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Registration No. 333-19193
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
Registration Statement
Under
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1
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SEPARATE ACCOUNT VL
(Exact Name of Trust)
FIRST VARIABLE LIFE INSURANCE COMPANY
(Name of Depositor)
10 POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(Complete Address of Depositor's Principal Executive Offices)
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ARNOLD R. BERGMAN Copy to: THOMAS C. LAUERMAN
Vice President - Legal and Administration Freedman, Levy, Kroll & Simonds
First Variable Life Insurance Company Suite 825
10 Post Office Square 1050 Connecticut Ave., N.W.
Boston, MA 02109 Washington, D.C. 20036
(Name and Address of Agent for Service)
Title and amount of securities being registered:
An indefinite amount of interests under flexible premium variable life
insurance policies.
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration
Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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CROSS REFERENCE SHEET
Item No. in Location
Form N-8 B-2 --------
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1, 2 Caption in Prospectus Cover, The Company, The
Separate Account
3 Inapplicable
4 Distribution and Other Agreements
5, 6 The Separate Account
7 Inapplicable
8 Financial Statements
9 Legal Proceedings
10(a), (b), (c), (d), (e) Highlights, Surrender and Withdrawals,
Surrender Charges, Transfers Among Policy
Options, Lapse and Reinstatement, Determination
of Account Value, Other Provisions of the
Policy, The Policy, Policy Options
10(f) Voting Rights, Other Provisions of the Policy
10(g), (h) Changes to Policy Options
10(i) Mixed and Shared Funding, Policy Benefits and
Values, Other Provisions of the Policy
11, 12 Variable Investors Series Trust, Federated
Insurance Series
13 Highlights, Charges and Deductions, Elimination
and Reduction of Charges and Expenses
14, 15 Application and Issuance of a Policy, Free Look
Right, Delayed Investment Start Date
16 Premiums, Allocation of Premiums, Determination
of Account Value
17 Surrender and Withdrawals, Payment of Proceeds
18 Taxation of the Company and the Separate
Account, Determination of Account Value, The
Separate Account, Policy Options, The Policy,
Charges and Deductions
19 Reports and Records, Advertising Practices,
Other Provisions of the Policy
20 See 10(g) & 10(h)
21 Policy Loans
22, 23, 24 Inapplicable
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25 The Company
26 Inapplicable
27 The Company
28 Management of the Company
29 The Company
30, 31, 32, 33, 34 Inapplicable
35 State Regulation
36 Inapplicable
37 Inapplicable
38, 39, 40, 41(a) Distribution and Other Agreements, The Company
41(b), 41(c), 42, 43 Inapplicable
44 Determination of Account Value
45 Inapplicable
46 Surrender and Withdrawals
47, 48, 49, 50 Inapplicable
51 Policy Benefits and Values
52 Changes to Policy Options
53(a) Federal Tax Status
53(b), 54, 55 Inapplicable
56, 57, 58 Inapplicable
59 Financial Statements
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Prospectus Dated:
CAPITAL FLEX PAY VUL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
Funded in
SEPARATE ACCOUNT VL
by
FIRST VARIABLE LIFE INSURANCE COMPANY
Marketing and Executive Office: Variable Service Center:
10 Post Office Square P.O. Box 1317
Boston, MA 02109 Des Moines, IA 50305-1317
Automated Information Line: (800) 845-0689
(800)-59-FUNDS
This prospectus describes Capital Flex Pay VUL (the "Policy"), a flexible
premium variable life insurance policy issued by First Variable Life Insurance
Company (the "Company"). The Policy provides for life insurance coverage and for
the accumulation of an Account Value. An Owner may adjust the amount and
frequency of premium payments and the level of life insurance provided under the
Policy, subject to certain restrictions.
A Death Benefit is payable under the Policy upon the Insured's death. The Owner
may choose either a Death Benefit generally equal to the Face Amount (Death
Benefit Option A), or a Death Benefit generally equal to the Face Amount plus
the Account Value (Death Benefit Option B). The Death Benefit will never be less
than the current Face Amount of a Policy, less any due and unpaid charges, any
loans and any interest due or accrued on the loans, as long as the Policy stays
in force.
After a Policy is approved for issue by the Company, the Net Premium may be
allocated to the Company's segregated investment account called Separate Account
VL (the "Separate Account") or to the Company's Fixed Account, which guarantees
a minimum fixed rate of interest. The Separate Account invests in selected
portfolios of two mutual funds: Variable Investors Series Trust ("VIST") and
Federated Insurance Series ("FIS"). The portfolios currently available under a
Policy are: VIST Small Cap Growth, VIST World Equity, VIST Growth, VIST Matrix
Equity, VIST Growth & Income, VIST Multiple Strategies, VIST High Income Bond,
VIST U.S. Government Bond, and FIS Prime Money Fund (the "Portfolios"). (See
"Policy Options.")
There is no guaranteed minimum Account Value for a Policy which is funded
through the Separate Account. The Death Benefit may, and the Account Value will,
vary up or down to reflect the investment experience of the Portfolios to which
Net Premiums have been allocated. The Owner bears the investment risk for all
amounts allocated to the Portfolios. The Policy continues in effect while the
Cash Surrender Value is sufficient to cover the current charges and deductions
under the Policy. The Company guarantees to keep the Policy in force during a
period ranging from 2 - 12 years, depending on the Insured's issue age, so long
as the required Minimum Monthly Premium amounts are paid. (See "Premiums.")
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE VARIABLE
INVESTORS SERIES TRUST AND FEDERATED INSURANCE SERIES. ALL PROSPECTUSES SHOULD
BE READ AND RETAINED FOR FUTURE REFERENCE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS (OR IN ANY SALES
LITERATURE APPROVED BY THE COMPANY) IN CONNECTION WITH THE OFFER OF THE POLICY
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THE POLICIES ARE NOT AVAILABLE IN ALL
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JURISDICTIONS, AND THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY
JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL THEREIN.
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TABLE OF CONTENTS
PAGE
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DEFINITIONS
HIGHLIGHTS
THE COMPANY
THE SEPARATE ACCOUNT
Financial and Performance Information
POLICY OPTIONS
Variable Investors Series Trust
Federated Insurance Series
Fixed Account Option
Transfers Among Policy Options
General Requirements
Systematic Transfers - Dollar Cost Averaging
Asset Rebalancing Program
Restrictions on Transfers
Automatic Transfers of Small Accounts
Changes in Policy Options
Mixed and Shared Funding
CHARGES AND DEDUCTIONS
Premium Load
Monthly Deductions
Administrative Charge
Cost of Insurance
Other Charges
Daily Deductions
Transaction Charges
Surrender Charge
Surrender Charge Percentage
Maximum Surrender Charge
Fund Expenses
Other Charges and Deductions
Income Taxes
Special Service Fees
Elimination, Reduction, or Refund of Charges and
Deductions; Increases in Bonuses
Group and Sponsored Arrangements
Purpose of Policy Charges
THE POLICY
Application and Issuance of a Policy
Free Look Right
Premiums
Planned Premiums
Monthly Minimum Premium
Additional Premiums
Grace Period
Premium Limitations
Allocation of Premiums
Delayed Investment Start Date
Telephone Transactions
POLICY BENEFITS AND VALUES
Death Benefit
Death Benefit Options
Applicable Percentage of Death Benefit Factors
Change in Death Benefit Options and Face Amount
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Adjustments to the Death Benefit Proceeds
Premium Value and Cash Value Bonuses
Premium Value Bonus
Cash Value Bonuses
Availability of Bonuses
Optional Additional Benefit Riders
Acceleration of Death Benefit Rider
Accidental Death Benefit Rider
Additional Term Insurance on the Insured
Children's Term Insurance Rider
Cost of Living Rider
Disability Waiver Benefit Riders
Extended Guaranteed Death Benefit Riders
Extension of Maturity Date Rider
Other Insured Persons Rider
Determination of Account Value
Account Value and Cash Surrender Value
Net Investment Experience
Policy Loans
Regular Loans
Preferred Loan
Immediate Loan Repayment
Surrender and Withdrawals
Surrender
Withdrawals
Maturity Proceeds
Lapse and Reinstatement
Payment of Proceeds
Tax Withholding
Payout Options
Tax Impact
Right to Exchange for a Fixed Benefit Policy
OTHER PROVISIONS OF THE POLICY
Suicide Exclusion
Representations and Contestability
Option to Extend Maturity Date
Misstatement of Age or Sex
Owner and Beneficiary
Assignments
Reports and Records
Voting Rights
Suspension of Payments and Transfers
Nonparticipation in Company Dividends
DISTRIBUTION AND OTHER AGREEMENTS
SAFEKEEPING OF ASSETS
MANAGEMENT OF THE COMPANY
FEDERAL TAX STATUS
General
Taxation of the Company and the Separate Account
Income Tax Treatment of Policy Benefits
Life Insurance
Acceleration of Death Benefits Rider
Modified Endowment Contracts
Other Tax Effects of Policy Changes
Taxation of Pre-Distributions from a Policy that is not a Modified
Endowment
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Contract
Taxation of Pre-Distributions from a Policy that is a Modified
Endowment Contract
Diversification Requirements
ADVERTISING PRACTICES
LEGAL MATTERS
State Regulation
Legal Proceedings
Counsel
EXPERTS
REGISTRATION STATEMENT
APPENDICES
APPENDIX A: ANNUAL RATES OF RETURN FOR THE SUB-ACCOUNTS
APPENDIX B: ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES, CASH SURRENDER
VALUES AND ACCUMULATED VALUE OF THE PREMIUMS
APPENDIX C: FINANCIAL STATEMENTS
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DEFINITIONS
ACCOUNT - The Fixed Account and/or one or more of the Sub-Accounts of the
Separate Account.
ACCOUNT VALUE - The sum of the amounts attributable to a Policy that are: (a) in
the Separate Account; (b) in the Fixed Account; and, if there is an outstanding
Policy loan, (c) in the Loan Account.
ACCUMULATION UNIT - A unit of measure used to calculate the Account Value of a
Sub-Account of the Separate Account.
ACCUMULATION UNIT VALUE or AUV - The value of an Accumulation Unit on a Business
Day.
AGE - The Insured's age as of his or her last birthday on the date for which age
is being determined.
BENEFICIARY - The person(s) or entity who will receive the Death Benefit.
BUSINESS DAY - Each day the New York Stock Exchange is open for trading, which
is Monday through Friday, except for the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, July Fourth, Labor Day, Thanksgiving
Day, Christmas Day.
CASH ACCUMULATION VALUE - Account Value minus any existing Indebtedness.
CASH SURRENDER VALUE - The amount available upon surrender of the Policy, which
is equal to the Account Value reduced by any outstanding Policy loan and accrued
interest; and reduced by any applicable Surrender Charges.
CODE - The Internal Revenue Code of 1986, as amended.
COMPANY - First Variable Life Insurance Company.
DEATH BENEFIT - The Death Benefit is the amount of insurance provided under a
Policy on the life of an Insured.
DEATH BENEFIT PROCEEDS - The amount payable on the death of the Insured. This
amount is the Death Benefit less Indebtedness and less any unpaid monthly
deductions and charges. The Death Benefit Proceeds are increased by any amounts
payable under optional additional benefit riders to a Policy.
DISTRIBUTOR - First Variable Capital Services, Inc., 10 Post Office Square,
Boston, MA 02109.
FACE AMOUNT - A dollar amount used to determine the Death Benefit under a
Policy. It is shown on the Owner's Policy data page.
FIXED ACCOUNT - The Fixed Account is the non-loaned portion of the Account Value
that is part of the Company's general account. The Fixed Account provides
guarantees of principal and interest and is not part of the Separate Account.
FUNDS - Variable Investors Series Trust and Federated Insurance Series, each of
which is an open-end management investment company in which the Separate Account
invests.
INDEBTEDNESS - All amounts owed to the Company by an Owner for loans on the
Policy plus interest due or accrued on the loans.
INSURED - The person on whose life the Policy is issued.
LOAN ACCOUNT - An account which is established in the Company's general account
for any amounts requested for loans plus interest due or accrued on the loans.
MATURITY DATE - The Policy Anniversary on or following the Insured's 95th
birthday.
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MONTHLY DEDUCTION - The amount deducted from Account Value on the first Business
Day of each Policy Month to cover charges and expenses incurred in connection
with the Policy and any additional benefit riders.
NET AMOUNT AT RISK - The amount of insurance coverage determined under this
Policy for each Policy Month.
NET INVESTMENT EXPERIENCE - For any period, the Net Investment Experience of a
Sub-Account of the Separate Account is the investment experience of the
underlying Portfolio for the same period, reduced by the amount of charges
against the Sub-Account for that period.
NET PREMIUM - The amounts paid for a Policy, less the applicable Premium Load.
OWNER - The person entitled to all the ownership rights under a Policy. The
initial owner is stated on the application for a Policy, and may be later
changed as the Policy provides.
POLICY ANNIVERSARY - An anniversary of the Policy Date.
POLICY DATE - The date the provisions of the Policy take effect, as shown on the
Owner's Policy data page. Policy Months and Policy Years are measured from this
date.
POLICY OPTION - The Fixed Account or any of the Sub-Accounts of the Separate
Account which can be selected by the Owner of a Policy.
POLICY QUARTER - One quarter of a Policy Year. The first Policy Quarter begins
on the Policy Date and ends on the last Business Day of the third Policy Month.
POLICY YEAR - Each 12-month period beginning on the Policy Date.
PORTFOLIO - A Fund's separate and distinct class of shares that is available as
an underlying investment under a Policy.
PREMIUM RATE CLASS - An insurance underwriting risk category that is used to
determine certain benefits and charges under a Policy. For example, Monthly
Minimum Premiums, cost of insurance charges, and Premium Value Bonuses will vary
by the premium rate class assigned an Insured. On the date of this prospectus,
the Company uses Preferred, Smoker and Non-Smoker premium rate classes which
will differ based on the sex of the Insured. These classes are further
sub-divided into "standard" and "substandard" categories. Charges are generally
higher for substandard categories.
SEPARATE ACCOUNT - A separate investment account of the Company, designated as
Separate Account VL.
SUB-ACCOUNT - A segment of the Separate Account which invests in a specified
Portfolio of the Funds.
VALUATION PERIOD - The period of time between the close of one Business Day and
the close of business for the next succeeding Business Day.
VARIABLE SERVICE CENTER - The Company's administrative service center for the
Policies is located at 1206 Mulberry Street, Des Moines, IA 50309. The mailing
address is P.O. Box 1317, Des Moines, IA 50305-1317.
HIGHLIGHTS
The following is a brief listing of the basic features of the Policy. These and
other features of the Policy are explained in detail throughout the prospectus.
The Owner should be sure to read the prospectus and the prospectuses of the
Funds for more complete information.
This prospectus describes a Policy issued by the Company that provides flexible
premium life insurance. Death Benefits and Account Value under these Policies
are "variable" and will reflect the Net Investment Experience of the Policy
Option(s) and Portfolios chosen by the Owner. The Fixed Account, which is part
of the Company's general
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account, provides guarantees of principal and interest. For a description of the
Fixed Account, see "Fixed Account Option" which appears later in this
prospectus.
Generally, a Policy may be issued on a proposed Insured up to Age 80 for a
minimum Face Amount of $25,000, or on a proposed Insured between Ages 81 - 85
for a Face Amount between $100,000 and $500,000. (See "Application and Issuance
of a Policy. ") An applicant must select a Face Amount and a Death Benefit
Option on the life of the proposed Insured. All persons proposed for insurance
must meet the Company's underwriting and other criteria for issuance. The Policy
is not available to employee benefit plans qualified under Section 401 of the
Code, except with the Company's consent.
