -1.00 3.76875903 10.62734641 -2.82
01/06/91 -1.00 3.71526147 10.62734641 -2.86
01/06/92 -1.00 5.38726262 10.62734641 -1.97
01/06/93 -1.00 5.92726274 10.62734641 -1.79
01/06/94 -1.00 7.19315839 10.62734641 -1.48
01/06/95 -1.00 7.08018122 10.62734641 -1.50
01/06/96 -1.00 9.23527036 10.62734641 -1.15
12/31/96 0.00 10.62734641 10.62734641 0.00
12/31/96 -1.00 10.62734641 10.62734641 -1.00
12/31/96 10.62734641 10.62734641 0.00
12/31/96 10.62734641 10.62734641 0.00
Avg Annual Return: 16.80% ERV: 3454.33
</TABLE>
<PAGE>
Alger American Fund - American Growth Portfolio
December 31, 1996
Assuming Contract Not Surrendered
Period: 1
<TABLE>
<CAPTION>
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.51901500 10.62734641 1116.43
12/31/96 0.00 10.62734641 10.62734641 0.00
12/31/96 -1.00 10.62734641 10.62734641 -1.00
Avg Annual Return: 11.54% ERV: 1115.43
Period: 5
Date Payment AUV Beg AUV End Value
12/31/91 1000.00 5.31187845 10.62734641 2000.68
12/31/92 -1.00 5.87918992 10.62734641 -1.81
12/31/93 -1.00 7.09146842 10.62734641 -1.50
12/31/94 -1.00 7.08580351 10.62734641 -1.50
12/31/95 -1.00 9.51901500 10.62734641 -1.12
12/31/96 0.00 10.62734641 10.62734641 0.00
12/31/96 -1.00 10.62734641 10.62734641 -1.00
Avg Annual Return: 14.79% ERV: 1993.75
Period: Inception
01/06/89 1000.00 3.06360579 10.62734641 3468.90
01/06/90 -1.00 3.76875903 10.62734641 -2.82
01/06/91 -1.00 3.71526147 10.62734641 -2.86
01/06/92 -1.00 5.38726262 10.62734641 -1.97
01/06/93 -1.00 5.92726274 10.62734641 -1.79
01/06/94 -1.00 7.19315839 10.62734641 -1.48
01/06/95 -1.00 7.08018122 10.62734641 -1.50
01/06/96 -1.00 9.23527036 10.62734641 -1.15
12/31/96 -1.00 10.62734641 10.62734641 -1.00
12/31/96 0.00 10.62734641 10.62734641 0.00
12/31/96 0.00 10.62734641 10.62734641 0.00
12/31/96 0.00 10.62734641 10.62734641 0.00
Avg Annual Return: 16.80% ERV: 3454.33
</TABLE>
<PAGE>
Alger American Fund - American Leveraged Growth
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.52371857 10.51021403 1103.58
12/31/96 -70.00 10.51021403 10.51021403 -70.00
12/31/96 -1.00 10.51021403 10.51021403 -1.00
Avg Annual Return: 3.26% ERV: 1032.58
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 10.51021403 NA
12/31/92 -1.00 NA 10.51021403 NA
12/31/93 -1.00 NA 10.51021403 NA
12/31/94 -1.00 NA 10.51021403 NA
12/31/95 -1.00 NA 10.51021403 NA
12/31/96 -30.00 10.51021403 10.51021403 -30.00
12/31/96 -1.00 10.51021403 10.51021403 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/25/95 1000.00 5.54126840 10.51021403 1896.72
01/25/96 -1.00 9.54033070 10.51021403 -1.10
12/31/96 -60.00 10.51021403 10.51021403 -60.00
12/31/96 -1.00 10.51021403 10.51021403 -1.00
12/31/96 10.51021403 10.51021403 0.00
12/31/96 10.51021403 10.51021403 0.00
12/31/96 10.51021403 10.51021403 0.00
12/31/96 10.51021403 10.51021403 0.00
12/31/96 10.51021403 10.51021403 0.00
12/31/96 10.51021403 10.51021403 0.00
12/31/96 10.51021403 10.51021403 0.00
12/31/96 10.51021403 10.51021403 0.00
Avg Annual Return: 36.88% ERV: 1834.61
</TABLE>
<PAGE>
Alger American Fund - American Leveraged Growth
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.52371857 10.51021403 1103.58
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 -1.00 10.51021403 10.51021403 -1.00
Avg Annual Return: 10.26% ERV: 1102.58
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 10.51021403 NA
12/31/92 -1.00 NA 10.51021403 NA
12/31/93 -1.00 NA 10.51021403 NA
12/31/94 -1.00 NA 10.51021403 NA
12/31/95 -1.00 NA 10.51021403 NA
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 -1.00 10.51021403 10.51021403 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/25/95 1000.00 5.54126840 10.51021403 1896.72
01/25/96 -1.00 9.54033070 10.51021403 -1.10
12/31/96 -1.00 10.51021403 10.51021403 -1.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
12/31/96 0.00 10.51021403 10.51021403 0.00
Avg Annual Return: 39.18% ERV: 1894.61
</TABLE>
<PAGE>
Alger American Fund - American Midcap Fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.31394288 10.26578307 1102.20
12/31/96 -70.00 10.26578307 10.26578307 -70.00
12/31/96 -1.00 10.26578307 10.26578307 -1.00
Avg Annual Return: 3.12% ERV: 1031.20
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 10.26578307 NA
12/31/92 -1.00 NA 10.26578307 NA
12/31/93 -1.00 NA 10.26578307 NA
12/31/94 -1.00 NA 10.26578307 NA
12/31/95 -1.00 NA 10.26578307 NA
12/31/96 -30.00 10.26578307 10.26578307 -30.00
12/31/96 -1.00 10.26578307 10.26578307 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
04/30/93 1000.00 4.91787767 10.26578307 2087.44
04/30/94 -1.00 6.33001925 10.26578307 -1.62
04/30/95 -1.00 7.32225959 10.26578307 -1.40
04/30/96 -1.00 10.46572252 10.26578307 -0.98
12/31/96 -40.00 10.26578307 10.26578307 -40.00
12/31/96 -1.00 10.26578307 10.26578307 -1.00
12/31/96 10.26578307 10.26578307 0.00
12/31/96 10.26578307 10.26578307 0.00
12/31/96 10.26578307 10.26578307 0.00
12/31/96 10.26578307 10.26578307 0.00
12/31/96 10.26578307 10.26578307 0.00
12/31/96 10.26578307 10.26578307 0.00
Avg Annual Return: 21.47% ERV: 2042.44
</TABLE>
<PAGE>
Alger American Fund - American Midcap Fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.31394288 10.26578307 1102.20
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 -1.00 10.26578307 10.26578307 -1.00
Avg Annual Return: 10.12% ERV: 1101.20
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 10.26578307 NA
12/31/92 -1.00 NA 10.26578307 NA
12/31/93 -1.00 NA 10.26578307 NA
12/31/94 -1.00 NA 10.26578307 NA
12/31/95 -1.00 NA 10.26578307 NA
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 -1.00 10.26578307 10.26578307 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
04/30/93 1000.00 4.91787767 10.26578307 2087.44
04/30/94 -1.00 6.33001925 10.26578307 -1.62
04/30/95 -1.00 7.32225959 10.26578307 -1.40
04/30/96 -1.00 10.46572252 10.26578307 -0.98
12/31/96 -1.00 10.26578307 10.26578307 -1.00
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 0.00 10.26578307 10.26578307 0.00
12/31/96 0.00 10.26578307 10.26578307 0.00
Avg Annual Return: 22.12% ERV: 2082.44
</TABLE>
<PAGE>
Alger American Fund - American Small Cap Fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.65854052 9.91081748 1026.12
