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As filed with the Securities and Exchange Commission on January __, 1996
File No. 333-
File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. ___ [_]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. ___ [_]
STATE FARM LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
STATE FARM LIFE INSURANCE COMPANY
(Name of Depositor)
One State Farm Plaza
Bloomington, Illinois 61710-0001
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (309) 766-0886
Laura P. Sullivan
One State Farm Plaza
Bloomington, Illinois 61710-0001
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
hereby elects to register an indefinite amount of the securities being offered.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant files a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE SHEET
Pursuant to Rules 481(a) and 495(a)
Showing location in Part A (prospectus) and Part B (Statement of Additional
Information) of registration statement of information required by Form N-4
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PART A
ITEM OF FORM N-4 PROSPECTUS CAPTION
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1. Cover Page....................... Cover Page
2. Definitions...................... Index of Terms
3. Synopsis......................... Fee Table; Profile
4. Condensed Financial Information.. How is the performance of the Policy presented?
5. General
(a) Depositor.................... What other information should I know?
(b) Registrant................... What other information should I know?
(c) Portfolio Company............ What are my allocation options under the Policy?
(d) Fund Prospectus.............. Cover Page
(e) Voting Rights................ What other information should I know?
(f) Administrators............... What other information should I know?
6. Deductions and Expenses
(a) General...................... What are the expenses under the Policy?
(b) Sales Load %................. Fee Table; Example
(c) Special Purchase Plan........ How do I purchase a Policy?
(d) Commissions.................. What other information should I know?
(e) Fund Expenses................ Fee Table; Example
(f) Expenses - Registrant........ Fee Table; What are the expenses under the Policy?
(g) Organizational Expenses...... N/A
7. Contracts
(a) Persons with Rights.......... What is the Policy?; What are my annuity options?; How do I invest
in a Policy?; How do I access my money?; What other information
should I know?
(b)(i) Allocation of Purchase
Payments.................. What are my allocation options?
(ii) Transfers................ What are my allocation options?
(iii) Exchanges................ N/A
(c) Changes...................... What other information should I know?
(d) Inquiries.................... What other information should I know?
8. Annuity Period................... What are my annuity options?
9. Death Benefit.................... Does the Policy have a Death Benefit?
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10. Purchases and Contract Value
(a) Purchases.................... How do I purchase a Policy?
(b) Valuation.................... What are my allocation options under the Policy?
(c) Daily Calculation............ What are my allocation options under the Policy?
(d) Underwriter.................. What other information should I know?
11. Redemptions
(a) - By Owners.................. How do I access my money?
- By Annuitant............... What are my annuity options?
(b) Texas ORP.................... N/A
(c) Check Delay.................. N/A
(d) Lapse........................ N/A
(e) Free Look.................... What else should I know about the Policy?
12. Taxes........................... How will my investment in the Policy be taxed?
13. Legal Proceedings............... What other information should I know
about the Policy?
14. Table of Contents for the
Statement of Additional
Information.................... Table of Contents of the Statement of
Additional Information
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<CAPTION>
PART B
ITEM OF FORM N-4 PART B CAPTION
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15. Cover Page...................... Cover Page
16. Table of Contents............... Table of Contents
17. General Information and
History......................... N/A
18. Services
(a) Fees and Expenses of
Registrant................... N/A
(b) Management Contracts......... N/A
(c) Custodian.................... N/A
Independent Public
Accountant................... Experts
(d) Assets of Registrant......... N/A
(e) Affiliated Persons........... N/A
(f) Principal Underwriter........ Distribution of the Policies
19. Purchase of Securities
Being Offered................... Distribution of the Policies
Offering Sales Load............. N/A
20. Underwriters.................... Distribution of the Policies
21. Calculation of Performance
Data............................ Calculation of Historical Performance Data
22. Annuity Payments................ Annuity Payment Provisions
23. Financial Statements............ Financial Statements
PART C -- OTHER INFORMATION
ITEM OF FORM N-4 PART C CAPTION
24. Financial Statements and
Exhibits........................ Financial Statements and Exhibits
(a) Financial Statements......... (a) Financial Statements
(b) Exhibits..................... (b) Exhibits
25. Directors and Officers of
the Depositor................... Directors and Officers of the Depositor
26. Persons Controlled By or
Under Common Control
with the Depositor or Persons Controlled By or under Common Control with the Depositor
Registrant...................... or Registrant
27. Number of Contract Owners....... Number of policy owners
28. Indemnification................. Indemnification
29. Principal Underwriters.......... Principal Underwriter
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30. Location of Accounts and
Records......................... Location of Books and Records
31. Management Services............. Management Services
32. Undertakings.................... Undertakings and Representations
Signature Page.................. Signatures
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PROFILE DATED _________________, 1997
STATE FARM VARIABLE ANNUITY POLICY
STATE FARM LIFE INSURANCE COMPANY VARIABLE
ANNUITY SEPARATE ACCOUNT
OF STATE FARM LIFE INSURANCE COMPANY
One State Farm Plaza
Bloomington, Illinois
61710-0001
Telephone:(800) XXX-XXXX
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING A POLICY. THE POLICY IS MORE FULLY
DESCRIBED IN THE FULL PROSPECTUS THAT ACCOMPANIES THIS PROFILE. PLEASE READ
THAT PROSPECTUS CAREFULLY.