In many respects the Policy is similar to traditional fixed-benefit whole life
insurance. Like fixed-benefit whole life insurance, the Policy provides for a
Death Benefit, an Account Value, and loan privileges. However, the Policy
differs from fixed-benefit whole life insurance in that the Death Benefit and
Account Value may increase or decrease to reflect the investment performance of
the Policy Options to which the Account Value is allocated. The portion of the
Account Value invested in the Sub-Accounts is not guaranteed and an Owner bears
the investment risk on this portion of the Account Value. (See "Determination of
Account Value." )
The Policy generally requires payment of an initial premium on or before the
Policy Date equal to at least 2 Monthly Minimum Premiums. Additional amounts may
be paid thereafter, subject to certain restrictions, as long as the Policy meets
the definition of a life insurance contract under the Code. Payment of the
Monthly Minimum Premium amounts specified in the Policy guarantees that the
Policy will remain in force for a guarantee period ranging from 2 to 12 years,
depending on the Insured's issue age. Planned and unplanned additional premiums
may be paid, subject to certain limitations. A Premium Load, as discussed below,
may be deducted from each premium payment before allocation of the Net Premium
to the Sub-Accounts and/or Fixed Account selected by the Owner.
Payment of large amounts of premium relative to the Death Benefit during the
first seven Policy Years may cause a Policy to be classified as a "modified
endowment contract" under section 7702A of the Code. Under current federal
income tax law, pre-death distributions under modified endowment contracts,
including loans, assignments, partial withdrawals and surrenders, will be
included in income on an income first basis, and a 10% penalty tax will be
imposed on income distributed before the Owner attains Age 59-1/2. (See "Federal
Tax Status.")
Owners have the right to return the Policy according to the terms of its
"free-look" right. The Company reserves the right to delay the initial
investment of the premium payment in the selected Policy Options in certain
instances, but it does not currently do so. (See "Delayed Investment Start
Date.")
The Account Value may be transferred among the Sub-Accounts. (See "Transfers
Among Policy Options.") Within 24 months after the Policy Date, the Owner has a
right to transfer all of the Account Value in the Sub-Accounts to the Fixed
Account. (See "Right to Exchange for a Fixed Benefit Policy.") Under certain
circumstances, a transaction fee may be assessed when an Owner transfers Account
Values from one Sub-Account to another Sub-Account or to or from the Fixed
Account. (See "Transaction Charges.") Other restrictions apply to transfers and
allocations involving the Fixed Account. (See "Fixed Account Option" and
"Transfers Among Policy Options.")
The Account Value of the Policy will vary daily based on, among other things,
the Net Investment Experience of the Sub-Accounts to which amounts have been
allocated and the amount of interest credited to any of the Account Value in the
Fixed Account. (See "Determination of Account Value" and "Fixed Account
Option.")
A loan privilege is available under the Policy after the "free look" period. The
Policy may be surrendered at any time, subject to a Surrender Charge, and a
withdrawal may be made of a Policy's Cash Surrender Value after the first Policy
Year. (See "Policy Loans" and "Surrender and Withdrawals.") Under certain
circumstances, a transaction charge may be assessed for loans and withdrawals
(See "Transaction Charges.")
Subject to state approval, a Policy continuously in force for 8 Policy Years
will be eligible for monthly Premium Value and Cash Value Bonuses. Premium Value
Bonuses are scheduled to be paid monthly starting in the 9th Policy Year, based
on the amount of premiums paid and not deemed withdrawn or borrowed. The amount
of a Premium Value Bonus credited each month is based on the Insured's premium
rate class, and the Monthly Minimum Premium and Premium Value percentage rate(s)
then in effect. On the date of this prospectus, the Premium Value percentage
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ranges from an annual rate of 11% of the Policy's Monthly Minimum Premium for
Preferred premium rate classes, to an annual rate of 5% for Non-Smoker and
Smoker premium rate classes.
The Cash Value Bonus is also scheduled to be paid monthly starting in the 9th
Policy Year, based on a Policy's then current Cash Accumulation Value and the
Company-determined percentage rate then in effect. On the date of this
prospectus, the Cash Bonus annual rate ranges from 0.15% for a Policy with Cash
Accumulation Value of $100,000 or more at the start of the applicable Policy
Year, to 0.10% for Cash Accumulation Value over $25,000 but under $100,000, to
0% for Cash Accumulation Value of $25,000 or less.
The Company may change the Premium Value Bonus and Cash Value percentage rates
at any time, but guarantees that the Premium Value annual rate will not be less
than 6% for Preferred premium rate classes and 3% for Non-Smoker and Smoker
premium rate classes. Because there is no minimum guaranteed Cash Value
percentage rate, the Company could terminate Cash Value Bonuses at any time. The
Premium Value and Cash Value bonuses will not be paid if the purchaser's state
does not permit them. Prospective purchasers should check with their sales
representatives or call the Company's Variable Service Center to confirm the
availability of the bonuses. (See "Policy Benefits and Values - Premium Value
Bonuses and Cash Value Bonuses.")
Upon the death of the Insured, the Company will pay the Death Benefit Proceeds
to the Beneficiary. (See "Death Benefit.") Death Benefit Proceeds paid to the
Beneficiary under the Policy are generally not subject to federal income tax.
Under current law, undistributed increases in Account Value are not taxable to
the Owner. (See "Federal Tax Status.") The Company may make any change in a
Policy or take any other action in order to comply with applicable state and
federal law, including all tax law requirements for treatment as life insurance.
Payments may be made in a lump sum or in the form of an annuity payout. (See
"Payout Options.")
The Policy is subject to the following charges and deductions:
Premium Load - guaranteed not to exceed 2.5% of each Premium Payment. On the
date of this Prospectus, the Company does not impose this charge. (See "Premium
Load.")
Monthly Deductions - composed of the following:
- - administrative charge - currently $8.50 each Policy Month (guaranteed
maximum of $11.00 per month);
- - policy benefit charge - at an annualized rate of 0.27% of Cash Accumulation
Value,
- - a cost of insurance charge - based on the Insured's attained age, sex,
premium rate class, duration and amount of coverage; and
- - any charges for optional additional benefit riders. (See "Monthly
Deductions.")
Daily Deductions - on the date of this Prospectus, the charge is equal to an
annual rate of 0.50% (guaranteed maximum of 0.90%) of the daily net assets in
each Sub-Account. (See "Daily Deductions.")
Transaction Fees - for certain transfers of Account Value between and among
Policy Options, loans, withdrawals of Cash Surrender Value and upon surrender of
a Policy:
- - Transfers, loans and withdrawals - on the date of this Prospectus, the
Company does not impose a transaction fee, but reserves the right to impose
a transaction fee of $25 for: (a) each transfer in excess of twelve (12)
transfers per Policy Year; (b) any loan; and (c) any withdrawal of Cash
Surrender Value. (See "Transaction Charges.")
- - Additional transaction charge - may be imposed for surrenders made for the
benefit of a third party assignee of the Policy pursuant to section 1035 of
the Code. (See "Surrender Charge.")
- - Surrender Charge - may be assessed during the first 12 Policy Years. The
Surrender Charge varies by stated percentages for each Policy Year during
this period. The maximum Surrender Charge is 125% of 12 Monthly Minimum
Premiums up to a limit, for standard premium rate classes, of $60 per
$1,000 of Face Amount. A new set of Surrender Charges is established for
the 12 year period following an increase in Face Amount.
Fund Expenses- underlying shares of the Portfolios of Variable Investors Series
Trust ("VIST") and Federated Insurance Series ("FIS") are purchased at net asset
value, which reflects investment management fees, other operating expenses and
any expense reimbursement paid by an investment adviser to the applicable
Portfolio. The total annual expenses of the Portfolios as a percentage of
average net assets for the year ended December 31, 1996 were:
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Other Operating
Management Expenses (After Total Annual
Portfolio Fees Reimbursement) Expenses
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VIST Small Cap Growth .85% .50% 1.35%
VIST World Equity .70% .50% 1.20%
VIST Growth .70% .47% 1.17%
VIST Matrix Equity .65% .50% 1.15%
VIST Growth & Income .75% .50% 1.25%
VIST Multiple Strategies .70% .50% 1.20%
VIST High Income Bond .70% .50% 1.20%
VIST U.S. Government Bond .60% .25% .85%
Federated Prime Money Fund II .55% .25% .80%
First Variable Advisory Services Corp., the investment adviser to VIST, has
agreed through April 1, 1997 to reimburse VIST for operating expenses (exclusive
of management fees) in excess of .50% of a VIST Portfolio's average net assets
(.25% in the case of the VIST U.S. Government Bond Portfolio). Had this
investment adviser not reimbursed expenses of the VIST Portfolios, for the year
ended December 31, 1996, the VIST annual expenses, as a percentage of the
Portfolio's average assets, were 2.38% for the Small Cap Growth Portfolio; 1.50%
for the VIST World Equity Portfolio; 1.17% for the VIST Growth Portfolio; 1.48%
for the VIST Matrix Equity Portfolio; 2.63% for the Growth & Income Portfolio;
1.32% for the VIST Multiple Strategies Portfolio; 1.99% for the VIST High Income
Bond Portfolio; and 1.66% for the VIST U.S. Government Bond Portfolio. Federated
Advisors, the investment adviser for FIS has voluntarily agreed to waive any
portion of its fee and/or reimburse certain operating expenses of FIS in excess
of .80% of the FIS Prime Money Fund II Portfolio's average net assets, but can
modify or terminate this voluntary agreement at any time at its sole discretion.
Had this investment adviser not waived expenses and/or reimbursed expenses of
the FIS Prime Money Fund II Portfolio for the year ended December 31, 1996, the
annual expenses, as a percentage of the Portfolio's average assets, were 1.37%.
The management fees and other expenses are more fully described in the
prospectuses for each of the underlying Funds.
THE COMPANY
First Variable Life Insurance Company ("the Company") is a stock life insurance
company which was organized under the laws of the State of Arkansas in 1968. The
Company is principally engaged in the annuity business. The Company is licensed
in 49 states, the District of Columbia and the U.S. Virgin Islands. The Company
is a wholly-owned subsidiary of Irish Life of North America, Inc. ("ILoNA")
which, in turn, is beneficially owned by Irish Life plc ("Irish Life"). ILoNA
also owns Interstate Assurance Company of Des Moines, Iowa and Guarantee Reserve
Life Insurance Company of Calumet City, Illinois. Irish Life was formed in 1939
through a consolidation of a number of Irish and British Life offices
transacting business in Ireland. In terms of assets, Irish Life controls over
50% of the Irish domestic life insurance market. As Ireland's leading
institutional investor, it owns in excess of 10% of the leading Irish publicly
traded stocks. Irish Life, through its international subsidiaries, conducts
business in Ireland, the United Kingdom, the United States, and France. As of
the end of 1996, the Irish Life consolidated group had in excess of $11 billion
in assets. ILoNA is a Delaware corporation, incorporated as Carrig
International, Inc. in 1986.
The Company has an A- (Excellent) rating from A.M. Best, an independent firm
that analyzes insurance carriers. This rating is assigned to companies that have
a strong ability to meet obligations to policy holders over a long period of
time. The Company also has an AA- rating from Standard and Poor's and an AA
rating from Duff & Phelps Credit Rating Co. on claims paying ability. The
financial strength of the Company may be relevant with respect of the Company's
ability to satisfy its obligations under the Policies.
THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Arkansas insurance law on March 6, 1987.
This account has been designated Separate Account VL (the "Separate Account").
The Company has registered the Separate Account with the Securities and Exchange
Commission ("SEC")
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as a unit investment trust pursuant to the provisions of the Investment Company
Act of 1940. Such registration does not involve supervision by the SEC of the
management of the Separate Account or the Company.
The assets of the Separate Account are the property of the Company. However, the
assets of the Separate Account, equal to the reserves and other Policy
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains and losses, whether or not realized, are, in accordance with the Policies,
credited to or charged against the Separate Account without regard to other
income, gains or losses of the Company. The Company's obligations arising under
the Policies are general obligations.
The Separate Account meets the definition of a "separate account" under the
federal securities laws.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one Portfolio of a selected Fund. Owners bear the
complete investment risk for premium payments and Account Value allocated or
transferred to a Sub-Account. Account Values fluctuate in accordance with the
investment performance of the Sub-Account(s) and reflect the imposition of the
charges and deductions assessed under a Policy.
FINANCIAL AND PERFORMANCE INFORMATION
The information presented in Appendix A to this prospectus reflects the
performance of the underlying investments of the Portfolios through , 1997.
POLICY OPTIONS
Owners of a Policy may allocate premium payments and Account Value to one or
more Sub-Accounts of the Separate Account and to the Fixed Account. Each
Sub-Account invests exclusively in a Portfolio of a selected Fund. A brief
summary of the Funds and the investment objectives of the currently available
Portfolios is set forth below. More comprehensive information, including a
discussion of potential risks, is found in the current prospectuses for the
Funds, which are included with this prospectus. The prospectuses for the Funds
may describe other portfolios that are not available under a Policy. THERE IS NO
ASSURANCE THAT THE AVAILABLE PORTFOLIOS WILL ACHIEVE THEIR STATED OBJECTIVES.
Investors should read this prospectus and the prospectuses for the Funds
carefully before investing.
VARIABLE INVESTORS SERIES TRUST
Variable Investors Series Trust ("VIST") is an open-end management investment
company that was formed as a series trust to provide funding options for
variable life insurance and variable annuity policies. Effective April 1, 1994,
VIST retained First Variable Advisory Services Corp. ("FVAS") to manage its
assets. FVAS is a wholly-owned subsidiary of the Company and retains the
services of sub-advisers under agreements to manage the assets of the VIST
Portfolios. The sub-advisers for the VIST Portfolios currently available under a
Policy are: Pilgrim Baxter & Associates, Ltd. with respect to VIST Small Cap
Growth Portfolio; Value Line, Inc. with respect to VIST Growth and VIST Multiple
Strategies Portfolios; State Street Bank and Trust Company with respect to VIST
Matrix Equity Portfolio; Warburg, Pincus Counsellors, Inc. with respect to VIST
Growth & Income Portfolio; Keystone Investment Management Company with respect
to VIST World Equity Portfolio; Federated Investment Counseling with respect to
VIST High Income Bond Portfolio; and Strong Capital Management, Inc.
with respect to VIST U.S. Government Bond Portfolio.
Each Portfolio has a distinct investment objective and policy. The investment
objectives of the Portfolios available under a Policy are:
VIST Small Cap Growth. The investment objective of this Portfolio is to seek
capital appreciation. The Portfolio will invest, under normal conditions, at
least 65% of its total assets in securities of companies with small
capitalization (market capitalization or annual revenues under $1 billion at the
time of purchase).
VIST World Equity. The investment objective of this Portfolio is to maximize
long-term total return by investing primarily in common stocks, and securities
convertible into common stocks, traded in securities markets located in
countries around the world, including the United States. See "Foreign
Investments" under "Policies and Techniques
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Applicable to all Portfolios" in the VIST prospectus for a discussion of the
risks involved in investing in foreign securities.
VIST Growth. The investment objective of this Portfolio is capital growth, which
it seeks to achieve through a policy of investing primarily in a diversified
portfolio of common stocks and securities convertible into or exchangeable for
common stock. The secondary objective is current income, when consistent with
its primary objective.
VIST Matrix Equity. The investment objective of this Portfolio is capital
appreciation and current income. The Portfolio will seek to achieve its
investment objective by investing in a diversified portfolio that is selected by
the Sub-Adviser on the basis of its proprietary analytical model. Sector weights
are normally maintained at a similar level to that of the S&P 500 Index. The
Portfolio will invest at least 65% of its total assets in equity securities.
VIST Growth & Income. The investment objectives of this Portfolio are to provide
current income and growth of capital. The Portfolio seeks to achieve its
objectives by investing in equity securities, fixed income securities and money
market instruments. The portion of the Portfolio invested at any given time in
each of these asset classes will vary depending on market conditions, and there
may be extended periods when the Portfolio is primarily invested in one of them.
In addition, the amount of income derived from the Portfolio will fluctuate
depending on the composition of the Portfolio's holdings and will tend to be
lower when a higher portion of the Portfolio is invested in equity securities.
The Portfolio may also purchase without limitation dollar-denominated American
Depository Receipts ("ADRs"). ADRs are issued by domestic banks and evidence
ownership of underlying foreign securities.
VIST Multiple Strategies. The investment objective of this Portfolio is to seek
as high a level of total return over an extended period of time as is considered
consistent with prudent investment risk by investing in equity securities,
bonds, and money market instruments in varying proportions.