12/31/96 -70.00 9.91081748 9.91081748 -70.00
12/31/96 -1.00 9.91081748 9.91081748 -1.00
Avg Annual Return: -4.49% ERV: 955.12
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 6.34285124 9.91081748 1562.52
12/31/92 -1.00 6.46652432 9.91081748 -1.53
12/31/93 -1.00 7.21478540 9.91081748 -1.37
12/31/94 -1.00 6.79522330 9.91081748 -1.46
12/31/95 -1.00 9.65854052 9.91081748 -1.03
12/31/96 -30.00 9.91081748 9.91081748 -30.00
12/31/96 -1.00 9.91081748 9.91081748 -1.00
Avg Annual Return: 8.82% ERV: 1526.13
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/20/88 1000.00 2.44855627 9.91081748 4047.62
09/20/89 -1.00 3.70511854 9.91081748 -2.67
09/20/90 -1.00 3.61780417 9.91081748 -2.74
09/20/91 -1.00 5.38544659 9.91081748 -1.84
09/20/92 -1.00 5.63163687 9.91081748 -1.76
09/20/93 -1.00 6.74101270 9.91081748 -1.47
09/20/94 -1.00 6.56150124 9.91081748 -1.51
09/20/95 -1.00 10.92950657 9.91081748 -0.91
09/20/96 -1.00 10.24518727 9.91081748 -0.97
12/31/96 0.00 9.91081748 9.91081748 0.00
12/31/96 -1.00 9.91081748 9.91081748 -1.00
12/31/96 9.91081748 9.91081748 0.00
Avg Annual Return: 18.34% ERV: 4032.75
</TABLE>
<PAGE>
Alger American Fund - American Small Cap Fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.65854052 9.91081748 1026.12
12/31/96 0.00 9.91081748 9.91081748 0.00
12/31/96 -1.00 9.91081748 9.91081748 -1.00
Avg Annual Return: 2.51% ERV: 1025.12
Period: 5
Date Payment AUV Beg AUV End Value
12/31/91 1000.00 6.34285124 9.91081748 1562.52
12/31/92 -1.00 6.46652432 9.91081748 -1.53
12/31/93 -1.00 7.21478540 9.91081748 -1.37
12/31/94 -1.00 6.79522330 9.91081748 -1.46
12/31/95 -1.00 9.65854052 9.91081748 -1.03
12/31/96 0.00 9.91081748 9.91081748 0.00
12/31/96 -1.00 9.91081748 9.91081748 -1.00
Avg Annual Return: 9.24% ERV: 1556.13
Period: Inception
09/20/88 1000.00 2.44855627 9.91081748 4047.62
09/20/89 -1.00 3.70511854 9.91081748 -2.67
09/20/90 -1.00 3.61780417 9.91081748 -2.74
09/20/91 -1.00 5.38544659 9.91081748 -1.84
09/20/92 -1.00 5.63163687 9.91081748 -1.76
09/20/93 -1.00 6.74101270 9.91081748 -1.47
09/20/94 -1.00 6.56150124 9.91081748 -1.51
09/20/95 -1.00 10.92950657 9.91081748 -0.91
09/20/96 -1.00 10.24518727 9.91081748 -0.97
12/31/96 -1.00 9.91081748 9.91081748 -1.00
12/31/96 0.00 9.91081748 9.91081748 0.00
12/31/96 0.00 9.91081748 9.91081748 0.00
Avg Annual Return: 18.34% ERV: 4032.75
</TABLE>
<PAGE>
Fidelity Investments - VIP II Asset Manager
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.69883665 10.94711539 1128.70
12/31/96 -70.00 10.94711539 10.94711539 -70.00
12/31/96 -1.00 10.94711539 10.94711539 -1.00
Avg Annual Return: 5.77% ERV: 1057.70
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 6.93341476 10.94711539 1578.89
12/31/92 -1.00 7.62837883 10.94711539 -1.44
12/31/93 -1.00 9.10866309 10.94711539 -1.20
12/31/94 -1.00 8.41928727 10.94711539 -1.30
12/31/95 -1.00 9.69883665 10.94711539 -1.13
12/31/96 -30.00 10.94711539 10.94711539 -30.00
12/31/96 -1.00 10.94711539 10.94711539 -1.00
Avg Annual Return: 9.06% ERV: 1542.83
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/06/89 1000.00 5.44684161 10.94711539 2009.81
09/06/90 -1.00 5.42983838 10.94711539 -2.02
09/06/91 -1.00 6.68383968 10.94711539 -1.64
09/06/92 -1.00 7.38389310 10.94711539 -1.48
09/06/93 -1.00 8.53543033 10.94711539 -1.28
09/06/94 -1.00 8.80330044 10.94711539 -1.24
09/06/95 -1.00 9.35616094 10.94711539 -1.17
09/06/96 -1.00 9.98056405 10.94711539 -1.10
12/31/96 0.00 10.94711539 10.94711539 0.00
12/31/96 -1.00 10.94711539 10.94711539 -1.00
12/31/96 10.94711539 10.94711539 0.00
12/31/96 10.94711539 10.94711539 0.00
Avg Annual Return: 9.93% ERV: 1998.88
</TABLE>
<PAGE>
Fidelity Investments - VIP II Asset Manager
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.69883665 10.94711539 1128.70
12/31/96 0.00 10.94711539 10.94711539 0.00
12/31/96 -1.00 10.94711539 10.94711539 -1.00
Avg Annual Return: 12.77% ERV: 1127.70
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 6.93341476 10.94711539 1578.89
12/31/92 -1.00 7.62837883 10.94711539 -1.44
12/31/93 -1.00 9.10866309 10.94711539 -1.20
12/31/94 -1.00 8.41928727 10.94711539 -1.30
12/31/95 -1.00 9.69883665 10.94711539 -1.13
12/31/96 0.00 10.94711539 10.94711539 0.00
12/31/96 -1.00 10.94711539 10.94711539 -1.00
Avg Annual Return: 9.48% ERV: 1572.83
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/06/89 1000.00 5.44684161 10.94711539 2009.81
09/06/90 -1.00 5.42983838 10.94711539 -2.02
09/06/91 -1.00 6.68383968 10.94711539 -1.64
09/06/92 -1.00 7.38389310 10.94711539 -1.48
09/06/93 -1.00 8.53543033 10.94711539 -1.28
09/06/94 -1.00 8.80330044 10.94711539 -1.24
09/06/95 -1.00 9.35616094 10.94711539 -1.17
09/06/96 -1.00 9.98056405 10.94711539 -1.10
12/31/96 -1.00 10.94711539 10.94711539 -1.00
12/31/96 0.00 10.94711539 10.94711539 0.00
12/31/96 0.00 10.94711539 10.94711539 0.00
12/31/96 0.00 10.94711539 10.94711539 0.00
Avg Annual Return: 9.93% ERV: 1998.88
</TABLE>
<PAGE>
Fidelity Investments - VIP II Contrafund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.54394708 11.39793188 1194.26
12/31/96 -70.00 11.39793188 11.39793188 -70.00
12/31/96 -1.00 11.39793188 11.39793188 -1.00
Avg Annual Return: 12.33% ERV: 1123.26
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.39793188 NA
12/31/92 -1.00 NA 11.39793188 NA
12/31/93 -1.00 NA 11.39793188 NA
12/31/94 -1.00 NA 11.39793188 NA
12/31/95 -1.00 NA 11.39793188 NA
12/31/96 -30.00 11.39793188 11.39793188 -30.00
12/31/96 -1.00 11.39793188 11.39793188 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/03/95 1000.00 6.93482918 11.39793188 1643.58
01/03/96 -1.00 9.47276054 11.39793188 -1.20
12/31/96 -60.00 11.39793188 11.39793188 -60.00
12/31/96 -1.00 11.39793188 11.39793188 -1.00
12/31/96 11.39793188 11.39793188 0.00
12/31/96 11.39793188 11.39793188 0.00
12/31/96 11.39793188 11.39793188 0.00
12/31/96 11.39793188 11.39793188 0.00
12/31/96 11.39793188 11.39793188 0.00
12/31/96 11.39793188 11.39793188 0.00
12/31/96 11.39793188 11.39793188 0.00
12/31/96 11.39793188 11.39793188 0.00
Avg Annual Return: 25.85% ERV: 1581.37
</TABLE>
<PAGE>
Fidelity Investments - VIP II Contrafund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.54394708 11.39793188 1194.26