"We," "us," and "our" refer to State Farm Life Insurance Company.
"You" and "your" refer to the owner of a Policy.
1. WHAT IS THE POLICY? The Policy is a contract between you and us, State
Farm Life Insurance Company. We have designed the Policy to be both an
investment vehicle and a source of lifetime retirement income. You purchase the
Policy by paying an initial premium or by making periodic premium payments, or
both, and you add money when you can. When you want annuity payments to begin,
you choose an "Annuity Date," and we will start sending you payments. There are
also other ways to access your money, each of which is discussed below.
The Policy permits you to allocate premiums to six subdivisions, or
"subaccounts," of the State Farm Life Insurance Company Variable Annuity
Separate Account (the "Variable Account"). Each subaccount invests in a
corresponding investment portfolio (each, a "Fund") of the State Farm Variable
Product Trust. Any premiums you allocate to the Funds will fluctuate depending
on market conditions. Therefore, you bear the investment risk on your Policy
value in the Funds. If you allocate premiums to our fixed account (the "Fixed
Account"), we will guarantee principal and interest. The Policy value you
accumulate before the Annuity Date will determine the amount of annuity payments
you receive.
The Policy offers important features. The Funds are professionally managed.
Your earnings generally grow tax-free until withdrawn, although if you withdraw
money before you are 59 1/2 years old, you may have to pay a 10% IRS tax
penalty. When you decide you want to start receiving annuity payments, you can
choose an annuity option that will provide you with a lifetime income.
2. WHAT ARE MY ANNUITY OPTIONS? When you want to begin receiving annuity
payments, you can choose from four annuity options. If you choose a "life
annuity," you will receive payments as long as the Annuitant lives (for example,
if you have named yourself as the Annuitant, you will receive payments for as
long as you live). If you choose a "life annuity with certain period," you will
receive payments as long as the Annuitant lives or to the end of the certain
period, if longer. If you choose a "joint and last survivor life annuity," you
will receive payments as long as the Annuitant or a second designated person
(such as your spouse) is alive. If you choose a "fixed year annuity," you will
receive payments for the number of years chosen.
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We will use the money you have accumulated under your Policy to provide
annuity payments. We will deduct a surrender charge unless your Policy has been
in force for at least five years and you choose any one of the annuity options
described above except for the "fixed year" option. You tell us how much of your
money to apply to fixed annuity payments and how much to apply to variable
annuity payments. Policy value that you apply to provide fixed annuity payments
will be allocated to the Fixed Account, and the amount of each annuity payment
will be the same. Policy value that you apply to provide variable annuity
payments will be allocated to the Funds you select, and the amount of each
annuity payment will vary according to the investment performance of those
Funds.
3. HOW DO I PURCHASE A POLICY?
You can purchase a Policy through any one of our authorized agents. Under
most circumstances, the minimum initial premium for a non-tax-qualified Policy
is $1,200 and $600 for tax-qualified Policies. (If you participate in our
special monthly purchase plan, you may pay monthly premiums of $100 or more for
non-tax-qualified plans and $50 or more for tax-qualified plans). The minimum
initial premium requirements are higher if you are age 66 or more. You may pay
additional premiums of at least $50 at any time before the Annuity Date.
4. WHAT ARE MY ALLOCATION OPTIONS?
There are seven different allocation options under the Policy. You can
allocate premiums to one or more of the six "subaccounts" of the Variable
Account. Each subaccount, in turn, invests in a corresponding Fund of the State
Farm Variable Product Trust. The six Funds are:
Large Cap Equity Index Fund Bond Fund
Small Cap Equity Index Fund Money Market Fund
Stock and Bond Balanced Fund International Equity Index Fund
You can also allocate premiums to the Fixed Account. We will pay you
interest on your Policy value in the Fixed Account at an effective annual rate
of at least 3%.
5. WHAT ARE THE EXPENSES UNDER THE POLICY?
Insurance Charges. Once each year, we deduct a $30 Annual Administrative
Fee. We currently waive this charge if the amount of total premiums you have
paid is at least $50,000. We also deduct a daily mortality and expense risk
charge from the assets of the Variable Account, currently equal on an annual
basis to 1.15%.
Surrender Charge. State Farm may deduct a surrender charge when you make a
withdrawal or surrender the Policy, when you take annuity payments, or when
proceeds are paid upon your death (unless you are also the Annuitant). We will
not deduct a surrender charge if the Policy has been in force at least five
Policy years and the applicable proceeds are applied under
2
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any of the annuity options except for the "fixed year" option. No surrender
charge is deducted when a Death Benefit is paid upon the Annuitant's death,
regardless of how many Policy years have elapsed or how the Death Benefit is
paid. The surrender charge is calculated as a percentage of the amount
withdrawn or surrendered. The applicable percentage is 7% in the first Policy
Year, and declines by 1% in each following Policy Year, until it reaches 0% in
the eighth Policy Year.