VIST High Income Bond. The investment objective of this Portfolio is to obtain
as high a level of current income as is believed to be consistent with prudent
investment management. As a secondary objective, the Portfolio seeks capital
appreciation when consistent with its primary objective. The Portfolio seeks to
achieve its investment objectives by investing primarily in fixed income
securities rated lower than A. Many of the high yield securities in which the
Portfolio may invest are commonly referred to as "junk bonds." For special risks
involved with investing in such securities (including among others, risk of
default and illiquidity) see "Investment Objectives and Policies of the
Portfolios -- High Income Bond Portfolio" in the VIST prospectus.
VIST U.S. Government Bond. The investment objective of this Portfolio is
primarily in securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies, authorities, or instrumentalities.
FEDERATED INSURANCE SERIES
Federated Insurance Series ("FIS") is an open-end investment management company
that was formed as a series trust to provide funding options for variable life
insurance and variable annuity policies. Pursuant to an investment advisory
policy, investment decisions for FIS are made by Federated Advisers, an
affiliate of Federated Investment Counseling. Federated Securities Corp. is the
principal distributor for shares of FIS Prime Money Fund Portfolio.
FIS Prime Money Fund II. The investment objective of the Portfolio is to provide
current income consistent with stability of principal and liquidity. The
Portfolio pursues its investment objective by investing exclusively in money
market instruments maturing in 397 days or less. An investment in the FIS Prime
Money Fund II Portfolio is neither insured nor guaranteed by the U.S.
Government.
FIXED ACCOUNT OPTION
This prospectus is generally intended to describe the Policy and Separate
Account. Because of certain exemptive and exclusionary provisions, interests in
the Fixed Account are not registered under the Securities Act of 1933 and the
Fixed Account is not registered as an investment company under the Investment
Company Act of 1940. Accordingly, neither the Fixed Account nor any interests
therein are generally subject to the provisions of these Acts, and the Company
has been advised that the staff of the SEC has not reviewed the disclosures in
the prospectus relating to the Fixed Account.
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The Company guarantees that it will credit interest to Account Values in the
Fixed Account at a minimum rate of 4% per year. Additional amounts of "current"
interest may be credited by the Company in its sole discretion. New premium
payments and transfers from the Separate Account or Loan Account to the Fixed
Account may each receive different current interest rate(s) than the current
interest rate(s) credited to Account Value existing in the Fixed Account. The
Company determines current interest rates in advance, and credits interest daily
to Fixed Account value.
TRANSFERS AMONG POLICY OPTIONS
General Requirements. An Owner may transfer Account Value among Policy Options
by written request or telephone authorization. The minimum amount which may be
transferred is the lesser of (a) $100; or (b) the Owner's entire interest in the
applicable Sub-Account or Fixed Account. A written request to transfer Account
Value, or to reallocate future premium payments should be sent or telecopied to
the Variable Service Center. To request a transfer or reallocation by telephone,
the Owner should contact his or her sales representative or contact the Variable
Service Center at 1-800-845-0689. Requests for transfers or reallocations by
telephone will be automatically permitted. The Company will use reasonable
procedures such as requiring certain identifying information from the caller,
tape recording the telephone instructions, and providing written confirmation of
the transaction, in order to confirm that instructions communicated by telephone
are genuine. Any telephone instructions reasonably believed by the Company to be
genuine will be the Owner's responsibility, including losses arising from any
errors in the communication of instructions. As a result of this, the Owner will
bear the risk of loss. If the Company does not employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, the Company may
be liable for any losses due to dishonored or fraudulent instructions.
(See "Telephone Transactions.")
Any transfer instruction must clearly specify the amount which is to be
transferred and the Policy Options which are to be affected. All Sub-Account
transfer requests made at the same time will be treated as a single request. The
transfer will be effective as of the end of the Valuation Period in which the
Company receives the transfer request at its Variable Service Center.
Unless otherwise permitted by the Company, Account Value to be transferred from
the Fixed Account to other Policy Options in any Policy Year may not exceed:
- - for transfers during the first Policy Year, 50% of the Fixed Account Value
on the Policy Date; and
- - for transfers after the first Policy Year, the greater of 50% of the Fixed
Account Value on the immediately preceding Policy Anniversary or 100% of
the Fixed Account Value transferred to other Policy Options during the
immediately preceding Policy Year.
A transaction fee may be imposed if the Owner makes more than 12 "free"
transfers in a Policy Year. The Company may from time to time increase the
permitted number of free transfers. (See "Charges and Deductions.")
The Company reserves the right at any time and without prior notice to any party
to modify, suspend or terminate the transfer privileges including, but not
limited to, the description in "Suspension of Payments and Transfers."
Systematic Transfers - Dollar Cost Averaging. The Company permits systematic
transfers, such as dollar cost averaging, that an Owner may elect by written
request to the Company at its Variable Service Center. Through systematic
transfers, designated amounts are transferred each month (or other permitted
period) from a selected Policy Option to other pre-selected Policy Options. The
dollar cost averaging program permits transfers from the Prime Money Fund II
Sub-Account or the Fixed Account to other Sub-Account(s) on a regularly
scheduled basis. Through use of systematic transfers, instead of transfers of
the total Account Value at one particular time, an Owner may be less susceptible
to the impact of market fluctuations. Systematic transfers prevent investing too
much when the price of shares is high and too little when the price of shares is
low. However, since systematic transfers, such as dollar cost averaging, involve
continuous investment regardless of fluctuating price levels, the purchaser
should consider his ability to continue purchases through periods of low price
levels. The minimum amount which may be transferred at any time is $100.
Transfers from the Fixed Account are also subject to the restrictions described
above in General Requirements, except that 100% of amounts in the Fixed Account
may be systematically transferred within one year if transfers are made monthly.
Systematic transfers under the dollar cost averaging program are not subject to
the transaction fee on transfers, and are not taken into account for purposes of
determining the number of "free" transfers
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within a year. The Company does not currently charge for enrolling in the dollar
cost averaging program, but reserves the right to do so. (See "Special Service
Fees.")
All systematic transfers are made on the same day of each month, quarter, 6
months or year (or the next Business Day if the same day of the selected period
is not a Business Day.)
Asset Rebalancing Program. The Company administers an asset rebalancing program
that an Owner may elect by written request to the Company at its Variable
Service Center. The asset rebalancing program enables the Owner to indicate to
the Company the percentage levels of Account Value he or she would like to
maintain in particular Sub-Accounts. On the last Business Day of each
pre-selected period, the Account Value will be automatically rebalanced to
maintain the indicated percentages by transfers among the Separate Account
Policy Options. The Owner may select from among the following periods, or any
other period acceptable to the Company: Policy Quarter, every second Policy
Quarter, or every Policy Anniversary. All Account Value allocated to the
Separate Account Policy Options must be included in the asset rebalancing
program. Other investment programs, such as systematic transfers and systematic
withdrawals, or other transfers or withdrawals may not work in concert with the
asset rebalancing program. Therefore, Owners should monitor their use of these
programs and other transfers or withdrawals while the asset rebalancing program
is being used. Asset rebalancing involving transfers from the Fixed Account are
subject to the restrictions described above in General Requirements. Unlike a
systematic transfer program, all transfers under the asset rebalancing program
will be taken into account for purposes of determining "free" transfers and
transaction fees. (See "Transaction Charges.") The Company does not currently
charge for enrolling in the asset rebalancing program, but reserves the right to
do so. (See "Special Service Fees.")
Restrictions on Transfers. Programmed or other frequent requests to transfer
among Policy Options by, or on behalf of, an Owner may have a detrimental effect
on the Fund share values held in the Separate Account. The Company may therefore
limit the number of permitted transfers in any Policy Year, or refuse to honor
any transfer request for an Owner or a group of Owners if it is informed that
the purchase or redemption of shares of one or more of the Portfolios is to be
restricted because of excessive trading, or if a specific transfer or group of
transfers is deemed to have a detrimental effect on AUV or Portfolio share
prices.
The Company may also at any time suspend or cancel its acceptance of third party
authorizations on behalf of an Owner; or restrict the Policy Options that will
be available for such transfers. Notice will be provided to the third party in
advance of the restrictions. The restrictions will not be imposed, however, if
the Company is given satisfactory evidence that: (a) the third party has been
appointed by the Owner to act on the Owner's behalf for all financial affairs;
or (b) the third party has been appointed by a court of competent jurisdiction
to act on the Owner's behalf.
Automatic Transfers of Small Accounts. The Company reserves the right, subject
to any applicable law, to transfer Account Value from any Policy Option if less
than $100, to the Policy Option with the highest Account Value.
CHANGES IN POLICY OPTIONS
New Sub-Accounts may be established and additional portfolios or mutual funds
may be made available by the Company when, in its sole discretion, it determines
that conditions so warrant. Any new Sub-Accounts may be made available to
existing Owners on a basis to be determined by the Company. Each additional
Sub-Account will invest in another portfolio of a Fund, or in another mutual
fund or in other investments.
The Company does not guarantee that continued purchase of Portfolio shares will
remain appropriate in view of the purposes of the Separate Account. If shares of
a Portfolio are no longer available for investment by the Separate Account or
if, in the judgment of the Company, further investment in the shares should
become inappropriate in view of the purpose of the Policies, the Company may
substitute shares of another portfolio, or mutual fund for shares already
purchased or to be purchased in the future. The Company also may, in its
discretion, remove Portfolios for transfers or new investments. No substitution
of securities may take place without prior approval of the SEC, to the extent
required, and under the requirements it may impose.
MIXED AND SHARED FUNDING
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Shares of VIST and FIS Prime Money Fund II are sold to the Company for
allocation to the Separate Account in connection with the Policies, and for
allocation to other separate accounts funding variable annuity policies and
other variable life insurance Policies issued, or to be issued, by the Company.
Shares of VIST and FIS Prime Money Fund II may also be sold to other insurance
companies, either affiliated or unaffiliated with the Company, for the same
purpose. It is conceivable that, in the future, it may be disadvantageous for
variable life insurance separate accounts and variable annuity separate accounts
to invest in one or more of the VIST Portfolios or FIS Prime Money Fund II
simultaneously if the interests of variable life insurance and variable annuity
policy owners differ. The boards of trustees of VIST and FIS Prime Money Fund II
and the participating insurance companies intend to monitor events to identify
any material irreconcilable conflicts which may arise and to determine what
action, if any, should be taken in response.
CHARGES AND DEDUCTIONS
PREMIUM LOAD
The Premium Load is a deduction that the Policy gives the Company the right to
make from each premium payment. After deduction, the Net Premium is allocated to
the Policy Options selected by an Owner. On the date of this Prospectus, no
Premium Load is being deducted by the Company. The Company guarantees that any
Premium Load deducted under any Policy will not exceed 2.5% of each premium
paid.
MONTHLY DEDUCTIONS
Various Monthly Deductions are made from the Account Value and the Separate
Account. On the first day of each Policy Month, the Company will deduct an
amount to cover charges and deductions incurred in connection with the Policy.
The Monthly Deduction will be deducted by subtracting values from the Fixed
Account and/or canceling Accumulation Units from each applicable Sub-Account.
The deductions will be in the ratio that the value of each Policy Option bears
to the Cash Accumulation Value, or by any other method selected by the Owner and
acceptable to the Company. The amount of the monthly deduction will vary from
month to month. The Policy may lapse if the Cash Surrender Value is not
sufficient to cover the monthly deduction which is due. (See "Lapse and
Reinstatement.")
The Monthly Deductions are comprised of the following charges:
Administrative Charge. A monthly administrative charge is deducted each Policy
Month. The charge is currently $8.50 per Policy Month, and is guaranteed by the
Company not to exceed $11.00 per Policy Month.
Cost of Insurance. The Company will make a monthly deduction for the cost of
providing life insurance coverage for the Insured. The Cost of Insurance Charge
for any Policy Month is determined by: (a) subtracting the Account Value from
the Death Benefit; (b) dividing the net amount by 1.003273739; and (c)
multiplying the results by the current cost of insurance rate divided by 1,000.
The cost of insurance rate is based on the insured's Age, Policy Year, sex and
premium rate class. This charge is guaranteed not to exceed the maximum cost of
insurance charge determined on the basis of the mortality table guaranteed in
the Policy, calculated, for standard issues, using the 1980 Commissioner's
Standard Ordinary Mortality tables, Age Last Birthday ("1980 CSO"). The maximum
cost of insurance charge for substandard issues are based on multiples or
additives to the guaranteed standard rates established by the 1980 CSO. These
mortality tables are sex distinct and separate mortality tables may be used for
different premium rate classes.
The Company currently is charging cost of insurance rates that are lower,
although it can at any time raise them to not more than the above-described
guaranteed maximums.
In general, the cost of insurance rates increase with the Insured's age.
Therefore, the longer a Policy is owned, the higher the cost of insurance rate
will be. Also, the cost of insurance rates will generally be lower if the
Insured is a female than if a male. Similarly, current cost of insurance rates
are lower for non-smokers than smokers, and lower for persons that have other
highly favorable health characteristics, as compared to those that do not. On
the other hand, insured persons who present particular health, occupational or
avocational risks may be charged higher cost of insurance rates and other
additional charges based on the Face Amount of their Policies.
The monthly cost of insurance rates for an increase in Face Amount will be based
on the Age and premium rate class of the insured at the time of the increase.
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Other Charges. The Company will make an additional monthly charge for the
benefits it expects to provide under the Policies. This charge is computed as a
percentage of the Policy's Cash Accumulation Value on the monthly deduction day.
The charge is made of a rate that is equal, on an annual basis, to 0.27%.
The Company will also make a monthly deduction for the cost of optional
additional benefit riders added to the Policy. See "Optional Additional Benefit
Riders."
DAILY DEDUCTIONS
Each Business Day, the Company will deduct a mortality and expense risk charge
which is equal to a percentage of the net assets in each Sub-Account of the
Separate Account for this class of Policy. The mortality and expense risk charge
is currently equal to 0.50% (which the Company guarantees will not be increased
to more than 0.90%), on an annual basis, of the daily net assets in each
Sub-Account.
TRANSACTION CHARGES
On the date of this Prospectus, the Company does not impose a transaction charge
on transfers, withdrawals or loans. The Company reserves the right, however, to
assess a $25 transaction charge for:
- - each transfer of Account Value in excess of the number of permitted "free"
transfers (See "Transfers Among Policy Options");
- - a withdrawal of Cash Surrender Value (See "Surrender and Withdrawals");
- - and any loan using the Policy as security (See "Policy Loans").
Transaction charges will be deducted pro-rata from Account Value in each Policy
Option prior to the transaction, or by any other method selected by the Owner
and approved by the Company in advance of the transaction. If the entire
interest in a Sub-Account or the Fixed Account is being transferred, the
pro-rata portion of any applicable transaction fee will be deducted from the
amount which is transferred. Transfers under a systematic transfer program, such
as the dollar cost averaging program providing for the automatic transfer of
funds from the Prime Money Fund II Sub-Account or Fixed Account, are not taken
into account in determining any transfer fee. (See "Systematic Transfers -
Dollar Cost Averaging.")
Additional transaction charges, guaranteed not to exceed $250, may be imposed
for surrenders made for the benefit of a third party assignee of the Policy
pursuant to section 1035 of the Internal Revenue Code.
SURRENDER CHARGE
A surrender charge may be assessed if a Policy is surrendered during the first
12 Policy Years. (See "Surrender and Withdrawals.") A new set of surrender
charges will be established for the 12 year period following a permitted
increase in Face Amount. The additional surrender charge will be computed as if
the Face Amount increase were being issued in the form of a new Policy, based on
the insured person's age and other risk characteristics at the time of the
increase. (See "Death Benefit - Change in Death Benefit Options and Face
Amount.")
Surrender Charge Percentage. For each Policy Year, the maximum surrender charge
applicable to the initial Face Amount is multiplied by the surrender charge
percentage shown below. The result is then applied if a full surrender is made
at any time during that Policy Year:
-----------------------------------------------------------------------
Surrender Surrender
Policy Year Charge % Policy Year Charge %
-----------------------------------------------------------------------
1 50% 8 50%
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2 100% 9 40%
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3 100% 10 30%
-----------------------------------------------------------------------
4 100% 11 20%
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5 100% 12 10%
-----------------------------------------------------------------------
6 80% 13+ 0%
-----------------------------------------------------------------------
7 60%
------------------------------------
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Maximum Surrender Charge. The maximum surrender charge is 125% of one year's
Monthly Minimum Premium, but not more than $60.00 per $1,000 of Face Amount for
standard premium rate classes. This per $1,000 limit will not apply if an
Insured is in a substandard premium rate class. (See "Premiums - Monthly Minimum
Premium.") The dollar amount of the maximum surrender charge on the Policy Date
is stated in the Policy. No surrender charge is imposed upon a partial decrease
in Face Amount, but the full surrender charge will remain in effect for a
subsequent surrender.