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 -1.00 11.39793188 11.39793188 -1.00
Avg Annual Return: 19.33% ERV: 1193.26
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.39793188 NA
12/31/92 -1.00 NA 11.39793188 NA
12/31/93 -1.00 NA 11.39793188 NA
12/31/94 -1.00 NA 11.39793188 NA
12/31/95 -1.00 NA 11.39793188 NA
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 -1.00 11.39793188 11.39793188 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/03/95 1000.00 6.93482918 11.39793188 1643.58
01/03/96 -1.00 9.47276054 11.39793188 -1.20
12/31/96 -1.00 11.39793188 11.39793188 -1.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
12/31/96 0.00 11.39793188 11.39793188 0.00
Avg Annual Return: 28.23% ERV: 1641.37
</TABLE>
<PAGE>
Fidelity Investments - VIP Equity Income
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.50779221 10.70322945 1125.73
12/31/96 -70.00 10.70322945 10.70322945 -70.00
12/31/96 -1.00 10.70322945 10.70322945 -1.00
Avg Annual Return: 5.47% ERV: 1054.73
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 5.05188185 10.70322945 2118.66
12/31/92 -1.00 5.81572680 10.70322945 -1.84
12/31/93 -1.00 6.77565858 10.70322945 -1.58
12/31/94 -1.00 7.14527220 10.70322945 -1.50
12/31/95 -1.00 9.50779221 10.70322945 -1.13
12/31/96 -30.00 10.70322945 10.70322945 -30.00
12/31/96 -1.00 10.70322945 10.70322945 -1.00
Avg Annual Return: 15.79% ERV: 2081.62
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 3.43949933 10.70322945 3111.86
12/31/87 -1.00 3.34901098 10.70322945 -3.20
12/31/88 -1.00 4.04738616 10.70322945 -2.64
12/31/89 -1.00 4.67793244 10.70322945 -2.29
12/31/90 -1.00 3.90260285 10.70322945 -2.74
12/31/91 -1.00 5.05188185 10.70322945 -2.12
12/31/92 -1.00 5.81572680 10.70322945 -1.84
12/31/93 -1.00 6.77565858 10.70322945 -1.58
12/31/94 -1.00 7.14527220 10.70322945 -1.50
12/31/95 -1.00 9.50779221 10.70322945 -1.13
12/31/96 0.00 10.70322945 10.70322945 0.00
12/31/96 -1.00 10.70322945 10.70322945 -1.00
Avg Annual Return: 11.95% ERV: 3091.82
</TABLE>
<PAGE>
Fidelity Investments - VIP Equity Income
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.50779221 10.70322945 1125.73
12/31/96 0.00 10.70322945 10.70322945 0.00
12/31/96 -1.00 10.70322945 10.70322945 -1.00
Avg Annual Return: 12.47% ERV: 1124.73
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 5.05188185 10.70322945 2118.66
12/31/92 -1.00 5.81572680 10.70322945 -1.84
12/31/93 -1.00 6.77565858 10.70322945 -1.58
12/31/94 -1.00 7.14527220 10.70322945 -1.50
12/31/95 -1.00 9.50779221 10.70322945 -1.13
12/31/96 0.00 10.70322945 10.70322945 0.00
12/31/96 -1.00 10.70322945 10.70322945 -1.00
Avg Annual Return: 16.12% ERV: 2111.62
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 3.43949933 10.70322945 3111.86
12/31/87 -1.00 3.34901098 10.70322945 -3.20
12/31/88 -1.00 4.04738616 10.70322945 -2.64
12/31/89 -1.00 4.67793244 10.70322945 -2.29
12/31/90 -1.00 3.90260285 10.70322945 -2.74
12/31/91 -1.00 5.05188185 10.70322945 -2.12
12/31/92 -1.00 5.81572680 10.70322945 -1.84
12/31/93 -1.00 6.77565858 10.70322945 -1.58
12/31/94 -1.00 7.14527220 10.70322945 -1.50
12/31/95 -1.00 9.50779221 10.70322945 -1.13
12/31/96 -1.00 10.70322945 10.70322945 -1.00
12/31/96 0.00 10.70322945 10.70322945 0.00
Avg Annual Return: 11.95% ERV: 3091.82
</TABLE>
<PAGE>
Fidelity Investments - VIP Growth Fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.44635809 10.67612545 1130.18
12/31/96 -70.00 10.67612545 10.67612545 -70.00
12/31/96 -1.00 10.67612545 10.67612545 -1.00
Avg Annual Return: 5.92% ERV: 1059.18
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 5.68358864 10.67612545 1878.41
12/31/92 -1.00 6.11934746 10.67612545 -1.74
12/31/93 -1.00 7.19453328 10.67612545 -1.48
12/31/94 -1.00 7.08490560 10.67612545 -1.51
12/31/95 -1.00 9.44635809 10.67612545 -1.13
12/31/96 -30.00 10.67612545 10.67612545 -30.00
12/31/96 -1.00 10.67612545 10.67612545 -1.00
Avg Annual Return: 12.98% ERV: 1841.55
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 3.03009372 10.67612545 3523.36
12/31/87 -1.00 3.09366549 10.67612545 -3.45
12/31/88 -1.00 3.52179367 10.67612545 -3.03
12/31/89 -1.00 4.56197294 10.67612545 -2.34
12/31/90 -1.00 3.96562290 10.67612545 -2.69
12/31/91 -1.00 5.68358864 10.67612545 -1.88
12/31/92 -1.00 6.11934746 10.67612545 -1.74
12/31/93 -1.00 7.19453328 10.67612545 -1.48
12/31/94 -1.00 7.08490560 10.67612545 -1.51
12/31/95 -1.00 9.44635809 10.67612545 -1.13
12/31/96 0.00 10.67612545 10.67612545 0.00
12/31/96 -1.00 10.67612545 10.67612545 -1.00
Avg Annual Return: 13.36% ERV: 3503.11
</TABLE>
<PAGE>
Fidelity Investments - VIP Growth Fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.44635809 10.67612545 1130.18
12/31/96 0.00 10.67612545 10.67612545 0.00
12/31/96 -1.00 10.67612545 10.67612545 -1.00
Avg Annual Return: 12.92% ERV: 1129.18
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 5.68358864 10.67612545 1878.41
12/31/92 -1.00 6.11934746 10.67612545 -1.74
12/31/93 -1.00 7.19453328 10.67612545 -1.48
12/31/94 -1.00 7.08490560 10.67612545 -1.51
12/31/95 -1.00 9.44635809 10.67612545 -1.13
12/31/96 0.00 10.67612545 10.67612545 0.00
12/31/96 -1.00 10.67612545 10.67612545 -1.00
Avg Annual Return: 13.35% ERV: 1871.55
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 3.03009372 10.67612545 3523.36
12/31/87 -1.00 3.09366549 10.67612545 -3.45
12/31/88 -1.00 3.52179367 10.67612545 -3.03
12/31/89 -1.00 4.56197294 10.67612545 -2.34
12/31/90 -1.00 3.96562290 10.67612545 -2.69
12/31/91 -1.00 5.68358864 10.67612545 -1.88
12/31/92 -1.00 6.11934746 10.67612545 -1.74
12/31/93 -1.00 7.19453328 10.67612545 -1.48
12/31/94 -1.00 7.08490560 10.67612545 -1.51
12/31/95 -1.00 9.44635809 10.67612545 -1.13
12/31/96 -1.00 10.67612545 10.67612545 -1.00
12/31/96 0.00 10.67612545 10.67612545 0.00
Avg Annual Return: 13.36% ERV: 3503.11
</TABLE>
<PAGE>
Fidelity Investments - VIP High Income
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.65909246 10.84972597 1123.27
12/31/96 -70.00 10.84972597 10.84972597 -70.00
12/31/96 -1.00 10.84972597 10.84972597 -1.00
Avg Annual Return: 5.23% ERV: 1052.27
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 5.82848328 10.84972597 1861.50