Fund Expenses. There are Fund expenses that range on an annual basis from
.__% to 1.__% of the average daily value of your money invested in the Funds.
The following chart is designed to help you understand the expenses that
you will pay when you invest in the Policy. The column "Total Annual Insurance
Charges" shows the total of the $30 Annual Administrative fee and the 1.15%
mortality and expense risk charge. The column "Total Annual Fund Charges" shows
the investment charges for each Fund. The column "Total Annual Charges" shows
the combined total of the Total Annual Insurance Charges and Total Annual Fund
Charges columns. The next two columns show you two examples of the charges, in
dollars, you would pay under a Policy. The examples assume that you invested
$1,000 in a Policy that earns 5% annually and that you withdraw your money: (1)
at the end of year 1, and (2) at the end of year 10. For year 1, all charges
under the Policy, including a surrender charge, are deducted. For year 10, the
example shows all charges under the Policy assessed over a ten year period under
the Policy, but a surrender charge is not deducted.
<TABLE>
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Examples: Total Annual
Expenses at End of:
Total Annual Total Annual Total Annual (1) (2)
Fund Insurance Charges Fund Charges Charges 1 Year 10 Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large Cap Equity Index Fund
Small Cap Equity Index Fund
Stock and Bond Balanced
Fund
Bond Fund
Money Market Fund
International Equity Index
Fund
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</TABLE>
3
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6. HOW WILL MY INVESTMENT IN THE POLICY BE TAXED?
You should consult a qualified tax advisor with regard to your Policy.
Generally, taxation of earnings under variable annuities is deferred until
amounts are withdrawn and distributions made. The deferral of taxes on earnings
under variable annuity policies is designed to encourage long-term personal
savings and supplemental retirement plans. The taxable portion of a withdrawal
or distribution is taxed as ordinary income.
7. HOW DO I ACCESS MY MONEY?
Prior to the Annuity Date, if you want to take money out of your Policy,
you can choose among several different options. You can withdraw part of your
money. You can surrender the Contract, taking the proceeds as a single lump sum
payment or applying the proceeds to an annuity option. You can also take
withdrawals using our systematic withdrawal program after the Annuity Date, if
you have selected Annuity Option, you may request withdrawals.
8. HOW IS THE PERFORMANCE OF THE POLICY PRESENTED?
As of the date of this Profile, neither the Subaccounts nor the Funds
have commenced operations. Therefore, no performance data is presented.
9. DOES THE POLICY HAVE A DEATH BENEFIT?
The Policy offers a minimum Death Benefit if the Annuitant dies before the
Annuity Date. The amount of the Death Benefit will be the greater of (1) the sum
of all premiums paid less any withdrawals and less any applicable surrender
charges deducted, and (2) the value of your Policy. Both amounts will be
determined as of the date we receive due proof of death.
10. WHAT OTHER INFORMATION SHOULD I KNOW?
The Policy has several additional features that you may be interested in,
including the following.
FREE LOOK RIGHT. You should know that you have a "free-look right"; that
is, the right to return the Policy to us at our Home Office or to an authorized
State Farm agent and have us cancel the Policy within a certain number of days
(usually 10 days from the date you receive the Policy, but some states require
different periods). If you exercise this right, we will cancel the Policy as of
the day of mailing or delivery and send you a refund equal to the greater of (1)
the premiums paid under the Policy during the free-look period, and (2) your
Policy value (without the deduction of a surrender charge).
TRANSFERS. On or before the Annuity Date, you may transfer Policy value
from one Subaccount to another Subaccount(s) or to the Fixed Account. The
minimum amount of Policy value that may be transferred from a Subaccount is
$250, or, if less, the entire Policy value in that
4
<PAGE>
Subaccount. You may also transfer Policy value from the Fixed Account to
another Subaccount(s), but only once each Policy year and only during the 30-day
period following the end of each Policy year. The maximum amount that may be
transferred from the Fixed Account is generally the greater of 25% of the Policy
value in the Fixed Account or $1,000.
After the Annuity Date the only type of transfer permitted is a transfer of
Policy value used to provide variable annuity payments from one Subaccount to
another Subaccount.
DOLLAR-COST AVERAGING. Our dollar-cost averaging program permits you to
systematically transfer a set dollar amount from the Subaccount investing in the
Money Market Fund or the Subaccount investing in the Bond Fund to any
Subaccounts and/or the Fixed Account, subject to certain limitations. The
dollar-cost averaging method of investment is designed to reduce the risk of
making purchases only when the price of units in the Policy is high.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing program will
reallocate on a periodic basis your Policy value among the Subaccounts and the
Fixed Account to return to the percentages you have chosen. Certain limitations
apply.
SYSTEMATIC WITHDRAWAL PROGRAM. Our systematic withdrawal program provides
an automatic monthly, quarterly, semi-annual or annual payment to you from the
amounts you have accumulated in the Subaccounts and/or the Fixed Account.