FUND EXPENSES
Underlying shares of the Portfolios of Variable Investors Series Trust ("VIST")
and Federated Insurance Series ("FIS") are purchased at net asset value, which
reflects investment management fees, other operating expenses and any expense
reimbursement paid by an investment adviser to the applicable Portfolio. (See
"Highlights.")
OTHER CHARGES AND DEDUCTIONS
Income Taxes. While the Company is not currently reducing Account Value for
federal income taxes of the Separate Account, it reserves the right to do so if
it determines, in its sole discretion, that it will incur a tax as a result of
the operation of the Separate Account. The Company will make deductions for any
income taxes incurred by it as a result of the operation of the Separate Account
whether or not there was a Company reserve for taxes and whether or not it was
sufficient.
Special Service Fees. The Company may charge Owners for special services, such
as additional reports, dollar cost averaging, and asset rebalancing. As of the
date of this prospectus, it does not charge for these special services.
Elimination, Reduction or Refund of Charges and Deductions; Increases in
Bonuses. The charges and deductions on a Policy may be eliminated, reduced or
refunded, in whole or in part, when sales of Policies are made to individuals or
to group and sponsored arrangements in a manner that results in expected savings
of sales, administration or other expenses, or in a reduction in the level of
risks the Company expects to assume under the Policies. (Such groups are
described under "Group and Sponsored Arrangements" below.) Any such adjustment
to charges and deductions will be determined by the Company after examination of
relevant factors such as:
- - the size and type of group to which sales are to be made, because expenses
for a larger group are generally less than for a smaller group since large
numbers of Policies may be implemented and administered;
- - the total amount of premium payments to be received, because certain
expenses are likely to be less on larger premium payments than on smaller
ones;
- - any prior or existing relationship with the Company, because of the
likelihood of implementing the Policy with fewer contacts;
- - other circumstances, of which the Company is not presently aware, which
could result in reduced expenses; and
- - after a Contract is issued, in the event anticipated expenses for later
Policy Years are anticipated to be less than initially projected.
Charges and deductions may also be eliminated, reduced or refunded when a Policy
is issued to an officer, director, employee or agent of the Company or any of
its affiliates. No adjustment in charges and deductions is guaranteed by the
Company, and any adjustment may vary by group. Based on the same considerations
as discussed above, the Company may also credit higher Policy bonuses to members
of selected groups then would otherwise be payable. (See "Premium Value and Cash
Value Bonuses.")
All adjustments will be made under the Company's uniform administrative rules
then in effect, and in no event will adjustments to charges, deductions or
Policy bonuses be permitted if the adjustment would be unfairly discriminatory
to any person.
Group and Sponsored Arrangements. Group arrangements include those in which a
trustee, employer, an association or similar entity purchases individual
Policies covering a group of individuals on a group basis. An example of such an
arrangement is a non-tax qualified deferred compensation plan. Sponsored
arrangements include those in which an employer, an association or similar
entity permits the Company to offer Policies to its employees or members on an
individual basis.
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The United States Supreme Court has held that certain insurance contracts
providing values and benefits that vary with the sex of the insured may not be
used to fund certain employee benefit programs. Therefore, the Company may offer
Policies for use in connection with certain employee benefit programs where the
Policy does not vary with the sex of the Insured. The Company recommends that
any employer proposing to offer the Policies to employees under a group or
sponsored arrangement consult its attorney before doing so.
PURPOSE OF POLICY CHARGES
The charges under the Policies are designed to cover, in the aggregate, the
Company's direct and indirect costs of selling, administering and providing
benefits under the Policies. They are also designed, in the aggregate, to
compensate the Company for the risks it assumes pursuant to the Policies. These
include mortality risks (such as the risk that insured persons will, on average,
die before the Company expects, thereby increasing the amount of claims the
Company must pay); investment risks (such as the risk that adverse investment
performance will make it more costly to provide the Guaranteed Death Benefit
under the Policies or reduce the amount of the Company's asset-based fee
revenues below what the Company anticipates); sales risks (such as the risk that
the number of Policies sold and the premiums received (net of withdrawals) are
less than the Company expects thereby depriving the Company of expected
economies of scale); regulatory risks (such as the risk that tax or other
regulations may be changed in ways adverse to issuers of variable life insurance
policies); and expense risks (such as the risk that the costs of administrative
services that the Company must provide will exceed what the Company currently
projects).
If, as expected, the charges that the Company collects from the Policies exceed
its total costs in connection with the Policies, the Company will earn a profit.
Otherwise it will incur a loss. The current and maximum rates of certain of the
Company's charges have been set with reference to estimates of the amount of
specific types of expenses or risks that the Company will incur. In some cases,
this prospectus identifies such expenses or risks in the name of the charge:
e.g., the administrative charge, cost of insurance charge, and mortality and
expense risk charge. However, the fact that any charge bears the name of a
particular expense or risk does not mean that the amount the Company collects
from that charge will never be more than the amount of such expense or risk, or
that the Company may not also be compensated for such expense or risk out of any
other charges the Company is permitted to deduct by the terms of the Policies.
THE POLICY
APPLICATION AND ISSUANCE OF A POLICY
An application must be submitted to the Company at its Variable Service Center
by anyone wishing to purchase a Policy. The applicant selects:
- - A Face Amount for a minimum of $25,000 on a proposed Insured up to Age 80,
or a Face Amount between $100,000 and $500,000 on a proposed Insured
between Ages 81 - 85, and a Death Benefit Option on the life of a proposed
Insured (see "Death Benefit");
- - The amount of planned premium that is intended to be paid (see "Premiums");
and
- - The way that Net Premiums will be allocated to the Sub-Account(s) and/or
the Fixed Account (see "Allocation of Premiums").
The Company generally will not issue Policies to insure persons older than Age
85. The Company will review an application under its underwriting rules, and may
request additional information or reject an application. If the Company declines
an application, it will refund any premium payment made. If a Policy is issued,
Monthly Deductions will begin as of the Policy Date, even if the Policy's
issuance was delayed due to underwriting requirements.
If a premium payment is made with the application, the Policy Date generally
will be the date the Company approves the application. If the premium is paid
upon delivery of the Policy, the Policy will have a Policy Date which is
generally five days after issue.
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Under limited circumstances, the Company may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed. Even
though Monthly Deductions begin earlier, backdating may be desirable, for
example so that the cost of insurance rate is lower, based on a lower Age of the
Insured.
Free Look Right. An Owner has the right to review a Policy during an initial
inspection period specified in the Policy and, if dissatisfied, to return it to
the Company or to the agent through whom it was purchased. When the Policy is
returned to the Company during the permitted period, it will be voided as if it
had never been in force. The Company will ordinarily refund the Account Value,
Premium Load, and any Monthly Deductions (which may be greater or less than the
premium payments received) on a Policy returned during the permitted period,
unless a different amount is required by state law. The "free look" period is
typically 10 days, and may be greater depending on state requirements.
PREMIUMS
The Policy is designed for the flexible payment of premiums. The amount of
premiums paid and the time between payments may vary, as long as the Account
Value is greater than the next Monthly Deductions. The minimum amount required
on the Policy Date, as shown in the Policy, will be at least equal to 2 times
the Monthly Minimum Premium. The Owner may also elect to pay: planned premiums;
Monthly Minimum Premiums; and/or additional premiums, subject to the limitations
described below.
Planned Premiums. The Owner may elect, within limits specified by the Company,
to pay premium on a pre-determined schedule. The Company will provide periodic
reminder notices. Failure to make a payment will not necessarily result in lapse
of a Policy, provided the Account Value is sufficient to cover the Monthly
Deductions. Although planned premium payments will not necessarily assure that a
Policy will remain in force (see "Lapse and Reinstatement"), the amounts paid
will generally provide greater benefits than if a lower amount of premium is
paid. Paying planned premiums can also help assure that coverage remains in
force if they are greater than or equal to the Monthly Minimum Premium.
The Owner may arrange to pay planned premiums by pre-authorized automatic
deductions from accounts maintained at other financial institutions, and may
request to change the amount of planned premiums by submitting a written request
to the Variable Service Center.
Monthly Minimum Premium. The Monthly Minimum Premium is shown in the Policy and
varies by issue age, sex, Death Benefit amount (including optional additional
benefit riders), and premium rate class of the Insured. It will be increased if
the Face Amount is increased, or other benefits added, during the Death Benefit
Guarantee Period.
A Policy is guaranteed to stay in force during the Death Benefit Guarantee
period if, as of the first Business Day of each Policy Month, the cumulative
amount of premiums paid, less the sum of any outstanding Policy loans (including
accrued interest) and cumulative withdrawals, at least equals the Monthly
Minimum Premium times the number of elapsed Policy Months. The length of the
Death Benefit guarantee period ranges from 2 to 12 years, depending on the
Insured's Age on the Policy Date (the "issue age"):
Issue Age Guaranteed Death Benefit Period
--------- -------------------------------
0 - 53 12 Policy Years
54 - 59 To Age 65
60 - 70 5 Policy Years
71 and over Later of Age 75 or 2 Policy Years
At the time of application, the Owner may elect to purchase additional
Guaranteed Death Benefit protection. (See "Optional Additional Benefit Riders -
Extended Guaranteed Death Benefit Riders.")
Additional Premiums. The Owner may pay additional premiums during the lifetime
of the Insured at any time, subject to the premium limitations described below.
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Grace Period. If sufficient Monthly Minimum Premiums are not paid during the
Death Benefit Guarantee Period, the Policy will enter a grace period on the
first Business Day of any Policy Month where the Cash Surrender Value is not
sufficient to cover the current Monthly Deduction and accrued interest on any
Policy Loans. After the Death Benefit Guarantee Period, the Policy will enter a
grace period on the first Business Day of any Policy Month where the Cash
Surrender Value is not sufficient to cover the current Monthly Deduction and
accrued interest on Policy loans.
A grace period of 61 days from the applicable Business Day will be allowed for
the payment of a minimum required premium. The Company will send a grace period
notice to the Owner's last known address which will show the minimum required
premium for the grace period. This is the amount necessary to cover the Monthly
Deduction(s) due under the Policy plus an amount equal to three times the
current Monthly Deduction. If the minimum required premium is not paid by the
end of the grace period, the Policy will end without value. If the Insured dies
during the grace period, the Company will pay the Death Benefit Proceeds.
PREMIUM LIMITATIONS
The Company will refuse any premium payment that may cause this Policy no longer
to be treated as life insurance for tax purposes. The Company reserves the right
to require satisfactory evidence of insurability before accepting any premium
payment that would increase the then current Death Benefit under a Policy. The
Company may require that any Indebtedness be repaid prior to accepting any
premium payments.
Payment of premiums in excess of certain amounts may cause a Policy to be
classified as a "modified endowment contract" for federal income tax purposes.
(See "Federal Tax Status.")
ALLOCATION OF PREMIUMS
Net Premium payments are allocated to the appropriate Sub-Account(s) within the
Separate Account that invest in the selected Portfolio(s), or to the Fixed
Account, in accordance with an Owner's instructions. For each Sub-Account, Net
Premium payments are converted to Accumulation Units. The number of Accumulation
Units credited to a Policy is determined by dividing the amount allocated to the
Sub-Account by the value of the applicable Accumulation Unit next determined
after receipt of a premium payment. Calculations of Accumulation Unit Value for
each Sub-Account are made as of the end of each Business Day. Net Premium
payments allocated to the Fixed Account are credited in dollars.
Net Premium payments are generally allocated to the Sub-Accounts or the Fixed
Account as of the later of the Policy Date or the date the premium is received.
Delayed Investment Start Date. Net Premium payments are allocated to the
Sub-Accounts or to the Fixed Account as selected by the Owner. On the date of
this prospectus, the Company does not delay investment start dates and will
allocate Net Premium payments to the selected Policy Options upon issuance of a
Policy. The Company reserves the right, however, to allocate Net Premium
payments to the Prime Money Fund II Sub-Account for an investment delay period
before they will be invested (together with any investment gain) in any other
Policy Option(s) designated by the Owner. If the Company elects to delay such
initial investments in the Policy Options, the delay would apply where a Policy
is issued subject to a requirement that Net Premium payments be refunded upon
the exercise of a "free look" right. Allocation to the Policy Option(s)
designated by the Owner would be made at the end of the "free look" period. The
investment delay period would be measured from the date a Policy is issued from
the Variable Service Center and would include up to 5 extra days in addition to
the applicable "free look" inspection period to provide time for mail or other
delivery of the Policy to the Owner.
Should the Company elect to delay investment start dates, it will so advise
prospective investors in a Policy.
TELEPHONE TRANSACTIONS
An Owner may initiate various transactions by telephone. The Variable Service
Center (1-800-845-0689) is available for telephone transfers of Account Value,
notification of change of address, change of premium allocations among Policy
Options, partial withdrawal requests, policy loans and systematic withdrawals.
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The Company's automated information line (1-800-59-FUNDS) is available for
current information on Accumulation Unit Values, current Account Value, and for
telephone transfers of Account Value.
If there are joint owners of a Policy, unless the Company is informed to the
contrary, instructions will be accepted from either one of the joint owners.
Requests for transfers or reallocations by telephone will be automatically
permitted. The Company will use reasonable procedures such as requiring certain
identifying information from the caller, tape recording the telephone
instructions, and providing written confirmation of the transaction, in order to
confirm that instructions communicated by telephone are genuine. Any telephone
instructions reasonably believed by the Company to be genuine will be the
Owner's responsibility, including losses arising from any errors in the
communication of instructions. As a result of this, the Owner will bear the risk
of loss. If the Company does not employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, the Company may be liable
for any losses due to dishonored or fraudulent instructions.
POLICY BENEFITS AND VALUES
DEATH BENEFIT
As long as the Policy remains in force, a Death Benefit is payable upon the
death of the Insured. Upon receipt of proof of death of the Insured and any
applicable election for payment of the Death Benefit, the Company will pay the
Death Benefit Proceeds to the Beneficiary. While the Insured is living, the
Owner may elect for the Death Benefit Proceeds to be paid in a single sum or
under a Payout Option. If no election is in effect at the death of the Insured,
the Beneficiary may make the election during a 60 day period following the
Company's receipt of proof of death. The amount of the Death Benefit is based on
values as of the date of death. The Death Benefit amount is based on the Death
Benefit Option in effect on the date of the Insured's death and any increases or
decreases to the Face Amount.
Death Benefit Option A. Under this option, the Death Benefit is the greater of:
(a) the Face Amount or (b) the Account Value times the applicable percentage of
Death Benefit factors from the table below.
Death Benefit Option B. Under this option, the Death Benefit is the greater of:
(a) the Face Amount plus the Account Value or (b) the Account Value times the
applicable percentage of Death Benefit factors from the table below.
Applicable Percentage of Death Benefit Factors.
Percentage Percentage Percentage
Attained of Account Attained of Account Attained of Account
Age Value Age Value Age Value
35 250 57 142 79 105
36 250 58 138 80 105
37 250 59 134 81 105
38 250 60 130 82 105
39 250 61 128 83 105
40 250 62 126 84 105
41 243 63 124 85 105
42 236 64 122 86 105
43 229 65 120 87 105
44 222 66 119 88 105
45 215 67 118 89 105
46 209 68 117 90 105
47 203 69 116 91 104
48 197 70 115 92 103
49 191 71 113 93 102
50 185 72 111 94 101
51 178 73 109 95 100
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52 171 74 107
53 164 75 105
54 157 76 105
55 150 77 105
56 146 78 105
Change in Death Benefit Options and Face Amount. The Owner may make written
request to the Variable Service Center not more than once each Policy Year
during the Insured's lifetime to change the Death Benefit Option. A change from
Death Benefit Option B to Death Benefit Option A will cause the Face Amount to
be increased by the amount of the Account Value. A change from Death Benefit
Option A to Death Benefit Option B will cause the Face Amount to decrease by the
amount of the Account Value.