12/31/92 -1.00 7.07023673 10.84972597 -1.53
12/31/93 -1.00 8.38408611 10.84972597 -1.29
12/31/94 -1.00 8.12239579 10.84972597 -1.34
12/31/95 -1.00 9.65909246 10.84972597 -1.12
12/31/96 -30.00 10.84972597 10.84972597 -30.00
12/31/96 -1.00 10.84972597 10.84972597 -1.00
Avg Annual Return: 12.78% ERV: 1825.21
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 4.39790384 10.84972597 2467.02
12/31/87 -1.00 4.38419865 10.84972597 -2.47
12/31/88 -1.00 4.82075349 10.84972597 -2.25
12/31/89 -1.00 4.54999812 10.84972597 -2.38
12/31/90 -1.00 4.38090843 10.84972597 -2.48
12/31/91 -1.00 5.82848328 10.84972597 -1.86
12/31/92 -1.00 7.07023673 10.84972597 -1.53
12/31/93 -1.00 8.38408611 10.84972597 -1.29
12/31/94 -1.00 8.12239579 10.84972597 -1.34
12/31/95 -1.00 9.65909246 10.84972597 -1.12
12/31/96 0.00 10.84972597 10.84972597 0.00
12/31/96 -1.00 10.84972597 10.84972597 -1.00
Avg Annual Return: 9.37% ERV: 2449.29
</TABLE>
<PAGE>
Fidelity Investments - VIP High Income
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.65909246 10.84972597 1123.27
12/31/96 0.00 10.84972597 10.84972597 0.00
12/31/96 -1.00 10.84972597 10.84972597 -1.00
Avg Annual Return: 12.23% ERV: 1122.27
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 5.82848328 10.84972597 1861.50
12/31/92 -1.00 7.07023673 10.84972597 -1.53
12/31/93 -1.00 8.38408611 10.84972597 -1.29
12/31/94 -1.00 8.12239579 10.84972597 -1.34
12/31/95 -1.00 9.65909246 10.84972597 -1.12
12/31/96 0.00 10.84972597 10.84972597 0.00
12/31/96 -1.00 10.84972597 10.84972597 -1.00
Avg Annual Return: 13.15% ERV: 1855.21
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 4.39790384 10.84972597 2467.02
12/31/87 -1.00 4.38419865 10.84972597 -2.47
12/31/88 -1.00 4.82075349 10.84972597 -2.25
12/31/89 -1.00 4.54999812 10.84972597 -2.38
12/31/90 -1.00 4.38090843 10.84972597 -2.48
12/31/91 -1.00 5.82848328 10.84972597 -1.86
12/31/92 -1.00 7.07023673 10.84972597 -1.53
12/31/93 -1.00 8.38408611 10.84972597 -1.29
12/31/94 -1.00 8.12239579 10.84972597 -1.34
12/31/95 -1.00 9.65909246 10.84972597 -1.12
12/31/96 -1.00 10.84972597 10.84972597 -1.00
12/31/96 0.00 10.84972597 10.84972597 0.00
Avg Annual Return: 9.37% ERV: 2449.29
</TABLE>
<PAGE>
Fidelity Investments - VIP II Investment Grade Bonds
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 10.23003126 10.39636047 1016.26
12/31/96 -70.00 10.39636047 10.39636047 -70.00
12/31/96 -1.00 10.39636047 10.39636047 -1.00
Avg Annual Return: -5.47% ERV: 945.26
<CAPTION>
Period: 5
<S> <C> <C> <C> <C>
Date Payment AUV Beg AUV End Value
12/31/91 1000.00 8.13494493 10.39636047 1277.99
12/31/92 -1.00 8.54505299 10.39636047 -1.22
12/31/93 -1.00 9.33885824 10.39636047 -1.11
12/31/94 -1.00 8.85273893 10.39636047 -1.17
12/31/95 -1.00 10.23003126 10.39636047 -1.02
12/31/96 -30.00 10.39636047 10.39636047 -30.00
12/31/96 -1.00 10.39636047 10.39636047 -1.00
Avg Annual Return: 4.44% ERV: 1242.47
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
12/05/88 1000.00 6.22177981 10.39636047 1670.96
12/05/89 -1.00 6.77065887 10.39636047 -1.54
12/05/90 -1.00 7.03871050 10.39636047 -1.48
12/05/91 -1.00 7.97119073 10.39636047 -1.30
12/05/92 -1.00 8.46425200 10.39636047 -1.23
12/05/93 -1.00 9.30988988 10.39636047 -1.12
12/05/94 -1.00 8.92632078 10.39636047 -1.16
12/05/95 -1.00 10.14254900 10.39636047 -1.03
12/05/96 -1.00 10.46693164 10.39636047 -0.99
12/31/96 0.00 10.39636047 10.39636047 0.00
12/31/96 -1.00 10.39636047 10.39636047 -1.00
12/31/96 10.39636047 10.39636047 0.00
Avg Annual Return: 6.48% ERV: 1660.12
</TABLE>
<PAGE>
Fidelity Investments - VIP II Investment Grade Bonds
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 10.23003126 10.39636047 1016.26
12/31/96 0.00 10.39636047 10.39636047 0.00
12/31/96 -1.00 10.39636047 10.39636047 -1.00
Avg Annual Return: 1.53% ERV: 1015.26
<CAPTION>
Period: 5
<S> <C> <C> <C> <C>
Date Payment AUV Beg AUV End Value
12/31/91 1000.00 8.13494493 10.39636047 1277.99
12/31/92 -1.00 8.54505299 10.39636047 -1.22
12/31/93 -1.00 9.33885824 10.39636047 -1.11
12/31/94 -1.00 8.85273893 10.39636047 -1.17
12/31/95 -1.00 10.23003126 10.39636047 -1.02
12/31/96 0.00 10.39636047 10.39636047 0.00
12/31/96 -1.00 10.39636047 10.39636047 -1.00
Avg Annual Return: 4.94% ERV: 1272.47
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
12/05/88 1000.00 6.22177981 10.39636047 1670.96
12/05/89 -1.00 6.77065887 10.39636047 -1.54
12/05/90 -1.00 7.03871050 10.39636047 -1.48
12/05/91 -1.00 7.97119073 10.39636047 -1.30
12/05/92 -1.00 8.46425200 10.39636047 -1.23
12/05/93 -1.00 9.30988988 10.39636047 -1.12
12/05/94 -1.00 8.92632078 10.39636047 -1.16
12/05/95 -1.00 10.14254900 10.39636047 -1.03
12/05/96 -1.00 10.46693164 10.39636047 -0.99
12/31/96 -1.00 10.39636047 10.39636047 -1.00
12/31/96 0.00 10.39636047 10.39636047 0.00
12/31/96 0.00 10.39636047 10.39636047 0.00
Avg Annual Return: 6.48% ERV: 1660.12
</TABLE>
<PAGE>
Fidelity Investments - VIP II Index 500 Fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.40056171 11.37199169 1209.71
12/31/96 -70.00 11.37199169 11.37199169 -70.00
12/31/96 -1.00 11.37199169 11.37199169 -1.00
Avg Annual Return: 13.87% ERV: 1138.71
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.37199169 NA
12/31/92 -1.00 NA 11.37199169 NA
12/31/93 -1.00 NA 11.37199169 NA
12/31/94 -1.00 NA 11.37199169 NA
12/31/95 -1.00 NA 11.37199169 NA
12/31/96 -30.00 11.37199169 11.37199169 -30.00
12/31/96 -1.00 11.37199169 11.37199169 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
08/27/92 1000.00 6.11484116 11.37199169 1859.74
08/27/93 -1.00 6.87919480 11.37199169 -1.65
08/27/94 -1.00 7.14668797 11.37199169 -1.59
08/27/95 -1.00 8.53630324 11.37199169 -1.33
08/27/96 -1.00 10.21465227 11.37199169 -1.11
12/31/96 -30.00 11.37199169 11.37199169 -30.00
12/31/96 -1.00 11.37199169 11.37199169 -1.00
12/31/96 11.37199169 11.37199169 0.00
12/31/96 11.37199169 11.37199169 0.00
12/31/96 11.37199169 11.37199169 0.00
12/31/96 11.37199169 11.37199169 0.00
12/31/96 11.37199169 11.37199169 0.00
Avg Annual Return: 14.82% ERV: 1823.05
</TABLE>
<PAGE>
Fidelity Investments - VIP II Index 500 Fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.40056171 11.37199169 1209.71