Certain restrictions apply.
11. HOW CAN I MAKE INQUIRIES?
If you need further information about the Policy, please write us at our
home office, call us at (800) XXX-XXXX, or contact an authorized State Farm
Agent. The address of our home office is:
State Farm Life Insurance Company
One State Farm Plaza
Bloomington, Illinois 61710-0001
Telephone: (800) XXX-XXXX.
5
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PROSPECTUS DATED ___________________, 1997
STATE FARM VARIABLE ANNUITY POLICY
STATE FARM LIFE INSURANCE COMPANY VARIABLE ANNUITY
SEPARATE ACCOUNT
OF STATE FARM LIFE INSURANCE COMPANY
One State Farm Plaza
Bloomington, Illinois 61710-0001
Telephone: (800) XXX-XXXX
UNLESS OTHERWISE INDICATED, THIS PROSPECTUS DESCRIBES THE OPERATION OF THE
POLICY BEFORE THE ANNUITY DATE. DEFINITIONS OF CERTAIN TERMS USED IN THIS
PROSPECTUS MAY BE FOUND BY REFERRING TO THE INDEX OF TERMS.
This prospectus describes a variable annuity policy (the "Policy") offered
by State Farm Life Insurance Company ("State Farm," "we," "us," or "our"). The
Policy is designed to be both an investment vehicle and a source of lifetime
retirement income. The purchaser of a Policy (the "Owner," "you," or "your") can
purchase the Policy by making a minimum initial premium payment, by making
periodic payments under a special monthly purchase plan or both. The Owner then
determines the amount and timing of additional premium payments.
The Owner may allocate premiums and transfer Policy Accumulation Value to
the State Farm Life Insurance Company Variable Annuity Separate Account (the
"Variable Account") and also to State Farm's general account (the "Fixed
Account"), within certain limits. The Variable Account is divided into
subaccounts (each, a "Subaccount"). Each Subaccount invests in a corresponding
investment portfolio (each, a "Fund") of State Farm Variable Product Trust (the
"State Farm Fund"). The Funds currently available are the Large Cap Equity Index
Fund, Small Cap Equity Index Fund, Stock and Bond Balanced Fund, Bond Fund,
Money Market Fund, and International Equity Index Fund. The accompanying
prospectus for the State Farm Fund describes each of the Funds, including the
risks of investing in each Fund, and provides other information about the State
Farm Fund.
The Policy provides for a Cash Surrender Value. Because this value is
based on the performance of the Funds, to the extent of allocations to the
Variable Account, there is no guaranteed Cash Surrender Value or guaranteed
minimum Cash Surrender Value. On any given day, the Cash Surrender Value could
be more or less than the premiums paid. The Policy also permits withdrawals,
within certain limits. The Policy provides additional benefits, including four
annuity options, a minimum Death Benefit upon the Annuitant's death, and dollar
cost averaging, portfolio rebalancing and systematic withdrawal programs.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE. A
PROSPECTUS FOR STATE FARM VARIABLE PRODUCT TRUST MUST ACCOMPANY THIS PROSPECTUS
AND SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
INDEX OF TERMS..................................................................
FEE TABLE.......................................................................
EXAMPLE.........................................................................
1. What is the Policy?...................................................
2. What are my annuity options?..........................................
3. How do I purchase a Policy?...........................................
Applying for a Policy............................................
Initial Premium..................................................
Issuance of a Policy.............................................
Free Look Right to Cancel Policy.................................
Making Additional Premium Payments...............................
4. What are my allocation options?.......................................
Premium Allocations..............................................
Subaccount Options...............................................
Fixed Account Option.............................................
Transfers........................................................
Dollar-Cost Averaging............................................
Portfolio Rebalancing Program....................................
Policy Accumulation Value........................................
Cash Surrender Value.............................................
Subaccount Policy Accumulation Value
Accumulation Unit Values.........................................
Net Investment Factor............................................
Fixed Policy Accumulation Value..................................
5. What are the expenses under the Policy?...............................
Surrender Charge.................................................
Annual Administrative Fee........................................
Transfer Processing Fee..........................................
Mortality and Expense Risk Charge................................
Fund Expenses....................................................
6. How will my investment in the Policy be taxed?........................
Introduction.....................................................
Tax Status of the Policies.......................................
Tax Treatment of Annuities.......................................
Taxation of Qualified Plans......................................
Other Tax Consequences...........................................
7. How do I access my money?.............................................
Withdrawals......................................................
Surrenders.......................................................
Systematic Withdrawal Program....................................
Requesting Payments and Telephone Transactions...................
8. How is the performance of the Policy presented?.......................
9. Does the Policy have a Death Benefit?.................................
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10. What other information should I know?.................................
State Farm and the Variable Account..............................
Modification.....................................................
Distribution of the Policies.....................................
Legal Proceedings................................................
Reports to Owners................................................
Financial Statements.............................................