The Owner may request to increase or decrease the Face Amount by making written
request to the Variable Service Center during the Insured's lifetime. No
decrease in the Face Amount may be requested, however, during the first Policy
Year.
The Company may require evidence of insurability for a change that would
increase the Face Amount. The Company may restrict any requested increases in
Face Amount to minimums and maximums that vary with the Insured's Age and
premium rate class. If the Face Amount is increased during any Death Benefit
Guarantee period, the Monthly Minimum Premium will usually be increased. (See
"Premiums.") The increase in Monthly Minimum Premium begins when the increase in
Face Amount begins, and applies for the remainder of the applicable Death
Benefit Guarantee Period. The increase in Monthly Minimum Premium is based on
the Insured's attained age, sex, additional Face Amount and premium rate class.
The surrender charge and applicable surrender charge period will also increase
as a result of an increase in Face Amount, other than an increase due solely to
a change in Death Benefit Option. (See "Surrender Charge.")
Any reduction will be in the following order:
(a) against the most recent increase in insurance;
(b) against the next most recent increases;
(c) against the initial Face Amount.
The Company may deny any request to reduce the Face Amount if:
(a) the Death Benefit would be reduced below that required to qualify
the Policy as life insurance; or
(b) the Death Benefit would be reduced below a minimum Face Amount shown in
the Policy.
A change in Death Benefit Option or Face Amount will take effect on the first
Business Day of the Policy Month coinciding with or next following the date the
Company approves the request. For a discussion of possible tax consequences of
changing insurance coverage under a Policy, see "Federal Tax Status."
Adjustments to the Death Benefit Proceeds. The Death Benefit Proceeds actually
paid to the Beneficiary are equal to the Death Benefit reduced by any
outstanding Indebtedness and unpaid monthly charges, and increased by the
amounts, if any, payable under any optional additional benefits riders.
PREMIUM VALUE AND CASH VALUE BONUSES
Subject to state approval, a Policy continuously in force for 8 Policy Years
will be eligible for monthly Premium Value and Cash Value Bonuses.
Premium Value Bonus. Premium Value Bonuses are scheduled to be paid monthly
starting in the 9th Policy Year, based on the amount of premiums paid and not
deemed withdrawn or borrowed. The amount of a Premium Value Bonus credited each
month is determined by multiplying the Policy's Monthly Minimum Premium by the
Premium Value percentage rate(s) then in effect. On the date of this prospectus,
the Premium Value percentage ranges from an annual rate of 11% for Preferred
premium rate classes, to an annual rate of 5% for Non-Smoker and Smoker premium
rate classes.
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Cash Value Bonuses The Cash Value Bonus is also scheduled to be paid monthly
starting in the 9th Policy Year. The amount of each month's bonus is determined
by multiplying the Policy's then current Cash Accumulation Value by a
Company-determined percentage rate then in effect. On the date of this
prospectus, the Cash Value Bonus annual rate ranges from 0.15% for a Policy with
Cash Accumulation Value of $100,000 or more at the start of the applicable
Policy Year, to 0.10% for Cash Accumulation Value over $25,000 but under
$100,000, to 0% for Cash Accumulation Value of $25,000 or less.
Availability of Bonuses. The Company may change the Premium Value and Cash Value
Bonus percentage rates at any time, but guarantees that the Premium Value annual
rate will not be less than 6% for Preferred premium rate classes and 3% for
Non-Smoker and Smoker premium rate classes. Because there is no minimum
guaranteed Cash Value percentage rate, the Company could terminate Cash Value
Bonuses at any time. The Premium Value and Cash Value Bonuses will not be paid
if the purchaser's state does not permit them. Because the Policies have not
been offered for nine years, the Company has not, on the date of this
prospectus, credited any bonuses to Owners of the Policies. Prospective
purchasers should check with their sales representatives or call the Company's
Variable Service Center to confirm the availability of the bonuses. (See "Policy
Benefits and Values - Premium Value Bonuses and Cash Value Bonuses.")
OPTIONAL ADDITIONAL BENEFIT RIDERS
The Company permits applicants for, and Owners of, a Policy to purchase
additional benefits provided by rider to the Policy, subject to state
availability and the Company's underwriting and issuance standards. The riders
to be made available upon appropriate local regulatory approval include:
Acceleration of Death Benefit Rider. This rider permits an Owner to receive an
advance of the Death Benefit when the Insured has been diagnosed as having a
terminal illness with a life expectancy of less than 12 months, all as defined
in the rider. The advance, up to a maximum of $500,000, is calculated as the
product of (a) times (b), which is divided by (c), and reduced by (d), where:
(a) is equal to the Death Benefit in effect when the advance is paid;
(b) is a percentage of Death Benefit (not to exceed 100%) as elected by the
Owner;
(c) is the sum of 1 plus "i", where "i" equals the Published Monthly Average
(Moody's Corporate Bond Yield Average - Monthly Average Corporates as
published by Moody's Investors Service, Inc., or its successor) for the
calendar month ending two months prior to the date the rate is determined;
and
(d) is the percentage of Death Benefit elected by the Owner times the
Indebtedness, if any, at the time the advance is paid.
If the Moody's Corporate Bond Yield Average - Monthly Average Corporates is no
longer published, the Insurance Commissioner of the state in which the Policy's
application is dated will substitute a similar average. The "i" rate is
determined by the Company on January 1 and July 1 of each calendar year. The
rate may be increased whenever such increase would be at least 1/2%. The rate
will be decreased whenever such decrease would be at least 1/2%. Amounts
advanced under the rider generally will be considered Death Benefits for federal
income tax purposes. (See "Federal Tax Status - Life Insurance and Modified
Endowment Contract Definitions.") There is no charge for this rider and it will
be included with a Policy in each jurisdiction where the rider is available.
Upon payment of an advance under this Rider, the Policy's Face Amount, Account
Value, Cash Surrender Value and any term life insurance rider benefit on the
life of the Insured will be reduced by the percentage of Death Benefit and term
life insurance rider benefit advanced to the Owner; and any Indebtedness will be
reduced by the portion of the Indebtedness deemed repaid when calculating the
advance. The Policy will terminate if the percentage of Death Benefit elected by
the Owner is 100%.
Accidental Death Benefit Rider. This rider provides an additional amount
specified in the Policy if the Insured dies from an accidental injury, subject
to exclusions listed in the rider. The benefits provided by the rider will
terminate at age 70. An additional charge specified in the Policy is included in
the monthly deduction.
Additional Term Insurance on the Insured. A "Covered Insured Rider" provides
additional convertible term life insurance coverage for a pre-selected period up
to Age 95. An Owner may convert the term insurance to a
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permanent plan of life insurance, subject to the conditions listed in the rider,
up to the Insured's Age 70. The monthly charge for the term life insurance
riders will not exceed the maximum rates shown in the Policy.
Term life insurance provided under this rider may be less costly initially under
nonguaranteed "current" insurance charges in effect on the date of this
prospectus than an equivalent amount of insurance coverage under the base
Policy. However, for Owners who intend to qualify for Premium Value and Cash
Value Bonuses, and meet the Monthly Minimum Premium requirements for the Death
Benefit Guarantee, coverage under the base Policy will probably be less costly
over time.
Coverage on the Insured that is provided under the rider lowers the Monthly
Minimum Premium requirement from the amount that would be required if the same
amount of coverage were provided under the base Policy. Coverage under the
rider, as compared to coverage under the base Policy, also results in a lower
Surrender Charge, a smaller amount of premiums that would be required initially
to maintain a Policy's Guaranteed Death Benefit, and lower charges based on
minimum premium payments and Account Value. However, the amount of any Premium
Value Bonus will be reduced if coverage on the Insured is taken under the rider
instead of the base Policy, and the potential for Cash Value Bonuses may also be
reduced if only Monthly Minimum Premiums are paid. (See "Premium Value and Cash
Value Bonuses.")
Children's Term Insurance Rider. This rider provides up to $10,000 of term life
insurance on the lives of the Insured's children who are between 15 days of age
and age 18 on the Policy Date. The coverage terminates for each insured child on
the child's 21st birthday. An Owner may convert the term insurance to a
permanent plan of insurance, subject to the conditions listed in the rider,
within 31 days before or after an Insured child's 21st birthday. The monthly
charge for the rider is shown in the Policy.
Cost of Living Rider. This rider permits the Owner to purchase additional
amounts of insurance based on increases in the Consumer Price Index published by
the U.S. Department of Labor, without submitting additional evidence of
insurability to the Company. The amount of additional insurance to be offered by
the Company is based on the formula described in the rider, up to a maximum of
$30,000 of Face Amount every third Policy Year until the Policy Anniversary
following the Insured's 65th birthday. There is no charge for the rider, but any
additional amounts of insurance purchased under the rider will increase the Face
Amount of the base Policy, and be subject to monthly cost of insurance charges.
Additional amounts of insurance purchased under this rider will also increase
the Monthly Minimum Premium and surrender charges under the Policy. (See
"Premiums Monthly Minimum Premium" and "Charges and Deductions.")
Disability Waiver Benefit Riders. An applicant may elect to purchase either or
both of the disability benefit riders available. The riders provide benefits if
the Insured is totally disabled, as defined under the terms of the applicable
rider, before Age 60. A "Waiver of Monthly Deduction" rider waives the Monthly
Deductions incurred in connection with the Policy (The waiver does not include
daily deductions against Separate Account assets for the mortality and expense
risk charge, which will continue to apply.) A "Cash Deposit Benefit" rider
provides for a deposit of a preselected monthly benefit amount into a Policy's
Account Value, which will be applied against the Monthly Minimum Premium
requirements for the Guaranteed Death Benefit. (See "Premiums - Monthly Minimum
Premium.") The monthly charges for the disability waiver benefit riders are
stated in the Policy.
Extended Guaranteed Death Benefit Riders. Extended Guaranteed Death Benefit
riders permit the Owner to extend the initial Guaranteed Death Benefit period
provided within a Policy (see "Premiums - Guaranteed Death Benefit"). If elected
by the Owner, and if the Monthly Minimum Premiums continue to be paid, the Death
Benefit will remain in force for an extended period even if the Cash Surrender
Value is less than the next Monthly Deduction. A subsequent increase or decrease
in the Face Amount will result in an increase or decrease, respectively, in the
level of charges for the Extended Guaranteed Death Benefit. The same is
generally true for the addition or cancellation of any benefits under any other
rider. An applicant for a Policy may choose either:
- a 20 Year Guaranteed Death Benefit (measured from the Policy Date); or
- a Guaranteed Death Benefit to the Insured's Age 65.
The monthly charge for the rider is shown in the Policy, and the Monthly Minimum
Premium requirement for a Policy with an extended Guaranteed Death Benefit rider
may be higher than the requirement for a Policy without the rider.
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Extension of Maturity Date Rider. This rider allows the Owner to request a later
Maturity Date if the Account Value is at least $2,000. It is included with a
Policy at no additional cost. (See "Optional Additional Benefit Riders -
Extension of Maturity Date Rider.")
Other Insured Persons Rider. This rider provides term life insurance coverage on
the lives of additional insured persons selected by the Owner. An Owner may
convert the term insurance to a permanent plan of life insurance, subject to the
conditions listed in the rider, up to the insured person's Age 70. The monthly
charge for the term life insurance riders will not exceed the maximum rates
shown in the Policy. In the event an insured person under this rider is not a
family member, certain special tax rules will apply. For a brief description of
these tax rules see "Federal Tax Status - Income Tax Treatment of Policy
Benefits."
DETERMINATION OF ACCOUNT VALUE
Account Value and Cash Surrender Value. The Account Value under a Policy
includes its value in the Separate Account, in the Fixed Account and, if there
is any Indebtedness, in the Loan Account. The Account Value reflects premiums,
the Net Investment Experience of the Sub-Accounts, interest credited on its
Account Value in the Fixed Account and on amounts held in the Loan Account,
amounts deducted for charges and deductions due under the Policy, and amounts
withdrawn.
The Cash Surrender Value is the amount the Owner will receive upon surrender of
the Policy. The Cash Surrender Value is the Account Value reduced by any
outstanding Policy loan (and accrued interest) and by any applicable Surrender
Charges. (See "Policy Loans" and "Surrender Charge.")
The Cash Surrender Value in the Separate Account may increase or decrease daily
depending on the Net Investment Experience of the Sub-Accounts. Unfavorable
investment experience and charges can reduce the Cash Surrender Value to zero.
Because there is no guaranteed minimum Account Value in the Separate Account,
the Owner bears the entire investment risk with respect to the Account Value
allocated to the Separate Account.
Net Investment Experience. The Net Investment Experience of the Sub-Accounts
will affect the Account Value and, in some circumstances, the Death Benefit. The
Net Investment Experience of the Sub-Accounts is determined as of the close of
regular trading on the New York Stock Exchange on each day when the Exchange is
open for trading.
A Sub-Account's Net Investment Experience for any period reflects the investment
experience of the underlying Portfolio shares for the same period, reduced by
the charges against the Sub-Account for that period. (Currently the Sub-Accounts
are charged only for the Company's mortality and expense risk, but in the future
the Company may impose a charge against the Sub-Accounts for taxes if
appropriate. See "Charges and Deductions" and "Taxation of the Company and the
Separate Account.")
The investment experience of Portfolio shares for any period is the increase or
decrease in their net asset value for the period invested plus the amount of any
dividends or capital gains distributions on the shares during the period.
Dividends and capital gains distributions on Portfolio shares are reinvested in
additional shares of the Portfolio on the payment date and affect subsequent
investment experience.
Owners who allocate Account Value to the Fixed Account will not share in the
investment experience of any of the Company's assets. Instead, the Company
guarantees that Account Values in the Fixed Account will earn interest at an
annual rate of at least 4.0%. The Company may from time to time credit interest
at rates higher than 4.0%, but it is under no obligation to do so. The Company
declares current interest rates for the Fixed Account periodically. Account
Values that are in the Fixed Account will earn interest daily.
POLICY LOANS
The Owner may borrow all or part of the Policy's "loan value" at any time after
the initial free-look period. The Company will usually make the loan within
seven days of the date when a loan request is received in writing or by
telephone at the Variable Service Center. (See "Telephone Transactions.")
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The maximum amount available for a loan is equal to 90% of the Account Value
less the sum of Surrender Charges and Indebtedness. The minimum amount for each
loan is $100. A loan reduces the Account Value in the Sub-Accounts and the Fixed
Account by the amount of the loan. Account Value equal to the amounts loaned are
transferred to the Loan Account from the Fixed Account and the Separate Account
when the loans are made by the Company. Amounts in the Loan Account are credited
with interest at the equivalent of a minimum guaranteed annual interest rate of
4%.
Interest on a policy loan accrues daily and will be payable in arrears at the
end of each Policy Month. If not paid when due, an amount equal to the unpaid
interest is deducted from the Account Value in the Sub-Accounts and the Fixed
Account and transferred to the Loan Account as an additional loan on the first
Business Day of the next Policy Month. A loan repayment increases the Account
Value in the Sub-Accounts and the Fixed Account by the amount of the repayment.
Unless the Owner requests otherwise, loans and loan repayments are attributed to
the Sub-Accounts and the Fixed Account in proportion to the Account Value in
each. The Company may disapprove any such request.
Regular Loans. Indebtedness attributable to a Regular Loan is charged interest
at the equivalent of a 6% annual loan interest rate. After the first Policy
Year, certain Indebtedness attributable to a Regular Loan will be converted
automatically into a Preferred Loan. The conversion will occur if the Cash
Accumulation Value on a Policy Anniversary equals or exceeds $10,000. If so,
outstanding Indebtedness attributable to a Regular Loan, up to a loan conversion
limit equal to 15% of such Cash Accumulation Value, will be converted into a
Preferred Loan within 7 Business Days of the Policy Anniversary.