12/31/96 0.00 11.37199169 11.37199169 0.00
12/31/96 -1.00 11.37199169 11.37199169 -1.00
Avg Annual Return: 20.87% ERV: 1208.71
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.37199169 NA
12/31/92 -1.00 NA 11.37199169 NA
12/31/93 -1.00 NA 11.37199169 NA
12/31/94 -1.00 NA 11.37199169 NA
12/31/95 -1.00 NA 11.37199169 NA
12/31/96 0.00 11.37199169 11.37199169 0.00
12/31/96 -1.00 11.37199169 11.37199169 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
08/27/92 1000.00 6.11484116 11.37199169 1859.74
08/27/93 -1.00 6.87919480 11.37199169 -1.65
08/27/94 -1.00 7.14668797 11.37199169 -1.59
08/27/95 -1.00 8.53630324 11.37199169 -1.33
08/27/96 -1.00 10.21465227 11.37199169 -1.11
12/31/96 -1.00 11.37199169 11.37199169 -1.00
12/31/96 0.00 11.37199169 11.37199169 0.00
12/31/96 0.00 11.37199169 11.37199169 0.00
12/31/96 0.00 11.37199169 11.37199169 0.00
12/31/96 0.00 11.37199169 11.37199169 0.00
12/31/96 0.00 11.37199169 11.37199169 0.00
12/31/96 0.00 11.37199169 11.37199169 0.00
Avg Annual Return: 15.25% ERV: 1853.05
</TABLE>
<PAGE>
VIP MONEY MARKET SUBACCOUNT
7- DAY YIELD AND EFFECTIVE YIELD
7-day Period Ended 12/31/96
YIELD EFFECTIVE YIELD
- ----- ---------------
( Base Period Return ) x (365/7) (1 + Base Period Return )/365/7/ - 1
= 0.00068685 x (365/7) = (1 + 0.00068685) /365/7/ - 1
= 3.58% = 3.64%
WHERE:
UV = Unit Value
NCS = UV \Beginning of Period\ - UV \End of Period\
= 10.27872097 - 10.27146900
= 0.00725197
ES = Annual Contract Charge per Week, based on Average Account Size
= (30 / (365/7) ) / Average Account Size of $30,000
= 0.00001918
Base Period Return = (NCS / UV\Beginning of Period\) - ES
= (0.00725197 / 10.27146900) - 0.00001918
= 0.00068685
<PAGE>
Fidelity Investments - VIP Money Market fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.90244776 10.27146900 1037.27
12/31/96 -70.00 10.27146900 10.27146900 -70.00
12/31/96 -1.00 10.27146900 10.27146900 -1.00
Avg Annual Return: -3.37% ERV: 966.27
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 8.88613767 10.27146900 1155.90
12/31/92 -1.00 9.09342455 10.27146900 -1.13
12/31/93 -1.00 9.24575613 10.27146900 -1.11
12/31/94 -1.00 9.49331155 10.27146900 -1.08
12/31/95 -1.00 9.90244776 10.27146900 -1.04
12/31/96 -30.00 10.27146900 10.27146900 -30.00
12/31/96 -1.00 10.27146900 10.27146900 -1.00
Avg Annual Return: 2.30% ERV: 1120.54
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 6.70686414 10.27146900 1531.49
12/31/87 -1.00 7.03122182 10.27146900 -1.46
12/31/88 -1.00 7.43642169 10.27146900 -1.38
12/31/89 -1.00 7.99215556 10.27146900 -1.29
12/31/90 -1.00 8.50430887 10.27146900 -1.21
12/31/91 -1.00 8.88613767 10.27146900 -1.16
12/31/92 -1.00 9.09342455 10.27146900 -1.13
12/31/93 -1.00 9.24575613 10.27146900 -1.11
12/31/94 -1.00 9.49331155 10.27146900 -1.08
12/31/95 -1.00 9.90244776 10.27146900 -1.04
12/31/96 0.00 10.27146900 10.27146900 0.00
12/31/96 -1.00 10.27146900 10.27146900 -1.00
Avg Annual Return: 4.27% ERV: 1519.64
</TABLE>
<PAGE>
Fidelity Investments - VIP Money Market fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.90244776 10.27146900 1037.27
12/31/96 0.00 10.27146900 10.27146900 0.00
12/31/96 -1.00 10.27146900 10.27146900 -1.00
Avg Annual Return: 3.63% ERV: 1036.27
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 8.88613767 10.27146900 1155.90
12/31/92 -1.00 9.09342455 10.27146900 -1.13
12/31/93 -1.00 9.24575613 10.27146900 -1.11
12/31/94 -1.00 9.49331155 10.27146900 -1.08
12/31/95 -1.00 9.90244776 10.27146900 -1.04
12/31/96 0.00 10.27146900 10.27146900 0.00
12/31/96 -1.00 10.27146900 10.27146900 -1.00
Avg Annual Return: 2.84% ERV: 1150.54
<CAPTION>
Period: 10
<S> <C> <C> <C> <C>
12/31/86 1000.00 6.70686414 10.27146900 1531.49
12/31/87 -1.00 7.03122182 10.27146900 -1.46
12/31/88 -1.00 7.43642169 10.27146900 -1.38
12/31/89 -1.00 7.99215556 10.27146900 -1.29
12/31/90 -1.00 8.50430887 10.27146900 -1.21
12/31/91 -1.00 8.88613767 10.27146900 -1.16
12/31/92 -1.00 9.09342455 10.27146900 -1.13
12/31/93 -1.00 9.24575613 10.27146900 -1.11
12/31/94 -1.00 9.49331155 10.27146900 -1.08
12/31/95 -1.00 9.90244776 10.27146900 -1.04
12/31/96 -1.00 10.27146900 10.27146900 -1.00
12/31/96 0.00 10.27146900 10.27146900 0.00
Avg Annual Return: 4.27% ERV: 1519.64
</TABLE>
<PAGE>
Fidelity Investments - VIP Overseas Fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.65594708 10.76676020 1115.04
12/31/96 -70.00 10.76676020 10.76676020 -70.00
12/31/96 -1.00 10.76676020 10.76676020 -1.00
Avg Annual Return: 4.40% ERV: 1044.04
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 7.49968834 10.76676020 1435.63
12/31/92 -1.00 6.59430105 10.76676020 -1.63
12/31/93 -1.00 8.92090977 10.76676020 -1.21
12/31/94 -1.00 8.93790329 10.76676020 -1.20
12/31/95 -1.00 9.65594708 10.76676020 -1.12
12/31/96 -30.00 10.76676020 10.76676020 -30.00
12/31/96 -1.00 10.76676020 10.76676020 -1.00
Avg Annual Return: 6.95% ERV: 1399.47
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/28/87 1000.00 5.89083380 10.76676020 1827.71
01/28/88 -1.00 5.31954703 10.76676020 -2.02
01/28/89 -1.00 6.07208226 10.76676020 -1.77
01/28/90 -1.00 7.12823919 10.76676020 -1.51
01/28/91 -1.00 7.00274904 10.76676020 -1.54
01/28/92 -1.00 7.58252829 10.76676020 -1.42
01/28/93 -1.00 6.81542332 10.76676020 -1.58
01/28/94 -1.00 9.22749995 10.76676020 -1.17
01/28/95 -1.00 8.56889175 10.76676020 -1.26
01/28/96 -1.00 9.68432752 10.76676020 -1.11
12/31/96 0.00 10.76676020 10.76676020 0.00
12/31/96 -1.00 10.76676020 10.76676020 -1.00
Avg Annual Return: 6.18% ERV: 1813.33
</TABLE>
<PAGE>
Fidelity Investments - VIP Overseas Fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.65594708 10.76676020 1115.04
12/31/96 0.00 10.76676020 10.76676020 0.00
12/31/96 -1.00 10.76676020 10.76676020 -1.00
Avg Annual Return: 11.40% ERV: 1114.04
<CAPTION>
Period: 5
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 7.49968834 10.76676020 1435.63
12/31/92 -1.00 6.59430105 10.76676020 -1.63
12/31/93 -1.00 8.92090977 10.76676020 -1.21
12/31/94 -1.00 8.93790329 10.76676020 -1.20
12/31/95 -1.00 9.65594708 10.76676020 -1.12
12/31/96 0.00 10.76676020 10.76676020 0.00
12/31/96 -1.00 10.76676020 10.76676020 -1.00