11. How do I make inquiries?..............................................
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
ii
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INDEX OF TERMS
ACCUMULATION UNIT - A unit of measure used to calculate Variable Policy
Accumulation Value.
ACCUMULATION UNIT VALUE - The value of a Subaccount's Accumulation Unit. A
Subaccount's Accumulation Unit Value varies to reflect the performance of the
underlying Fund, and may increase or decrease from Valuation Day to Valuation
Day.
ANNUITY DATE - You may choose this date, which can be no later than the Final
Annuity Date. If a Death Benefit is payable and an annuity option is chosen, the
Annuity Date will be the date we receive due proof of the Annuitant's death.
Payment intervals start on this date. The first annuity payment is at the end
of the first payment interval.
CASH SURRENDER VALUE - The Policy Accumulation Value less any applicable
Surrender Charge and less any applicable Annual Administrative Fee.
CODE - The United States Internal Revenue Code, as amended.
DOLLARS - Any money we pay, or which is paid to us, must be in United States
dollars.
FINAL ANNUITY DATE - The Policy Anniversary when the Annuitant is age 95 (85 in
Pennsylvania).
FIXED ACCOUNT - Part of our General Account to which Policy Accumulation Value
may be transferred or premium payments may be allocated under a Policy.
FIXED ANNUITY PAYMENT - An annuity payment supported by our General Account.
Payment does not vary from one payment to the next.
FIXED POLICY ACCUMULATION VALUE - The Policy Accumulation Value in the Fixed
Account.
GENERAL ACCOUNT - Our assets not allocated to the Variable Account or any other
separate account.
HOME OFFICE - One State Farm Plaza, Bloomington, Illinois 61710-0001.
INITIAL PREMIUM PAYMENT - The amount shown in the Policy that was paid on the
Policy Date.
NET ASSET VALUE PER SHARE - The value per share of any Fund on any Valuation
Day. The method of computing the Net Asset Value Per Share is described in the
prospectus for the State Farm Fund.
PAYEE - If the Annuitant dies prior to the Annuity Date and a Death Benefit is
payable, the beneficiaries shown in the application, unless changed. If you
cash surrender the Policy, the persons that you have named. A payee can be
other than a natural person only if we agree.
POLICY ACCUMULATION VALUE - The sum of the Variable Policy Accumulation Value
and the Fixed Policy Accumulation Value.
POLICY DATE - The effective date of this Policy.
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POLICY MONTH, YEAR, OR ANNIVERSARY - Each Policy Month, Year, or Anniversary is
measured from the Policy Date.
REQUEST - A written request signed by the person making the request. Such
request must be sent to and received by us and be in a form acceptable to us.
We may, in our sole discretion, accept telephone requests in connection with
certain transactions, in accordance with rules and procedures established by us.
SEC - The United States Securities and Exchange Commission.
SUBACCOUNT - A subdivision of the Variable Account, the assets of which are
invested in a corresponding Fund.
SUBACCOUNT POLICY ACCUMULATION VALUE - The Policy Accumulation Value in a
Subaccount.
SUCCESSOR OWNER - Your Successor Owner is named in the application if you are
not the Annuitant.
VALUATION DAY - Each day on which both the New York Stock Exchange and the Home
Office are open for business except for a day that a Subaccount's corresponding
Fund does not value its shares. The New York Stock Exchange is currently closed
on weekends and on the following holidays: New Year's Day; Presidents' Day;
Good Friday; Memorial Day; July Fourth; Labor Day; Thanksgiving Day; and
Christmas Day. During 1997, the Home Office is closed on the Friday after
Thanksgiving and the day after Christmas.
VALUATION PERIOD - The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
VARIABLE ACCOUNT - A separate account of ours consisting of Subaccounts to which
premium payments may be allocated or Policy Accumulation Value may be
transferred.
VARIABLE ANNUITY PAYMENT - An annuity payment that may vary in amount from one
payment to the next with the investment experience of one or more Subaccounts
you have chosen to support such payments.
VARIABLE POLICY ACCUMULATION VALUE - The sum of all Subaccount Policy
Accumulation Values.
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FEE TABLE
POLICY OWNER TRANSACTION EXPENSES
Surrender Charge/1/ % of Amount
Year Withdrawn
---- -----------
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8
and over 0%
Transfer Processing Fee No charge for first 12 transfers in a Policy
Year; thereafter, $25 fee per
transfer may be charged
Annual Administrative Fee $30
(waived if total premiums paid are
at least $50,000)
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of Variable Account Value)
Mortality and Expense Risk Charge 1.15%/2/
FUND ANNUAL EXPENSES
(as a percentage of average daily net assets of a Fund after reimbursement)
<TABLE>
<CAPTION>
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State Farm Investment Other Expenses Total Annual
Variable Product Trust Advisory Fees (after Expenses (after
reimbursement) reimbursement)