Preferred Loan. A Preferred Loan is charged interest at the equivalent of a 4%
annual loan interest rate. An Owner may qualify for Preferred Loans if the Cash
Accumulation Value on any Policy Anniversary is at least $10,000. If so, the
maximum available for a Preferred Loan that year is equal to 15% of such Cash
Accumulation Value, less any Indebtedness attributable to a Regular Loan that is
automatically converted that year to a Preferred Loan. A Preferred Loan will
reduce the amount available as a Regular Loan.
Immediate Loan Repayment. If the Indebtedness on the first Business Day of a
Policy Month exceeds the Account Value less the Surrender Charge, an immediate
loan repayment will be required. A period of 61 days will be allowed from the
first day of such Policy Month for the loan repayment. The Company will send a
notice to the Owner or assignee, if any. The Policy will terminate without value
61 days after the mailing of the notice unless a sufficient repayment is made
during that period. A repayment is sufficient if it is large enough to reduce
the total Indebtedness to an amount equal to: (a) the Policy's Account Value
less the Surrender Charge; plus (b) an amount sufficient to continue the Policy
in force for 3 months.
The amount taken from the Sub-Accounts as a result of a loan does not
participate in the investment experience of the Sub-Accounts. Therefore, the
Death Benefit and Account Value of the Policy can be permanently affected by a
loan, even if it is repaid. In addition, any proceeds payable under a Policy are
reduced by the amount of any outstanding loan plus accrued interest.
A loan repayment must be designated as such. Otherwise, the Company may treat
the payment as a Premium Payment.
SURRENDER AND WITHDRAWALS
Surrender. The Owner may surrender a Policy for its Cash Surrender Value at any
time while the Insured is living by a signed written request conforming to the
Company's administrative procedures. The Cash Surrender Value of the surrendered
Policy will be determined as of the Business Day when a surrender request is
received at the Company's Variable Service Center. The Cash Surrender Value
equals the Account Value reduced by any Policy loans and accrued interest and by
any applicable Surrender Charges. (See "Surrender Charges.") The Owner may elect
in writing to have all of the Cash Surrender Value, or may elect in either
writing or telephone, to have part of the Cash Surrender Value applied to a
payout option. (See "Payout Options.") The Company's liability for the Death
Benefit ends when a Policy is surrendered.
Withdrawals. After the first Policy Year, the Owner may make a withdrawal of a
portion of the Policy's Cash Surrender Value (minimum $100). A withdrawal will
reduce the Account Value and Death Benefit generally by the amount withdrawn and
any applicable transaction charge. If Death Benefit Option A is in effect, a
withdrawal will
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reduce the Face Amount by the withdrawal plus any applicable transaction charge.
(See "Transaction Charges.") A withdrawal may not be made, unless the Company
expressly consents, if:
- the Death Benefit would be reduced below that required to qualify the
Policy as life insurance; or
- the Death Benefit would be reduced below the minimum Face Amount
specified in the Policy; or
- the remaining Cash Surrender Value would be less than the greater of
(a) $1,000 or (b) 3 times the most recent Monthly Deduction.
A permitted withdrawal will result in the cancellation of Accumulation Units
from each applicable Sub-Account Policy Option or a reduction in Fixed Account
Value in the ratio that the Account Value in the Policy Option bears to the Cash
Accumulation Value. The Owner may request in writing in advance if a different
method for canceling Accumulation Units or reducing Fixed Account Value is
desired. The Company reserves the right to approve or disapprove any such
request.
MATURITY PROCEEDS
If the Insured is living on the "Maturity Date" (the anniversary of the Policy
Date on which the Insured is Age 95), the Company will pay the Owner the Cash
Surrender Value on surrender of the Policy to the Company. In such case, the
Policy will terminate and the Company will have no further obligations under the
Policy. The Cash Surrender Value for this purpose will be determined as of the
Maturity Date.
LAPSE AND REINSTATEMENT
If sufficient premium is not paid, a Policy may lapse following a 61 day grace
period. (See "Premiums - Grace Period." ) If the Insured dies during the grace
period, the Company will pay the Death Benefit Proceeds.
If a grace period ends and the Owner has neither paid the required premium nor
surrendered the Policy for its Cash Surrender Value, the Owner may reinstate the
Policy by:
(a) submitting a written request at any time within 3 years after the end of the
grace period and prior to the Maturity Date;
(b) providing evidence of insurability satisfactory to the Company;
(c) paying a sufficient premium to cover all charges and deductions that were
due and unpaid during the grace period;
(d) paying sufficient premium to keep the Policy in force for 3 Policy Months
from the date of reinstatement; and
(e) repaying any Indebtedness against the Policy that existed at the end of the
grace period.
The reinstatement will be effective on the first Business Day of the Policy
Month next beginning on or after the Company approves reinstatement. The values
under and terms and conditions of the reinstated Policy will be in accordance
with the Company's administrative procedures.
PAYMENT OF PROCEEDS
The Company ordinarily will pay any Cash Surrender Value or Death Benefit
Proceeds from the Sub-Accounts within seven days after receipt by the Variable
Service Center of a request, or proof of death of the Insured, and all other
required elections and documentation in a form satisfactory to the Company.
However, the Company may delay payment or transfers from the Sub-Accounts. (See
"Suspension of Payments and Transfers.") The Company may also delay payment if
it considers it necessary to contest the Policy. The Company will pay interest
on the Death Benefit Proceeds from the date they become payable to the date they
are paid in one sum or, if an optional payment option was selected, to the
effective date of the option. (See "Payout Options.")
TAX WITHHOLDING
All distributions or portions thereof which are includable in the gross income
of the Owner are subject to federal income tax withholding. The Company will
withhold federal taxes at the rate of 10% from each distribution. However, the
Owner may elect not to have taxes withheld or to have taxes withheld at a
different rate.
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PAYOUT OPTIONS
The Policy's Death Benefit Proceeds and Cash Surrender Value can be paid in one
sum, or all or part of the Proceeds may be paid under a Payout Option. If a
Payout Option is selected for the payment of Cash Surrender Value, any Surrender
Charges and Indebtedness will be deducted from the Account Value before the
first payment is made.
During the Insured's lifetime, the Owner may elect: (a) for Cash Surrender Value
to be paid under a Payout Option; (b) for Death Benefit Proceeds to be paid
under a Payout Option; and (c) to change a previously elected Payout Option for
Death Benefit Proceeds. Any election must be by written request to the Variable
Service Center.
The following Payout Options or any other Payout Option acceptable to the
Company may be selected:
Option A - Life Annuity. Equal monthly payments during the life of the payee.
Option B - Life Annuity With Periods Certain Of 120 Months: Equal monthly
payments during the lifetime of the payee and in any event for one hundred
twenty (120) months.
Option C - Fixed Payments For A Period Certain: Equal monthly payments for any
specified period (at least five years but not exceeding thirty years), as
selected.
Option D - Death Benefit Proceeds Remaining With The Company: Proceeds from the
Death Benefit left with the Company. The Death Benefit Proceeds will remain in
the Fixed Account and be credited with interest by the Company at a rate of not
less than 4%. Full and partial withdrawals may be made at any time with no
Surrender Charge.
The amount of each payment under Payment Options A, B, or C will be not less
than the amounts calculated based on the annuity tables in the Policy. The
Company may permit other settlement options. If the payee dies during a period
certain (Payout Options B or C), the remaining payments attributable to Death
Proceeds will be made to the estate of the Beneficiary. The Beneficiary may
elect to have the commuted value of the remaining payments paid in a single sum
instead. The Company will determine the commuted value by discounting the
remaining payments at its then current interest rate used for commutation.
Tax Impact. Whether a Payout Option is chosen may have tax consequences for the
Owner or Beneficiary. Therefore, a qualified tax adviser should be consulted
before deciding whether to elect one or more Payout Options.
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
During the first 24 months after the Policy Date, if the Policy has not lapsed,
there is an unconditional right to transfer all of the Account Value in the
Sub-Accounts to the Fixed Account without any transaction charge.
OTHER PROVISIONS OF THE POLICY
SUICIDE EXCLUSION
If the Insured commits suicide within two years from the Policy Date (or less if
required by state law), the Death Benefit will be limited to the Cash Surrender
Value.
REPRESENTATIONS AND CONTESTABILITY
Generally, the Company can challenge the validity of the Policy or any rider to
the Policy on the Policy Date during the Insured's lifetime for two years from
the Policy Date, based on misrepresentations made in the application. The
Company can challenge an increase in Death Benefit requiring evidence of
insurability for two years, during the Insured's lifetime, from the date of the
increase. For any increase in Face Amount (or in rider benefit) requiring
evidence of insurability, the Company will not contest payment of the Death
Benefit Proceeds (or rider benefit) based on such an increase after it has been
in force during the Insured's lifetime for two years from its effective date.
Any
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reinstatement of the Policy will be incontestable after that reinstatement
has been in force for two years from its effective date during the lifetime of
the Insured. However, the two year time limit on the Company's right to
challenge all or part of the Policy does not apply if the Insured dies within
the two year period.
OPTION TO EXTEND MATURITY DATE
The Owner may elect a later maturity date, if the Account Value is at least
$2,000. With this option, the Death Benefit will equal the Account Value. As
described in the rider attached to the Policy, a request must be made in writing
and within six months prior to the current maturity date. (See "Optional
Additional Benefit Riders.")
For any period during which the Maturity Date is extended, the following
stipulations apply: the Owner will not be permitted to make any further premium
payments except if necessary to prevent lapse of the Policy; no increase or
decrease in the Face Amount or change of Death Benefit Options will be
permitted; no partial withdrawal will be permitted if Account Value remaining
after the withdrawal is $2,000; all value in the Separate Account will be
transferred to the Fixed Account; the Company will not credit Bonuses to Account
Value, including but not limited to, Premium Value Bonuses and Cash Value
Bonuses; all supplemental riders except the Acceleration of Death Benefit rider
will terminate; Indebtedness will be charged interest at an annual rate of 4.0%
per year; and the Death Benefit will equal the applicable Minimum Death Benefit
Percentage of Account Value. For attained ages beyond Age 95, the applicable
Minimum Death Benefit Percentage is the Minimum Death Benefit Percentage at Age
95.
MISSTATEMENT OF AGE OR SEX
If the Insured's Age or sex is misstated in any application for benefits under
this Policy, the Death Benefit will be the amount provided by the Insured's
correct age and sex.
OWNER AND BENEFICIARY
The Owner is named in the application but may be changed from time to time. At
the death of the Owner, his or her estate will become the Owner unless a
successor Owner has been named. The Owner's rights as such terminate when the
Insured dies.
The Beneficiary and any contingent Beneficiary is also named in the application.
A Beneficiary of the Policy (other than an irrevocably named Beneficiary) may be
changed at any time before the death of the Insured. The Beneficiary has no
rights under the Policy until the death of the Insured and must survive the
Insured in order to receive the Death Benefit Proceeds. If no named Beneficiary
survives the Insured, the proceeds will be paid to the Owner.
A change of Owner or Beneficiary must be in written form satisfactory to the
Company and must be dated and signed by the Owner making the change. The change
will be effective on the date it is signed, but subject to all payments made and
actions taken by the Company under the Policy before the signed change form is
received by the Company at its Variable Service Center.
ASSIGNMENTS
The Owner may assign (transfer) the Owner's rights in the Policy to someone
else. An absolute assignment of the Policy is a change of Owner and Beneficiary
to the assignee. A collateral assignment of the Policy does not change the Owner
or Beneficiary, but their rights will be subject to the terms of the assignment.
The assignment must be in writing, signed by the Owner and is effective only
when received by the Company at its Variable Service Center. The Company is not
responsible for any assignment not submitted for recording, nor is the Company
responsible for the sufficiency or validity of any assignment.
The assignment will be subject to any Indebtedness under a Policy before and
after the assignment was recorded. Because there may be unfavorable tax
consequences, including recognition of taxable income and the loss of income
tax-free treatment for any death benefit payable to the Beneficiary, an Owner
should consult a qualified tax adviser prior to transferring ownership or making
an assignment.
REPORTS AND RECORDS
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The Company will mail to the Owner, at the last known address of record, an
annual statement showing current Account Values, transactions since the last
statement, Policy loan information and any other information required by federal
or state laws or regulations.
The Owner will also be sent annual and semi-annual reports containing the
financial statements of the Funds or Portfolios the Owner is using.
In addition, Owners will receive statements of significant transactions, such as
changes in the Death Benefit, transfers among Policy Options, premium payments,
Policy loans, increases in Policy loan principal, Policy loan repayments,
reinstatement and termination.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote the
shares of the Portfolios held by the Separate Account Sub-Accounts at regular or
special meetings of the shareholders in accordance with instructions received
from Owners having the voting interest in the affected Portfolio(s). The number
of votes that an Owner has the right to instruct for a particular Sub-Account is
determined by dividing the Owner's Account Value in the Sub-Account by the net
asset value per share of the corresponding Portfolio. The Company will vote
shares held in the Sub-Account for which it has not received instructions, as
well as shares held in the Sub-Account that are attributable to it, in the same
proportion as it votes shares held in the Sub-Account for which it has received
instructions. On the date of this prospectus, the Funds are not required to hold
routine annual meetings of shareholders.
The number of shares which an Owner has a right to vote will be determined as of
a date to be chosen by the Company not more than 60 days prior to a shareholder
meeting of a Fund. Each Owner having a voting interest will receive proxy
material, annual reports and any other materials relating to the appropriate
Portfolio.
The Company may disregard voting instructions under limited circumstances
prescribed by SEC rule. If the Company does disregard voting instructions, a
summary of that action and the reasons for it will be included in the next
semiannual report to Owners.
SUSPENSION OF PAYMENTS AND TRANSFERS
The Company reserves the right to suspend or postpone payments for surrenders,
withdrawals and Policy loans or transfers from the Sub-Accounts for any period
when:
- - the New York Stock Exchange is closed for trading;
- - trading on the New York Stock Exchange is restricted by the SEC;
- - an emergency exists as a result of which disposal of securities held in the
applicable Sub-Accounts is not reasonably practicable or it is not
reasonably practicable to determine the value of the applicable
Sub-Account's net assets; or
- - during any other period when the SEC, by order, permits such suspension.
The Company also reserves the right to defer payment for a surrender, withdrawal
and Policy loan or transfer from the Fixed Account for the period permitted by
law but not for more than six months after written election is received by the
Company. The Company will pay interest to the extent provided under state
insurance law requirements on payments that are delayed.
Also, the Company can defer payment of any amount that is attributable to a
purchase payment made by check for a reasonable period of time (not to exceed 15
days) to allow the check to clear the banking system.
NONPARTICIPATION IN COMPANY DIVIDENDS
The Policies are nonparticipating. This means that they do not participate in
any dividend or distribution of the Company's surplus.
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DISTRIBUTION AND OTHER AGREEMENTS
First Variable Capital Services, Inc. ("FVCS"), 10 Post Office Square, MA 02109,
acts as distributor of the Policies. FVCS, a wholly owned subsidiary of the
Company, is registered with the SEC as a broker/dealer under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. The Policy is offered on a continuous basis.
The Company and FVCS have agreements with various broker/dealers under which the
Policies will be sold by registered representatives of broker/dealers. The
registered representatives are required to be authorized under applicable state
regulations to sell variable life insurance policies. The commissions payable to
a broker/dealer for sales of a Policy may vary with the sales agreement, but are
not expected, on an aggregate basis, to exceed 100% of the amount of premiums
paid in the first Policy Year up to 12 Monthly Minimum Premiums, plus 4% of
additional first year premium payments, plus 3.5% of all premiums received in
Policy Years 2 through 5. In addition, Broker/Dealers may receive annual "trail
commission" equivalent to 0.30% of a Policy's Account Value beginning in Policy
Year 6, as well as expense allowances, wholesaler fees, bonuses and training
fees.
Under a Services Agreement between the Company and FVCS, the Company performs
insurance underwriting, issuance and other administrative services for the
Policies.
SAFEKEEPING OF ASSETS
The Company serves as the custodian of the assets of the Separate Account.
MANAGEMENT OF THE COMPANY
The directors and executive officers of the Company and their principal business
experience during the past five years, are:
Position with Principal Occupation
Name and Address the Company During Past 5 Years
- ---------------- ------------- --------------------
Ronald M. Butkiewicz Chairman and Director President and Chief Executive Officer,
2211 York Road, Suite 202 Irish Life of North America, Inc.;
Oakbrook, IL 60521 Chairman and Chief Executive Officer,
Interstate Assurance Company
Michael J. Corey Director Managing Director, Insurance Practice
401 East Host Drive Group, Ward Howell Intl., Inc.;
Lake Geneva, WI 53147 President, GSG International Inc.