Avg Annual Return: 7.40% ERV: 1429.47
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/28/87 1000.00 5.89083380 10.76676020 1827.71
01/28/88 -1.00 5.31954703 10.76676020 -2.02
01/28/89 -1.00 6.07208226 10.76676020 -1.77
01/28/90 -1.00 7.12823919 10.76676020 -1.51
01/28/91 -1.00 7.00274904 10.76676020 -1.54
01/28/92 -1.00 7.58252829 10.76676020 -1.42
01/28/93 -1.00 6.81542332 10.76676020 -1.58
01/28/94 -1.00 9.22749995 10.76676020 -1.17
01/28/95 -1.00 8.56889175 10.76676020 -1.26
01/28/96 -1.00 9.68432752 10.76676020 -1.11
12/31/96 -1.00 10.76676020 10.76676020 -1.00
12/31/96 0.00 10.76676020 10.76676020 0.00
Avg Annual Return: 6.18% ERV: 1813.33
</TABLE>
<PAGE>
INVESCO - Industrial Income Fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.66281277 11.63616373 1204.22
12/31/96 -70.00 11.63616373 11.63616373 -70.00
12/31/96 -1.00 11.63616373 11.63616373 -1.00
Avg Annual Return: 13.32% ERV: 1133.22
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.63616373 NA
12/31/92 -1.00 NA 11.63616373 NA
12/31/93 -1.00 NA 11.63616373 NA
12/31/94 -1.00 NA 11.63616373 NA
12/31/95 -1.00 NA 11.63616373 NA
12/31/96 -30.00 11.63616373 11.63616373 -30.00
12/31/96 -1.00 11.63616373 11.63616373 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
08/10/94 1000.00 7.54229847 11.63616373 1542.79
08/10/95 -1.00 8.66025707 11.63616373 -1.34
08/10/96 -1.00 10.66131890 11.63616373 -1.09
12/31/96 -50.00 11.63616373 11.63616373 -50.00
12/31/96 -1.00 11.63616373 11.63616373 -1.00
12/31/96 11.63616373 11.63616373 0.00
12/31/96 11.63616373 11.63616373 0.00
12/31/96 11.63616373 11.63616373 0.00
12/31/96 11.63616373 11.63616373 0.00
12/31/96 11.63616373 11.63616373 0.00
12/31/96 11.63616373 11.63616373 0.00
12/31/96 11.63616373 11.63616373 0.00
Avg Annual Return: 18.11% ERV: 1489.35
</TABLE>
<PAGE>
INVESCO - Industrial Income Fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.66281277 11.63616373 1204.22
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 -1.00 11.63616373 11.63616373 -1.00
Avg Annual Return: 20.32% ERV: 1203.22
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.63616373 NA
12/31/92 -1.00 NA 11.63616373 NA
12/31/93 -1.00 NA 11.63616373 NA
12/31/94 -1.00 NA 11.63616373 NA
12/31/95 -1.00 NA 11.63616373 NA
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 -1.00 11.63616373 11.63616373 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
08/10/94 1000.00 7.54229847 11.63616373 1542.79
08/10/95 -1.00 8.66025707 11.63616373 -1.34
08/10/96 -1.00 10.66131890 11.63616373 -1.09
12/31/96 -1.00 11.63616373 11.63616373 -1.00
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 0.00 11.63616373 11.63616373 0.00
12/31/96 0.00 11.63616373 11.63616373 0.00
Avg Annual Return: 19.75% ERV: 1539.35
</TABLE>
<PAGE>
INVESCO - Utilities Fund
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.85732680 11.01267628 1117.21
12/31/96 -70.00 11.01267628 11.01267628 -70.00
12/31/96 -1.00 11.01267628 11.01267628 -1.00
Avg Annual Return: 4.62% ERV: 1046.21
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.01267628 NA
12/31/92 -1.00 NA 11.01267628 NA
12/31/93 -1.00 NA 11.01267628 NA
12/31/94 -1.00 NA 11.01267628 NA
12/31/95 -1.00 NA 11.01267628 NA
12/31/96 -30.00 11.01267628 11.01267628 -30.00
12/31/96 -1.00 11.01267628 11.01267628 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/03/95 1000.00 9.17325321 11.01267628 1200.52
01/03/96 -1.00 9.91891925 11.01267628 -1.11
12/31/96 -60.00 11.01267628 11.01267628 -60.00
12/31/96 -1.00 11.01267628 11.01267628 -1.00
12/31/96 11.01267628 11.01267628 0.00
12/31/96 11.01267628 11.01267628 0.00
12/31/96 11.01267628 11.01267628 0.00
12/31/96 11.01267628 11.01267628 0.00
12/31/96 11.01267628 11.01267628 0.00
12/31/96 11.01267628 11.01267628 0.00
12/31/96 11.01267628 11.01267628 0.00
12/31/96 11.01267628 11.01267628 0.00
Avg Annual Return: 6.72% ERV: 1138.41
</TABLE>
<PAGE>
INVESCO - Utilities Fund
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.85732680 11.01267628 1117.21
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 -1.00 11.01267628 11.01267628 -1.00
Avg Annual Return: 11.62% ERV: 1116.21
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.01267628 NA
12/31/92 -1.00 NA 11.01267628 NA
12/31/93 -1.00 NA 11.01267628 NA
12/31/94 -1.00 NA 11.01267628 NA
12/31/95 -1.00 NA 11.01267628 NA
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 -1.00 11.01267628 11.01267628 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
01/03/95 1000.00 9.17325321 11.01267628 1200.52
01/03/96 -1.00 9.91891925 11.01267628 -1.11
12/31/96 -1.00 11.01267628 11.01267628 -1.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
12/31/96 0.00 11.01267628 11.01267628 0.00
Avg Annual Return: 9.51% ERV: 1198.41
</TABLE>
<PAGE>
Janus Aspen Series - Aggresive Growth
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.12069199 9.69637089 1063.12
12/31/96 -70.00 9.69637089 9.69637089 -70.00
12/31/96 -1.00 9.69637089 9.69637089 -1.00
Avg Annual Return: -0.79% ERV: 992.12
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 9.69637089 NA
12/31/92 -1.00 NA 9.69637089 NA
12/31/93 -1.00 NA 9.69637089 NA
12/31/94 -1.00 NA 9.69637089 NA
12/31/95 -1.00 NA 9.69637089 NA
12/31/96 -30.00 9.69637089 9.69637089 -30.00
12/31/96 -1.00 9.69637089 9.69637089 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 5.39445624 9.69637089 1797.47
09/13/94 -1.00 6.87057960 9.69637089 -1.41
09/13/95 -1.00 8.64332119 9.69637089 -1.12
09/13/96 -1.00 9.51102088 9.69637089 -1.02
12/31/96 -40.00 9.69637089 9.69637089 -40.00
12/31/96 -1.00 9.69637089 9.69637089 -1.00
12/31/96 9.69637089 9.69637089 0.00
12/31/96 9.69637089 9.69637089 0.00
12/31/96 9.69637089 9.69637089 0.00
12/31/96 9.69637089 9.69637089 0.00
12/31/96 9.69637089 9.69637089 0.00
12/31/96 9.69637089 9.69637089 0.00
Avg Annual Return: 18.55% ERV: 1752.92
</TABLE>
<PAGE>
Janus Aspen Series - Aggresive Growth
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.12069199 9.69637089 1063.12
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 -1.00 9.69637089 9.69637089 -1.00
Avg Annual Return: 6.21% ERV: 1062.12
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 9.69637089 NA
12/31/92 -1.00 NA 9.69637089 NA