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<S> <C> <C> <C>
Large Cap Equity Index Fund __% __% __%
Small Cap Equity Index Fund __ __ __
Stock and Bond Balanced Fund __ __ __
Bond Fund __ __ __
Money Market Fund __ __ __
International Equity Index Fund __ __ __
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</TABLE>
____________________________
/1/ After the first Policy Year, you may withdraw a portion of your Policy
Accumulation Value without incurring a surrender charge. This amount is called
the "Free Withdrawal Amount." The Free Withdrawal Amount is equal to 10% of your
Policy Accumulation Value as of the previous Policy Anniversary. If the entire
10% is not withdrawn in a particular Policy Year, the unused Free Withdrawal
Amount does not carry over to the next Policy Year. The surrender charge may be
waived in certain additional circumstances. We cannot deduct more than 8 1/2% of
the total premiums you have paid under the Policy. See " Surrender Charge," page
___.
/2/ The amount shown in the Fee Table above reflects the mortality and
expense risk charge currently charged. The maximum mortality and expense risk
charge that we can charge is 1.25%. See "Mortality and Expense Risk Charge,"
page __.
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EXAMPLE
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You would pay the following 1. If you surrender or 2. If you do not
expenses on a $1,000 initial annuitize your Policy at surrender or annuitize
premium, assuming a 5% annual the end of the stated your Policy at the end of
return on assets and the charges time period: the stated time period:
and expenses listed in the Fee
Table above:
-------------------------------------------------------------------------------------------------------------
1 Year 3 Years 1 Year 3 Years
-------------------------------------------------------------------------------------------------------------
Large Cap Equity Index Fund $_____ $______ $______ $______
Small Cap Equity Index Fund $_____ $______ $______ $______
Stock and Bond Balanced Fund $_____ $______ $______ $______
Bond Fund $_____ $______ $______ $______
Money Market Fund $_____ $______ $______ $______
International Equity Index Fund $_____ $______ $______ $______
=============================================================================================================
</TABLE>
The purpose of the Fee Table is to assist you in understanding the expenses
that you will pay directly or indirectly when you invest in the Policy. The
amount of the Investment Advisory Fees in the Fee Table are the actual expenses
expected to be incurred in the current fiscal year. "Other Expenses" are based
on estimated amounts for the current fiscal year and reflect the fact that the
investment adviser to the State Farm Fund has agreed to reimburse each of the
Funds to the extent necessary to limit the Fund's "Total Expenses" to an amount
equal to twice the Fund's Investment Advisory Fees. Absent this expense
arrangement, estimated "Other Expenses" for the Large Cap Equity Index Fund,
Small Cap Equity Index Fund, Stock and Bond Balanced Fund, Bond Fund, Money
Market Fund, and International Equity Index Fund would have been ______%,
______%, _____%, _____%, ______%, and ______%, respectively.
The purpose of the Example is to demonstrate the effect of the expenses on
a $1,000 investment in the Variable Account. For a more complete description of
these expenses, see "What are the expenses under the Policy?," page __. The
expenses and fees for each Fund are described in the prospectus for the State
Farm Fund.
The Example assumes that the average Policy Accumulation Value is $30,000,
so that the Annual Administrative Fee is 0.10%. The Fee Table and the Example do
not reflect transfer processing fees. You might incur transfer processing fees
if you make more than twelve transfers in a Policy Year. See "Transfer
Processing Fee," page ___. The Fee Table and the Example assume that you have
invested all your money in the Variable Account.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE ASSUMED
5% ANNUAL RATE OF RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS
THAN THIS ASSUMED RATE.
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<PAGE>
1. WHAT IS THE POLICY?
The Policy is an individual deferred variable annuity policy offered by us,
State Farm Life Insurance Company. Under the terms of the Policy, we promise to
pay you annuity payments after the Annuity Date. Until the Annuity Date, you may
pay premiums under the Policy, and you will generally not be taxed on increases
in the value of your Policy as long as you do not take distributions. When you
use the Policy in connection with a tax-qualified retirement plan, federal
income taxes may be deferred on your premium payments, as well as increases in
the value of your Policy. See "How will my investment in the Policy be taxed?,"
page __. The Policy may not be available in all states.
When you pay premiums, you can allocate those premiums to one or more of
the six subdivisions of the Variable Account, known as "Subaccounts." Premiums
allocated to a Subaccount will be invested solely in a Fund, as you direct. Your
Policy value in a Subaccount, called the "Subaccount Policy Accumulation Value,"
will vary according to the performance of the corresponding Fund. Depending on
market conditions, your Subaccount Policy Accumulation Value in each Subaccount
could increase or decrease. The total of the Subaccount Policy Accumulation in
each Subaccount is called the Variable Policy Accumulation Value.
You can also allocate premiums to our Fixed Account. Your Policy value in
the Fixed Account is called the Fixed Policy Accumulation Value. When you
allocate premium to the Fixed Account, we guarantee principal and interest. See
"Fixed Account Option," page ___.
You can request that we transfer Policy Accumulation Value from one account
to another, subject to certain conditions. See "Transfers," page __.