Norman A. Fair Director Vice President, Treasurer, & Asst. Sec.,
2211 York Road, Suite 202 Irish Life of North America, Inc.; prior
Oakbrook, IL 60521 to 1994, Senior Vice President and Chief
Financial Officer, Interstate Assurance
Company
Michael R. Ferrari Director President, Drake University
25th & University Avenue
Des Moines, IA 50311
Stephen Shone Director Chief Financial Officer, Irish Life plc
Lower Abbey Street
Dublin 1, Ireland
T. David Kingston Director Managing Director, Irish Life plc
Lower Abbey Street
Dublin 1, Ireland
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John M. Soukup President and Director President and Director of the Company;
10 Post Office Square prior to July, 1997, Market Development
Boston, MA 02109 Officer, Fortis Financial Group
Jeff S. Liebmann Director Partner, Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Kenneth R. Meyer Director Managing Director, Lincoln Capital
200 South Wacker Drive, Suite 2100 Management Co.
Chicago, IL 60606
Thomas K. Neavins Director Vice President and Corporate Secretary,
2211 York Road, Suite 202 Irish Life of North America, Inc.
Oakbrook, IL 60521
Philip R. O'Connor Director (non-voting) Principal of Coopers & Lybrand
111 West Washington, Suite 1247 LLP/Palmer Bellevue Corp.
Chicago, IL 60602
Arnold R. Bergman Vice President-Legal & Vice President-Legal & Administration
10 Post Office Square Administration and and Secretary of the Company; prior to
Boston, MA 02109 Secretary February 1995, Counsel, Aetna Life
Insurance and Annuity Company.
John V. Egan Vice President, Treasurer Vice President and Treasurer of the
10 Post Office Square and Chief Financial Officer Company; prior to August, 1997, Vice
Boston, MA 02109 President, Fortis Financial Group
Martin Sheerin Vice President and Chief Vice President and Chief Actuary of the
10 Post Office Square Actuary Company; prior to October, 1994, Vice
Boston, MA 02109 President, Irish Life of North America,
Inc.
Thomas Simpson Vice President - Sales Vice President; prior to February, 1996,
10 Post Office Square Vice President, Alexander Hamilton Life
Boston, MA 02109 Ins. Co.; prior to November, 1994,
National Sales Manager, Bankers Nat.
Life Ins. Co.
FEDERAL TAX STATUS
GENERAL
BECAUSE OF THE COMPLEXITY OF THE LAWS AND BECAUSE TAX RESULTS WILL VARY
ACCORDING TO THE STATUS OF THE OWNER, LEGAL AND TAX ADVICE MAY BE NEEDED BY A
PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A POLICY.
It should be understood that any detailed description of the federal income tax
consequences regarding the purchase of these Policies cannot be made in this
prospectus and that special tax rules may be applicable with respect to
purchases not discussed herein. In addition, no attempt is made to consider any
applicable state, local, gift, inheritance, estate, foreign or other tax laws.
This discussion assumes that the Owner is a natural person and a U.S. citizen
and resident. This discussion of federal tax status is based upon the Company's
understanding of current federal income tax laws as
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they are currently interpreted. These laws and the related regulations and
interpretations can change, and such changes can be retroactive.
TAXATION OF THE COMPANY AND THE SEPARATE ACCOUNT
Under current federal income tax law, no tax is imposed on the Company as a
result of the operations of the Separate Account and the Fixed Account. Thus, no
charge is currently imposed for Company federal income taxes. The Company
reserves the right to charge the Separate Account or Fixed Account for Company
federal income taxes, if there are changes in federal tax law.
Under current laws the Company may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant
and, accordingly, the Company is not currently imposing a charge for them. If
they increase, however, a charge for such taxes attributable to the Separate
Account and/or Fixed Account may be imposed.
INCOME TAX TREATMENT OF POLICY BENEFITS
Life Insurance. Section 7702 of the Code provides that if certain tests are met,
a Policy will be treated as life insurance for federal tax purposes. The Company
will monitor compliance with these tests. As a result, the Company believes
Owners will not be taxed on increases in Account Value under the Policies unless
and until they are distributed. Furthermore, the Company believes the Death
Benefits received under the Policies are generally excludable from the gross
income of the Beneficiary pursuant to the provisions of Section 101 of the Code.
Acceleration of Death Benefits Rider. Section 101(g) of the Code provides that
amounts received under a life insurance contract on the life of an insured who
is a terminally ill individual, as defined, may be treated as an amount paid by
reason of the death of the insured. The Company believes that under this
provision, accelerated death benefit payments are generally excluded from the
Owner's gross income. This exclusion does not apply, however, to amounts paid to
someone other than the Insured, if the payee has an insurable interest in the
Insured's life because the Insured is a director, officer or employee of the
payee or by reason of the Insured being financially interested in any trade or
business carried on by the payee. (See "Acceleration of Death Benefit Rider" for
more information regarding the rider.)
Modified Endowment Contracts. Section 7702A of the Code contains provisions
affecting the tax treatment of any loan, assignment or other pre-death
distribution from a life insurance policy which is also a "modified endowment
contract."
A modified endowment contract is a life insurance policy where cumulative
premiums paid under the policy at any time during the first seven policy years
exceed the sum of the net level premiums that would have been paid on or before
such time if the policy provided for paid up future benefits after the payment
of seven level annual premiums ("7-pay test"). (The amount of premiums payable
under the 7-pay test are calculated based upon certain assumptions regarding the
policy's earnings and the use of a reasonable mortality charge. Riders to the
policy are considered part of the policy for purposes of applying the 7-pay
test.)
Whenever there is a "material change" under a Policy, the Policy will generally
be (a) treated as a new contract for purposes of determining whether the Policy
is a modified endowment and (b) subjected to a new seven-pay period and a new
seven-pay premium limit. The new seven-pay limit would be determined taking into
account, under a prescribed formula, the Account Value of the Policy at the time
of such change. A materially changed Policy would be considered a modified
endowment contract if it failed to satisfy the new seven-pay limit. A material
change for these purposes could occur as a result of a change in death benefit
option, election of additional rider benefits, an increase in a Policy's Face
Amount and certain other changes.
If a Policy's benefits are reduced during the first seven Policy years (or
within seven years after a material change), the seven-pay premium limit will be
redetermined based on the reduced level of benefits and applied retroactively
for purposes of the seven-pay test. (Such a reduction in benefits could include,
for example, a decrease in Face Amount requested by the Owner or, in some cases,
a partial withdrawal or termination or reduction of benefits under a rider.) If
the premiums previously paid are greater than the recalculated seven-pay limit,
the Policy will become a modified endowment contract.
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Any Policy received in exchange for a modified endowment contract will also be a
modified endowment contract. However, an exchange under Section 1035 of the Code
of a life insurance policy entered into before June 21, 1988 will not cause the
new policy to be treated as a modified endowment contract if no additional
premiums are paid and there is no increase as a result of the exchange.
Other Tax Effects of Policy Changes. Changes made to a Policy (for example, a
decrease in benefits under or a lapse or reinstatement of a Policy) may also
have other tax effects on the Policy. Such effects may include impacting the
maximum amount of premiums that can be paid under the Policy, as well as the
maximum amount of Account Value that may be maintained under the Policy.
Taxation of Pre-Death Distributions from a Policy that is not a Modified
Endowment Contract. As long as a Policy remains in force as a non-modified
endowment, a Policy loan will be treated as indebtedness, and no part of the
loan proceeds will be subject to current federal income tax. Interest on the
loan generally will not be tax deductible.
After the first 15 Policy Years, the proceeds from a withdrawal will not be
subject to federal income tax except to the extent such proceeds exceed the
Owner's "investment" in the Policy. (The "investment" generally will equal the
premiums paid, less the amount of any previous distributions from the Policy
that were not taxable.) During the first 15 Policy Years, certain withdrawals
that reduce the Death Benefit could be subject to federal income tax to the
extent that the Policy's Account Value exceeds the Owner's investment in the
Policy.
On the Maturity Date or upon full surrender, any excess of the amount of
proceeds (including amounts the Company uses to discharge any Policy loan and
accrued loan interest) over the Owner's investment in the Policy, will be
subject to federal income tax. In addition, if a Policy terminates after a grace
period while there is a Policy loan, the cancellation of such loan and accrued
loan interest will be treated as a distribution and could be subject to tax
under the above rules. Finally, if the Owner makes an assignment of rights or
benefits under a Policy, the Owner may be deemed to have received a distribution
from the Policy, all or part of which may be taxable.
Taxation of Pre-Death Distributions from a Policy that is a Modified Endowment
Contract. If the Policy falls within the definition of a modified endowment
contract, the following rules will apply to pre-death distributions under such
Policy:
(a) Distributions, such as withdrawals, will be included in the recipient's
gross income to the extent the Account Value of the Policy exceeds the
investment in the Policy (i.e. will be treated as income first). Any
additional amounts received, other than Policy loans, will be treated as a
return of capital to the Owner and will reduce the Owner's investment in
the Policy.
(b) Loans are considered distributions, including any increase in the amount of
the loan to pay interest. The Owner's investment in the Policy for tax
purposes will be increased by the amount of any prior loan that was
included in the Owner's gross income.
(c) A Policy assignment is treated as a distribution. For example, a collateral
assignment is a distribution which will subject any gain that accrues in
the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
included in gross income, all modified endowment contracts issued by the
Company and its affiliates to the same Owner during any calendar year must
be treated as one modified endowment contract.
Any taxable distribution from a Policy that is a modified endowment will be
subject to an additional tax equal to 10% of the taxable amount of the
distribution unless the distribution is:
(a) made on or after the date when the Owner attains Age 59 1/2;
(b) is attributable to the Owner becoming disabled (as defined in the Code); or
(c) is part of a series of substantially equal periodic payments made no less
frequently than annually for the life (or life expectancy) or for the joint
lives (or life expectancies) of the Owner or the Beneficiary.
If a Policy terminates after a grace period while there is a Policy loan, the
cancellation of such loan and accrued loan interest will be treated as a
distribution to the extent not previously treated as such and could be subject
to tax, including the 10% penalty tax, as described above. In addition, on the
Maturity Date and upon a full surrender, any excess of the
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proceeds (including any amounts the Company uses to discharge any loan and
accrued loan interest) over the Owner's investment in the Policy, will be
subject to federal income tax and, unless an exception applies, the 10% penalty
tax.
The coverage under the Other Insured Persons Rider for a non-family member is
not a qualified additional benefit as defined in Section 7702 of the Code. As a
result, the Monthly Deductions under a modified endowment contract attributable
to such coverage may be deemed to be distributions from the policy for tax
purposes. However, the benefit payable under the rider should be excludable from
the gross income of the beneficiary. A qualified tax advisor should be consulted
for more complete information.
Distributions that occur during a Policy year in which a Policy becomes a
modified endowment and during any subsequent Policy years, will be tax as
described in the four preceding paragraphs. In addition, distributions from a
Policy within two years before it becomes a modified endowment also will be
subject to tax in this manner. This means that a distribution made from a Policy
that is not a modified endowment could later become taxable as a distribution
from a modified endowment.
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable life insurance policies. The Code provides that a
variable life insurance policy will not be treated as a life insurance contract
under Section 7702 for any period (and any subsequent period) for which the
investments are not, in accordance with regulations prescribed by the United
States Treasury Department ("Treasury Department"), adequately diversified.
Failure to comply with the diversification requirements may result in the Policy
not qualifying as life insurance. If the Policy does not qualify as life
insurance, Owners may be subject to immediate taxation on the increases in
Account Value of their Policies plus the cost of insurance protection for the
year.
The Company intends that all Portfolios of the Funds underlying the Policies
will be managed by the Fund or its investment adviser to comply with the
diversification requirements set forth in Section 817(h) of the Code and Treas.
Reg. 1.817-5 promulgated thereunder.
The Treasury Department has indicated that the diversification regulations do
not provide guidance regarding the circumstances in which Owners may direct
their investments to Sub-Accounts of the Separate Account without being
considered the owners of the assets of the Separate Account. At this time it
cannot be determined whether additional guidance will be provided and what
standards may be contained in such guidance.
The amount of Owner control which may be exercised under the Policy is different
in some respects from the situation addressed in published rulings issued by the
Internal Revenue Service ("IRS") in which it was held that the policy owner was
not the owner of the assets of the separate account. It is unknown whether these
differences, such as the Owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the Owner to be
considered the owner of the assets of the Separate Account. To the extent the
Owner is treated as owner of the assets of the Separate Account attributable to
the Owner's Policy, the Owner would be liable for federal income tax on the
earnings allocable to the Policy prior to receipt of payments under the Policy.
In the event any forthcoming guidance or ruling by the IRS is considered to set
forth a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively, resulting in the Owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Policy in an attempt to maintain favorable tax treatment.
ADVERTISING PRACTICES
The Company may from time to time receive endorsements of the Policies from
professional organizations. The Company may use such endorsements in
advertisements or sales material for the Policies. The Company may also pay the
professional organization making the endorsement for the use of its customer or
mailing lists in order to distribute
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promotional materials regarding the Policies. An endorsement of the Policies by
a third party is not necessarily indicative of the future performance or results
which may be obtained by persons who purchase the Policies.
From time to time, articles discussing the Separate Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to, Lipper Analytical Services Inc. and Morningstar,
Inc.) may publish their own rankings or performance reviews of variable contract
separate accounts, including the Separate Account. References to, reprints or
portions of reprints of such articles or rankings may be used by the Company as
sales literature or advertising material and may include rankings that indicate
the names of other variable policy separate accounts and their investment
experience.
Articles and releases, developed by the Company, the Funds and other parties,
about the Separate Account or the Funds regarding individual Portfolio or Fund
asset levels and sales volumes, statistics and analyses of industry sales volume
and asset levels, and other characteristics may appear in various publications.
References to or reprints of such articles may be used in promotional literature
for the Policies or the Separate Account. Such literature may refer to personnel
of the adviser, or personnel of the sub-advisers, who have investment management
responsibility, and their investment style. The reference may allude to or
include excerpts from articles appearing in the media.
The advertising and sales literature for the Policies and the Separate Account
may refer to historical, current and prospective economic trends. In addition
sales literature may be published concerning topics of general investor interest
for the benefit of registered representatives and prospective Owners. These
materials may include, but are not limited to, discussions of college planning,
retirement planning, reasons for investing and historical examples of the
investment performance of various classes of securities, securities markets and
indices.
LEGAL MATTERS
STATE REGULATION
The Company is subject to the laws of the State of Arkansas governing insurance
companies and to regulation by the Arkansas Insurance Department. An annual
statement in a prescribed form is filed with the Insurance Department each year
covering the operation of the Company for the preceding year and its financial
condition as of the end of such year. Regulation by the Insurance Department
includes periodic examination to determine the Company's Policy liabilities and
reserves so that the Insurance Department may certify the items are correct. The
Company's books and accounts are subject to review by the Insurance Department
at all times and full examination of its operations is conducted periodically by
the National Association of Insurance Commissioners. Such regulation does not,
however, involve any supervision of management or investment practices or
policies. In addition, the Company is subject to regulation under the insurance
laws of other jurisdictions in which it may operate. As a result, various time
periods and other terms and conditions described in this prospectus may vary
depending on where the Owner resides. These variations will be reflected in the
Policy and riders, or related endorsements.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Separate Account,
the Distributor or the Company a party.
COUNSEL
Legal matters in connection with the Policies have been reviewed by the
Company's Legal Department. Freedman, Levy, Kroll & Simmonds, of Washington, DC,
has advised the Company on certain matters relating to the federal securities
and tax laws.
EXPERTS
39
40
The audited financial statements of First Variable Life Insurance Company
included in this prospectus and Registration Statement have been audited by
, independent auditors, as indicated in their report
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority as experts in accounting and auditing.