12/31/93 -1.00 NA 9.69637089 NA
12/31/94 -1.00 NA 9.69637089 NA
12/31/95 -1.00 NA 9.69637089 NA
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 -1.00 9.69637089 9.69637089 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 5.39445624 9.69637089 1797.47
09/13/94 -1.00 6.87057960 9.69637089 -1.41
09/13/95 -1.00 8.64332119 9.69637089 -1.12
09/13/96 -1.00 9.51102088 9.69637089 -1.02
12/31/96 -1.00 9.69637089 9.69637089 -1.00
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 0.00 9.69637089 9.69637089 0.00
12/31/96 0.00 9.69637089 9.69637089 0.00
Avg Annual Return: 19.36% ERV: 1792.92
</TABLE>
<PAGE>
Janus Aspen Series - Balanced
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.61844408 11.00576767 1144.24
12/31/96 -70.00 11.00576767 11.00576767 -70.00
12/31/96 -1.00 11.00576767 11.00576767 -1.00
Avg Annual Return: 7.32% ERV: 1073.24
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.00576767 NA
12/31/92 -1.00 NA 11.00576767 NA
12/31/93 -1.00 NA 11.00576767 NA
12/31/94 -1.00 NA 11.00576767 NA
12/31/95 -1.00 NA 11.00576767 NA
12/31/96 -30.00 11.00576767 11.00576767 -30.00
12/31/96 -1.00 11.00576767 11.00576767 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 7.38270142 11.00576767 1490.75
09/13/94 -1.00 8.01490615 11.00576767 -1.37
09/13/95 -1.00 9.12375101 11.00576767 -1.21
09/13/96 -1.00 10.49263163 11.00576767 -1.05
12/31/96 -40.00 11.00576767 11.00576767 -40.00
12/31/96 -1.00 11.00576767 11.00576767 -1.00
12/31/96 11.00576767 11.00576767 0.00
12/31/96 11.00576767 11.00576767 0.00
12/31/96 11.00576767 11.00576767 0.00
12/31/96 11.00576767 11.00576767 0.00
12/31/96 11.00576767 11.00576767 0.00
12/31/96 11.00576767 11.00576767 0.00
Avg Annual Return: 11.83% ERV: 1446.12
</TABLE>
<PAGE>
Janus Aspen Series - Balanced
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.61844408 11.00576767 1144.24
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 -1.00 11.00576767 11.00576767 -1.00
Avg Annual Return: 14.32% ERV: 1143.24
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.00576767 NA
12/31/92 -1.00 NA 11.00576767 NA
12/31/93 -1.00 NA 11.00576767 NA
12/31/94 -1.00 NA 11.00576767 NA
12/31/95 -1.00 NA 11.00576767 NA
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 -1.00 11.00576767 11.00576767 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 7.38270142 11.00576767 1490.75
09/13/94 -1.00 8.01490615 11.00576767 -1.37
09/13/95 -1.00 9.12375101 11.00576767 -1.21
09/13/96 -1.00 10.49263163 11.00576767 -1.05
12/31/96 -1.00 11.00576767 11.00576767 -1.00
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 0.00 11.00576767 11.00576767 0.00
12/31/96 0.00 11.00576767 11.00576767 0.00
Avg Annual Return: 12.76% ERV: 1486.12
</TABLE>
<PAGE>
Janus Aspen Series - Growth
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.17301105 10.70124071 1166.60
12/31/96 -70.00 10.70124071 10.70124071 -70.00
12/31/96 -1.00 10.70124071 10.70124071 -1.00
Avg Annual Return: 9.56% ERV: 1095.60
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 10.70124071 NA
12/31/92 -1.00 NA 10.70124071 NA
12/31/93 -1.00 NA 10.70124071 NA
12/31/94 -1.00 NA 10.70124071 NA
12/31/95 -1.00 NA 10.70124071 NA
12/31/96 -30.00 10.70124071 10.70124071 -30.00
12/31/96 -1.00 10.70124071 10.70124071 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 6.86058378 10.70124071 1559.81
09/13/94 -1.00 7.23420832 10.70124071 -1.48
09/13/95 -1.00 8.88334109 10.70124071 -1.20
09/13/96 -1.00 10.25418766 10.70124071 -1.04
12/31/96 -40.00 10.70124071 10.70124071 -40.00
12/31/96 -1.00 10.70124071 10.70124071 -1.00
12/31/96 10.70124071 10.70124071 0.00
12/31/96 10.70124071 10.70124071 0.00
12/31/96 10.70124071 10.70124071 0.00
12/31/96 10.70124071 10.70124071 0.00
12/31/96 10.70124071 10.70124071 0.00
12/31/96 10.70124071 10.70124071 0.00
Avg Annual Return: 13.42% ERV: 1515.09
</TABLE>
<PAGE>
Janus Aspen Series - Growth
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.17301105 10.70124071 1166.60
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 -1.00 10.70124071 10.70124071 -1.00
Avg Annual Return: 16.56% ERV: 1165.60
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 10.70124071 NA
12/31/92 -1.00 NA 10.70124071 NA
12/31/93 -1.00 NA 10.70124071 NA
12/31/94 -1.00 NA 10.70124071 NA
12/31/95 -1.00 NA 10.70124071 NA
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 -1.00 10.70124071 10.70124071 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 6.86058378 10.70124071 1559.81
09/13/94 -1.00 7.23420832 10.70124071 -1.48
09/13/95 -1.00 8.88334109 10.70124071 -1.20
09/13/96 -1.00 10.25418766 10.70124071 -1.04
12/31/96 -1.00 10.70124071 10.70124071 -1.00
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 0.00 10.70124071 10.70124071 0.00
12/31/96 0.00 10.70124071 10.70124071 0.00
Avg Annual Return: 14.32% ERV: 1555.09
</TABLE>
<PAGE>
Janus Aspen Series - International Growth
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.13695259 12.12372711 1326.89
12/31/96 -70.00 12.12372711 12.12372711 -70.00
12/31/96 -1.00 12.12372711 12.12372711 -1.00
Avg Annual Return: 25.59% ERV: 1255.89
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 12.12372711 NA
12/31/92 -1.00 NA 12.12372711 NA
12/31/93 -1.00 NA 12.12372711 NA
12/31/94 -1.00 NA 12.12372711 NA
12/31/95 -1.00 NA 12.12372711 NA
12/31/96 -30.00 12.12372711 12.12372711 -30.00
12/31/96 -1.00 12.12372711 12.12372711 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
05/02/94 1000.00 7.82815102 12.12372711 1548.73
05/02/95 -1.00 7.55583825 12.12372711 -1.60
05/02/96 -1.00 10.39829314 12.12372711 -1.17
12/31/96 -50.00 12.12372711 12.12372711 -50.00
12/31/96 -1.00 12.12372711 12.12372711 -1.00
12/31/96 12.12372711 12.12372711 0.00
12/31/96 12.12372711 12.12372711 0.00
12/31/96 12.12372711 12.12372711 0.00
12/31/96 12.12372711 12.12372711 0.00
12/31/96 12.12372711 12.12372711 0.00
12/31/96 12.12372711 12.12372711 0.00
12/31/96 12.12372711 12.12372711 0.00
Avg Annual Return: 16.28% ERV: 1494.96
</TABLE>
<PAGE>
Janus Aspen Series - International Growth
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.13695259 12.12372711 1326.89
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 -1.00 12.12372711 12.12372711 -1.00