2. WHAT ARE MY ANNUITY OPTIONS?
You choose the Annuity Date when you want annuity payments to begin. The
Annuity Date must come on or before the Final Annuity Date, which is the Policy
Anniversary when the Annuitant is age 95 (85 in Pennsylvania). You select an
annuity option from those listed below, and indicate whether you want your
annuity payments to be fixed or variable or a combination of fixed and variable.
If an annuity option for the Cash Surrender Value is not chosen by the Final
Annuity Date, Option 1 (described below) will be used on that date. On the
Annuity Date, the Cash Surrender Value under the Policy will be used to provide
annuity payments. If your Policy has been in force for at least five Policy
Years, and you choose Annuity Option 1, 2, or 3, no surrender charge will be
deducted. Unless you request otherwise, any money that you have invested in the
Subaccounts will be used to provide variable annuity income, and any money that
you have invested in the Fixed Account will be used to provide a fixed annuity
income.
Your first annuity payment, whether fixed or variable, will be based on the
amount of proceeds applied under the annuity option you have selected and on
"annuity purchase rates" based on the Annuitant's age and sex and, if
applicable, upon the age and sex of a second
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designated person. The annuity purchase rate that we apply will never be lower
than the rate shown in your Policy.
If you have told us you want fixed annuity payments, the payments will
always be the same as the first annuity payment. If you told us you want
variable annuity payments, the amount of variable annuity payments will vary
according to the investment performance of the Funds you have selected to
support your variable annuity payments.
You can choose either 1, 3, 6, or 12 month intervals to receive annuity
payments. Payment intervals start on the Annuity Date. The first annuity payment
is made at the end of the first payment interval. If any payment would be less
than $100, we may change the payment interval to the next longer interval. If on
the Annuity Date the payment for the 12 month interval is less than $100, we may
pay the Cash Surrender Value on that date in one sum.
We may require satisfactory proof that the Annuitant is living when each
annuity payment is due. If proof is required, payments will stop until such
proof is given. If any payment is made by check and the Annuitant personally
endorses the check on or after the date on which such payment is due, no other
proof will be required.
If you have selected Annuity Option 4, you may request withdrawals at any
time.
The available annuity options are:
. OPTION 1 - LIFE ANNUITY. Payments will be made to you at the end of
each payment interval as long as the Annuitant lives.
. OPTION 2 - LIFE ANNUITY WITH CERTAIN PERIOD. Payments will be made to
you at the end of each payment interval as long as the Annuitant lives
or to the end of the certain period, if longer. The certain period can
be any number of years from 5 to 20. You must choose the number of
years if you choose this option.
. OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY. Payments will be paid
to you at the end of each payment interval as long as the Annuitant or
a second designated person is alive. You must name the second person
on or before the Annuity Date.
. OPTION 4 - FIXED YEARS. Payments will be made to you at the end of
each payment interval for the number of years chosen. You must choose
the number of years from 5 to 30.
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3. HOW DO I PURCHASE A POLICY?
APPLYING FOR A POLICY. To purchase a Policy, you must complete an
application and submit it to an authorized State Farm agent. You must pay an
initial premium at least equal to the minimum required and/or make periodic
payments under a special monthly purchase plan. See "Initial Premium," below. We
reserve the right not to accept an application for any lawful reason.
INITIAL PREMIUM. The Policy may be purchased to use in connection with tax-
qualified plans, or it may be purchased on a non-tax-qualified basis. To
purchase a non-tax-qualified Policy, you may not be more than 85 years old on
the Policy Date. (You may not be more than 75 years old in Pennsylvania.) To
purchase a tax-qualified Policy, you must be at least 16 years old and not older
than 70 years old on the Policy Date. You must also make a minimum initial
premium payment or, make periodic payments under the special monthly purchase
plan, depending on how old you are and whether you are purchasing a tax-
qualified or non-tax-qualified Policy, as shown in the following table:
<TABLE>
<CAPTION>
=========================================
Issue Age 0-65 Issue Age
66 or more
-----------------------------------------------------------------------------------
<S> <C> <C>
Minimum initial premium required for $1,200 ($100 $5,000
non-tax-qualified policy per month for
special monthly
purchase plan)
-----------------------------------------------------------------------------------
Minimum initial premium required for $600 ($50 per $25,000
tax-qualified policy month for
special monthly
purchase plan)
===================================================================================
</TABLE>
ISSUANCE OF A POLICY. Once we receive your initial premium and your
completed application at our Home Office, we will usually issue your Policy
within two Valuation Days. However, if you did not give us all the information
we need, we will try to contact you to get the additional needed information. If
we cannot complete the application within five Valuation Days, we will either
send your money back or obtain your permission to keep your money until we
receive all the necessary information. The Policy Date of your Policy will be
the application date, except when the application date is the 29th, 30th, or
31st of any month. The Policy Date of these Policies will be the 28th of that
month.
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<PAGE>
FREE-LOOK RIGHT TO CANCEL POLICY. During your "free-look" period, you may
cancel your Policy. The free-look period expires 10 days after you receive your
Policy. Some states may require a longer period. If you decide to cancel the
Policy, you must return it by mail or other delivery method to State Farm or to
an authorized State Farm agent. You will receive a refund equal to the greater
of: (I) the premium payments made under the Policy during the free-look period;
and (ii) the Policy Accumulation Value (without the deduction of a surrender
charge) on the date the Policy is received at our Home Office or by our agent
for cancellation. Immediately after mailing or delivery, the Policy will be
deemed void from the beginning.