The interim financial statements of First Variable Life Insurance Company as of
and for the month period then ended have not been audited.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This prospectus omits
certain information contained in the Registration Statement. Copies of such
additional information may be obtained from the SEC upon payment of the
prescribed fee.
40
41
APPENDIX: A
ANNUAL RATES OF RETURN FOR THE SUB-ACCOUNTS
The following performance information of the Sub-Accounts assumes that the
Sub-Accounts have been in operation for the same periods as the corresponding
Portfolio and investing in that Portfolio. It reflects the total of the income
generated by the Portfolio, less total Portfolio operating expenses, plus or
minus realized or unrealized capital gains and losses, and less the current
mortality and expense risk charge (.50% per annum) and the policy benefit charge
(0.27% per annum).
The following Sub-Account performance figures do not reflect three significant
charges. If these charges were included, the total return figures would be
lower. First, cost of insurance charges have not been deducted. Second, the
surrender charges have not been deducted. Third, the administrative charge
(currently $8.50 per month) has not been deducted. For an example of the effect
of the deduction of the surrender charge, compare the "Cash Surrender Value" to
the corresponding "Account Value" in the hypothetical illustrations on pages
____ to _____.
Average Annual Total Return of the Sub-Account (1)
- -----------------------------------------------------------------------------------------------------------
FROM
PORTFOLIO - INCEPTION
INCEPTION DATE 1 YR. 3 YR. 5 YR. 10 YR. DATE
- -----------------------------------------------------------------------------------------------------------
VIST Small Cap Growth - 5/95 (2)(5)
- -----------------------------------------------------------------------------------------------------------
VIST World Equity - 6/88 (3)(5)
- -----------------------------------------------------------------------------------------------------------
VIST Growth - 6/88 (2)(3)(5)
- -----------------------------------------------------------------------------------------------------------
VIST Matrix Equity - 6/88 (3)(4)(5)
- -----------------------------------------------------------------------------------------------------------
VIST Growth & Income - 5/95 (5)
- -----------------------------------------------------------------------------------------------------------
VIST Multiple Strategies - 5/87 (3)(5)
- -----------------------------------------------------------------------------------------------------------
VIST High Income Bond - 6/87 (3)(5)
- -----------------------------------------------------------------------------------------------------------
VIST US Gov. Bond - 5/87 (3)(5)
- -----------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II - 11/94 (5)
- -----------------------------------------------------------------------------------------------------------
(1) The Separate Account commenced operations on March 31, 1997 to fund a
modified single premium variable life insurance policy (Form 8960) not described
in this prospectus. Because that policy's charges differ from those of the
Policy, the performance information shown is hypothetical only, based on the
assumptions stated.
(2) Prior to May 1, 1997, the VIST Small Cap Growth Portfolio was named the VIST
"Small Cap Portfolio," and the VIST Growth Portfolio was named the VIST "Common
Stock Portfolio."
(3) On April 1, 1994, First Variable Advisory Services Corp., an affiliate of
the Company, became the investment advisor. Prior to that date, results were
achieved by former investment advisers.
(4) Prior to May 1, 1997, the VIST Matrix Equity Portfolio was named the VIST
"Tilt Utility Portfolio" and had different investment policies.
(5) Performance information reflects any fee waivers and expense reimbursements
with respect to the Portfolios. Absent such waivers or reimbursements, the
performance shown would have been lower.
Performance information for any Sub-Account reflects only the performance of a
hypothetical investment in the Sub-Account during the particular time period on
which the calculations are based. Performance information should be considered
in light of the investment objectives and policies, characteristics and quality
of the Portfolio in which the Sub-Account 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. Actual returns may be more or less than
those shown and will depend on a number of factors, including the investment
allocations by an Owner and the different investment rates of return for the
Portfolios.
41
42
APPENDIX: B
ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES,
CASH SURRENDER VALUES AND ACCUMULATED VALUE OF PREMIUMS
The tables in Appendix B illustrate the way the Policies operate. They show how
the Death Benefit, Cash Surrender Value and Account Value change over an
extended period of time assuming hypothetical gross rates of return (i.e.
investment income and capital gains, realized or unrealized) for the Separate
Account equal to constant after-tax annual rates of 0%, 6% and 12%. The tables
are based on payment of an annual premium of $1,275 for a male Age 45 and $2,100
for a male Age 55; and a Face Amount of $100,000. The males aged 45 and 55 are
assumed to be in the Preferred - standard premium risk class. The tables are
first given based on current (i.e., non-guaranteed) premium load, administrative
expense charge, cost of insurance rates, and mortality and expense risk charge,
and the policy benefit charge and expected Premium Value Bonuses and Cash Value
Bonuses beginning in the 9th Policy Year. The next tables are based on the
guaranteed premium load, administrative expense charge, cost of insurance rates,
and mortality and expense risk charge, and the policy benefit charge and the
guaranteed Premium Value Bonuses beginning in the 9th Policy Year.
The Death Benefits, Cash Surrender Values and Account Values shown in the tables
also reflect a simple average of the investment advisory fees and operating
expenses incurred by the Portfolios, at an annual rate of 1.12% of the average
daily net assets of the Portfolios. This average reflects a voluntary cap on the
investment advisory fees. If the investment adviser discontinues these caps, the
values illustrated on the following pages could be less. (See "Highlights")
Taking account of the charges for mortality and expense risks and administrative
expense in the Separate Account and the average investment advisory fee and
operating expenses of the Portfolios, the gross current annual rates of return
of 0%, 6% and 12% correspond to net investment experience at constant annual
rates of -1.62%, 4.38% and 10.38%, respectively, for the "current" tables, and
- -2.02%, 3.98% and 9.98% respectively, for the "guaranteed" tables. The
hypothetical rates of return shown in the tables do not reflect any tax charges
attributable to the Separate Account since no such charges are currently made.
If any such charges are imposed in the future, the gross annual rate of return
would have to exceed the rates shown by an amount sufficient to cover the tax
charges, in order to produce the Death Benefits, Cash Surrender Values and
Account Values illustrated. (See "Taxation of the Company and the Separate
Account.")
The second column of each table shows the amount which would accumulate if the
assumed premiums were invested to earn interest, after taxes of 5% per year,
compounded annually.
42
43
MALE ISSUE AGE 45
PREFERRED STANDARD PREMIUM RATE CLASS - $1,275 ANNUAL PREMIUM
$100,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
CURRENT POLICY CHARGES AND BONUS FACTORS
Values Based on Assumed Hypothetical Gross Investment Returns of:
-------------------------------------------------------------------------------------------------
0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
Premiums ----------------------------- ----------------------------- -------------------------------
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
------ ----------- ------- --------- ------- ------- --------- ------- ------- --------- -------
1
2
3 [TO BE FILED BY PRE-EFFECTIVE AMENDMENT.]
4
5
6
7
8
9
10
15
20
25
30
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following nonguaranteed factors for Policy Years 9 and after:
Premium Value Percentage: 11% Cash Value Bonus Factors: Cash Surrender Value less than $25,000: .00%
Cash Surrender Value $25,000 to $100,000: .10%
Cash Surrender Value $100,001 or more: .15%
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATIVE OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING ECONOMIC CONDITIONS,
PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND ACCOUNT VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES AVERAGED 0%, 6% AND 12%
OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
43
44
MALE ISSUE AGE 45
PREFERRED STANDARD PREMIUM RATE CLASS - $1,275 ANNUAL PREMIUM
$100,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
GUARANTEED POLICY CHARGES AND BONUS FACTORS
Values Based on Assumed Hypothetical Gross Investment Returns of:
-------------------------------------------------------------------------------------------------
0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
Premiums ----------------------------- ----------------------------- -------------------------------
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
------ ----------- ------- --------- ------- ------- --------- ------- ------- --------- -------
1
2
3 [TO BE FILED BY PRE-EFFECTIVE AMENDMENT.]
4
5
6
7
8
9
10
15
20
25
30
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following guaranteed factors for Policy Years 9 and after:
Premium Value Percentage: 6% Cash Value Bonus Factor: .00%
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATIVE OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING ECONOMIC CONDITIONS,
PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND ACCOUNT VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES AVERAGED 0%, 6% AND 12%
OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
44
45
MALE ISSUE AGE 55
PREFERRED STANDARD PREMIUM RATE CLASS - $2,100 ANNUAL PREMIUM
$100,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
CURRENT POLICY CHARGES AND BONUS FACTORS
Values Based on Assumed Hypothetical Gross Investment Returns of:
-------------------------------------------------------------------------------------------------
0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
Premiums ----------------------------- ----------------------------- -------------------------------
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
------ ----------- ------- --------- ------- ------- --------- ------- ------- --------- -------
1
2
3 [TO BE FILED BY PRE-EFFECTIVE AMENDMENT.]
4
5
6
7
8
9
10
15
20
25
30
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following nonguaranteed factors for Policy Years 9 and after:
Premium Value Percentage: 11% Cash Value Bonus Factors: Cash Surrender Value less than $25,000: .00%
Cash Surrender Value $25,000 to $100,000: .10%
Cash Surrender Value $100,001 or more: .15%
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATIVE OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING ECONOMIC CONDITIONS,
PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND ACCOUNT VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES AVERAGED 0%, 6% AND 12%
OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
45
46
MALE ISSUE AGE 55
PREFERRED STANDARD PREMIUM RATE CLASS - $2,100 ANNUAL PREMIUM
$100,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
GUARANTEED POLICY CHARGES AND BONUS FACTORS
Values Based on Assumed Hypothetical Gross Investment Returns of:
-------------------------------------------------------------------------------------------------
0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
Premiums ----------------------------- ----------------------------- -------------------------------
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
------ ----------- ------- --------- ------- ------- --------- ------- ------- --------- -------
1
2
3 [TO BE FILED BY PRE-EFFECTIVE AMENDMENT.]
4
5
6
7
8
9
10
15
20
25
30
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following guaranteed factors for Policy Years 9 and after:
Premium Value Percentage: 6% Cash Value Bonus Factor: .00%
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATIVE OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING ECONOMIC CONDITIONS,
PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND ACCOUNT VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES AVERAGED 0%, 6% AND 12%
OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
46
47
APPENDIX C: FINANCIAL STATEMENTS
The financial statements of the Company contained in this prospectus should be
considered to bear only upon the ability of the Company to meet its obligations
under the Policies. They should not be considered as bearing upon the investment
experience of the separate account.
[To be filed by Pre-Effective Amendment]
47
48
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15 (d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING REGARDING INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act
of 1933 ("Act") may be permitted to directors and officers and controlling
persons of the Registrant and the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
In accordance with section 26(e) of the Investment Company Act of 1940, First
Variable Life Insurance Company represents that the fees and charges deducted
under the Policies described in this Registration Statement on Form S-6, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by First Variable Life Insurance
Company. First Variable Life Insurance Company bases its representation on its
assessment of all the facts and circumstances, including such relevant factors
as: the nature and extent of such services, expenses and risks, the need for
First Variable Life Insurance Company to earn a profit, the degree to which the
Policies include innovative features, and regulatory standards for the grant of
exemptive relief under the Investment Company Act of 1940 used prior to October
1996, including the range of industry practice. This representation applies to
all Policies sold pursuant to this Registration Statement, including those sold
on the terms specifically described in the prospectus contained herein, or in
any variations thereof based on supplements, endorsements, or riders to any
Policies or prospectus, or otherwise.
48
49
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference Sheet.
The prospectus consisting of _________________ pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The representation pursuant to section 26(e) under the Investment Company Act
of 1940.
The signatures.
Written consents of the following persons:
Arnold R. Bergman (See Exhibit 3)
Martin Sheerin (See Exhibit 6 (a))
Ernst & Young, LLP (See Exhibit 7)
The following exhibits:
1.A (1) Resolution of the Board of Directors of the Company authorizing the
establishment of the Separate Account.*
(2) Not Applicable.
(3) (a) Underwriting Agreement.* *
(b) Broker-Dealer Agreement.* *
(c) Form of Sales Agreement.* * *
(4) Not Applicable.
(5) Specimen Variable Life Insurance Policy. * * * *
(6) (a) Articles of Incorporation of First Variable Life Insurance
Company.# # (b) By-Laws of First Variable Life Insurance Company.* *
(7) Not Applicable.
(8) Form of Participation Agreement.* * *
(9) Not Applicable.
(10) Specimen Flexible Premium Variable Life Insurance Application. * * * *
2. Opinion and consent of Arnold R. Bergman, Vice President, Legal and
Administration, as to securities being registered. * * * *
3. Not Applicable.
4. Not Applicable
5. (See Exhibit 27)
49
50
6. Opinion and consent of Actuary.# # #
7. Consent of , Independent Auditors. # # #
8. Powers of Attorney. * * * *
27. Financial Data Schedule. # # #
----------
* Incorporated herein by reference to the Form S-6 Registration
Statement of First Variable Life Insurance Company and Separate
Account VL, filed electronically with the Securities and Exchange
Commission on June 3, 1996 (File No. 333-05053).
* * Incorporated herein by reference to Pre-Effective Amendment No. 1
to the Form S-6 Registration Statement of First Variable Life
Insurance Company and Separate Account VL, filed electronically
with the Securities and Exchange Commission on November 15, 1996
(File No. 333-05053).
* * * Incorporated herein by reference to Post-Effective Amendment No.
22 to the Form N-4 Registration Statement of First Variable Life
Insurance Company and First Variable Annuity Fund E, filed
electronically with the Securities and Exchange Commission on
September 18, 1996 (File Nos. 333-12197, 811-04092).
* * * * Filed herewith.
# Incorporated herein by reference to the Form S-6 Registration
Statement of First Variable Life Insurance Company and Separate
Account VL, filed electronically with the Securities and Exchange
Commission on January 3, 1997 (File No. 333-19193).
# # Incorporated herein by reference to Post-Effective Amendment No.
21 to the Form N-4 Registration Statement of First Variable Life
Insurance Company and First Variable Annuity Fund E, filed
electronically with the Securities and Exchange Commission on
April 29, 1996 (File Nos. 33-86738, 811-04092).
# # # To be filed by future pre-effective amendment.
50
51
EXHIBIT INDEX
Filed herewith, as indicated on the Exhibit list.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the First
Variable Life Insurance Company has duly caused this Pre-Effective Amendment No.
1 to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, on the 31st day of October, 1997.
First Variable Life Insurance Company
By: /s/ John M. Soukup
------------------
John M. Soukup
President
ATTEST:
/s/ Arnold R. Bergman
- ---------------------
Arnold R. Bergman
Secretary
51
52
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Separate Account VL of First Variable Life Insurance Company, has duly caused
this Pre-Effective Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, on the 31st day of
October, 1997.
Separate Account VL of
First Variable Life Insurance Company
(Registrant)
By: First Variable Life Insurance Company
(Depositor)
By: /s/ John S. Soukup
------------------
John M. Soukup
President
ATTEST:
/s/ Arnold R. Bergman
- ---------------------
Arnold R. Bergman
Secretary
52
53
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities indicated with First Variable
Life Insurance Company, on the 31st day of October, 1997.
PRINCIPAL EXECUTIVE OFFICER
/s/ John M. Soukup
- ------------------
John M. Soukup
President
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
/s/ John V. Egan
- ----------------
John V. Egan
Vice President & Treasurer
DIRECTORS
/s/ Ronald M. Butkiewicz*
- ------------------------
Ronald M. Butkiewicz
/s/ John M. Soukup
- ------------------
John M. Soukup
/s/ Michael J. Corey*
- --------------------
Michael J. Corey
/s/ Michael R. Ferrari*
- ----------------------
Michael R. Ferrari
/s/ T. David Kingston*
- ----------------------
T. David Kingston
/s/ Jeff S. Liebmann*
- ---------------------
Jeff S. Liebmann
53
54
/s/ Kenneth R. Meyer
- --------------------
Kenneth R. Meyer
/s/ Philip R. O'Connor*
- -----------------------
Philip R. O'Connor
/s/ Norman A. Fair*
- -------------------
Norman A. Fair
/s/ Thomas K. Neavins*
- ----------------------
Thomas K. Neavins
/s/ S. Shone
- ------------
Stephen Shone
* By: /s/ Arnold R. Bergman
---------------------
Arnold R. Bergman
Attorney-in-Fact
October 31, 1997
54