Avg Annual Return: 32.59% ERV: 1325.89
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 12.12372711 NA
12/31/92 -1.00 NA 12.12372711 NA
12/31/93 -1.00 NA 12.12372711 NA
12/31/94 -1.00 NA 12.12372711 NA
12/31/95 -1.00 NA 12.12372711 NA
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 -1.00 12.12372711 12.12372711 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
05/02/94 1000.00 7.82815102 12.12372711 1548.73
05/02/95 -1.00 7.55583825 12.12372711 -1.60
05/02/96 -1.00 10.39829314 12.12372711 -1.17
12/31/96 -1.00 12.12372711 12.12372711 -1.00
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 0.00 12.12372711 12.12372711 0.00
12/31/96 0.00 12.12372711 12.12372711 0.00
Avg Annual Return: 17.72% ERV: 1544.96
</TABLE>
<PAGE>
Janus Aspen Series - Short-Term Bonds
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 10.06934879 10.31184618 1024.08
12/31/96 -70.00 10.31184618 10.31184618 -70.00
12/31/96 -1.00 10.31184618 10.31184618 -1.00
Avg Annual Return: -4.69% ERV: 953.08
<CAPTION>
Period: NA
<S> <C> <C> <C> <C>
Date Payment AUV Beg AUV End Value
12/31/91 1000.00 NA 10.31184618 NA
12/31/92 -1.00 NA 10.31184618 NA
12/31/93 -1.00 NA 10.31184618 NA
12/31/94 -1.00 NA 10.31184618 NA
12/31/95 -1.00 NA 10.31184618 NA
12/31/96 -30.00 10.31184618 10.31184618 -30.00
12/31/96 -1.00 10.31184618 10.31184618 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 9.40331064 10.31184618 1096.62
09/13/94 -1.00 9.30881091 10.31184618 -1.11
09/13/95 -1.00 9.83708526 10.31184618 -1.05
09/13/96 -1.00 10.07351303 10.31184618 -1.02
12/31/96 -40.00 10.31184618 10.31184618 -40.00
12/31/96 -1.00 10.31184618 10.31184618 -1.00
12/31/96 10.31184618 10.31184618 0.00
12/31/96 10.31184618 10.31184618 0.00
12/31/96 10.31184618 10.31184618 0.00
12/31/96 10.31184618 10.31184618 0.00
12/31/96 10.31184618 10.31184618 0.00
12/31/96 10.31184618 10.31184618 0.00
Avg Annual Return: 1.56% ERV: 1052.44
</TABLE>
<PAGE>
Janus Aspen Series - Short-Term Bonds
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 10.06934879 10.31184618 1024.08
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 -1.00 10.31184618 10.31184618 -1.00
Avg Annual Return: 2.31% ERV: 1023.08
<CAPTION>
Period: NA
<S> <C> <C> <C> <C>
Date Payment AUV Beg AUV End Value
12/31/91 1000.00 NA 10.31184618 NA
12/31/92 -1.00 NA 10.31184618 NA
12/31/93 -1.00 NA 10.31184618 NA
12/31/94 -1.00 NA 10.31184618 NA
12/31/95 -1.00 NA 10.31184618 NA
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 -1.00 10.31184618 10.31184618 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 9.40331064 10.31184618 1096.62
09/13/94 -1.00 9.30881091 10.31184618 -1.11
09/13/95 -1.00 9.83708526 10.31184618 -1.05
09/13/96 -1.00 10.07351303 10.31184618 -1.02
12/31/96 -1.00 10.31184618 10.31184618 -1.00
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 0.00 10.31184618 10.31184618 0.00
12/31/96 0.00 10.31184618 10.31184618 0.00
Avg Annual Return: 2.72% ERV: 1092.44
</TABLE>
<PAGE>
Janus Aspen Series - Worldwide Growth
December 31, 1996
Assuming Contract Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.18708143 11.67321368 1270.61
12/31/96 -70.00 11.67321368 11.67321368 -70.00
12/31/96 -1.00 11.67321368 11.67321368 -1.00
Avg Annual Return: 19.96% ERV: 1199.61
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.67321368 NA
12/31/92 -1.00 NA 11.67321368 NA
12/31/93 -1.00 NA 11.67321368 NA
12/31/94 -1.00 NA 11.67321368 NA
12/31/95 -1.00 NA 11.67321368 NA
12/31/96 -30.00 11.67321368 11.67321368 -30.00
12/31/96 -1.00 11.67321368 11.67321368 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 6.17622771 11.67321368 1890.02
09/13/94 -1.00 7.52064040 11.67321368 -1.55
09/13/95 -1.00 8.81344669 11.67321368 -1.32
09/13/96 -1.00 10.96566107 11.67321368 -1.06
12/31/96 -40.00 11.67321368 11.67321368 -40.00
12/31/96 -1.00 11.67321368 11.67321368 -1.00
12/31/96 11.67321368 11.67321368 0.00
12/31/96 11.67321368 11.67321368 0.00
12/31/96 11.67321368 11.67321368 0.00
12/31/96 11.67321368 11.67321368 0.00
12/31/96 11.67321368 11.67321368 0.00
12/31/96 11.67321368 11.67321368 0.00
Avg Annual Return: 20.40% ERV: 1845.08
</TABLE>
<PAGE>
Janus Aspen Series - Worldwide Growth
December 31, 1996
Assuming Contract Not Surrendered
<TABLE>
<CAPTION>
Period: 1
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/95 1000.00 9.18708143 11.67321368 1270.61
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 -1.00 11.67321368 11.67321368 -1.00
Avg Annual Return: 26.96% ERV: 1269.61
<CAPTION>
Period: NA
Date Payment AUV Beg AUV End Value
<S> <C> <C> <C> <C>
12/31/91 1000.00 NA 11.67321368 NA
12/31/92 -1.00 NA 11.67321368 NA
12/31/93 -1.00 NA 11.67321368 NA
12/31/94 -1.00 NA 11.67321368 NA
12/31/95 -1.00 NA 11.67321368 NA
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 -1.00 11.67321368 11.67321368 -1.00
Avg Annual Return: NA ERV: NA
<CAPTION>
Period: Inception
<S> <C> <C> <C> <C>
09/13/93 1000.00 6.17622771 11.67321368 1890.02
09/13/94 -1.00 7.52064040 11.67321368 -1.55
09/13/95 -1.00 8.81344669 11.67321368 -1.32
09/13/96 -1.00 10.96566107 11.67321368 -1.06
12/31/96 -1.00 11.67321368 11.67321368 -1.00
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 0.00 11.67321368 11.67321368 0.00
12/31/96 0.00 11.67321368 11.67321368 0.00
Avg Annual Return: 21.19% ERV: 1885.08
</TABLE>
<PAGE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] SEP-11-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 426,867
[INVESTMENTS-AT-VALUE] 424,883
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 424,883
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 532
[TOTAL-LIABILITIES] 532
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 424,351
[DIVIDEND-INCOME] 4,842
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 718
[NET-INVESTMENT-INCOME] 4,124
[REALIZED-GAINS-CURRENT] 278
[APPREC-INCREASE-CURRENT] (1,984)
[NET-CHANGE-FROM-OPS] 2,418
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 55,114
[NUMBER-OF-SHARES-REDEEMED] 15,159
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 424,351
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 212,176
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