MAKING ADDITIONAL PREMIUM PAYMENTS. You may pay additional premiums of $50
or more at any time before the Annuity Date. You may arrange for monthly
premiums to be paid via automatic deduction from your checking account. Any
premium received after the Policy Date will be credited to the Policy on the
Valuation Day it is received at our Home Office. We reserve the right to refuse
a premium if total premiums paid in a Policy Year would exceed $30,000.
4. WHAT ARE MY ALLOCATION OPTIONS?
PREMIUM ALLOCATIONS. When you apply for a Policy, you specify the
percentage of premium to be allocated to each Subaccount of the Variable Account
and to be allocated to the Fixed Account. You can change the allocation
percentages at any time by sending a satisfactory written or telephone request
to our Home Office. The change will apply to all premiums received at the same
time or after we receive your request. Premium allocations must be in
percentages totaling 100%, and each allocation percentage must be a whole number
of at least 1%.
Until the free-look period expires, all premiums are allocated to the Fixed
Account. At the end of this period, Policy Accumulation Value is allocated among
the Subaccounts of the Variable Account and the Fixed Account based on the
premium allocation percentages specified in the application. For this purpose,
we assume your free-look period begins 10 days after we issue your Policy.
SUBACCOUNT OPTIONS. The Variable Account has six Subaccounts, each
investing in a specific Fund of the State Farm Fund. The State Farm Fund is a
series-type fund registered with the Securities and Exchange Commission as a
diversified open-end management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"). The investment objective(s) of each of
the Funds in which Subaccounts invest are summarized below. There is no
assurance that these objectives will be met.
LARGE CAP EQUITY INDEX FUND seeks to match the performance of the Standard
& Poor's Composite Index of 500 Stocks. This Fund will pursue its objective by
investing in a representative sample of stocks found in the index.
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<PAGE>
SMALL CAP EQUITY INDEX FUND seeks to match the performance of the Russell
2000 Small Stock Index. This Fund will pursue its objective by investing in a
representative sample of stocks found in the index.
STOCK AND BOND BALANCED FUND seeks long-term growth of capital, balanced
with current income. This Fund will pursue its objective by investing
approximately 60% of its assets in the Trust's Large Cap Equity Index Fund and
approximately 40% of its assets in the Trust's Bond Fund.
BOND FUND seeks to realize over a period of years the highest yield through
current income and capital gains. This Fund will pursue its objective by
investing in high quality debt securities with primarily intermediate-term (five
to fifteen years) maturities.
MONEY MARKET FUND seeks to maximize current income to the extent consistent
with the preservation of capital and maintenance of liquidity. This Fund will
pursue its objective by investing exclusively in high quality money market
instruments. AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT.
INTERNATIONAL EQUITY INDEX FUND seeks to match the performance of the
Morgan Stanley Capital International Europe, Australia and Far East Index. This
Fund will pursue its objective by investing in a representative sample of stocks
found in that index.
Further information about the Funds is contained in the accompanying prospectus
for the State Farm Fund, which you should read in conjunction with this
prospectus. See also "The State Farm Fund," page __.
FIXED ACCOUNT OPTION. The Fixed Account is part of our General Account. It
is not a separate account. Amounts allocated to the Fixed Account are credited
with interest for the period of allocation at rates determined in our sole
discretion, but in no event will interest credited on these amounts be less than
an effective annual rate of 3% per year, compounded annually. The current
interest rate is the Guaranteed Interest Rate plus any excess interest rate. The
current interest rate and the guarantee period for that rate are determined
periodically. Each guarantee period will be at least one year. You assume the
risk that interest credited thereafter may not exceed the guaranteed rate of 3%
per year. See "State Farm's Fixed Account Option," page __. There are
significant limits on your right to transfer Policy Accumulation Value from the
Fixed Account. See "Transfers," below.
TRANSFERS. After the end of the free-look period and while the Annuitant is
alive on or before the Annuity Date, you may transfer Policy Accumulation Value
from and among the Subaccounts at any time. The minimum amount of Policy
Accumulation Value that may be transferred from a Subaccount is $250, or, if
less, the entire Policy Accumulation Value held in that Subaccount. Fixed Policy
Accumulation Value may be transferred from the Fixed Account to a Subaccount or
Subaccounts only once each Policy Year and only during the 30-day period
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<PAGE>
following the end of each Policy Year. Unused transfers do not carry over to the
next Policy Year. The maximum transfer amount is the greater of 25% of the Fixed
Policy Accumulation Value on the date of the transfer or $1,000, unless waived
by us. The amount transferred must be at least $250, or, if less, the Policy
Accumulation Value held in the Fixed Account.
After the Annuity Date, you may request to transfer money from one
Subaccount to another Subaccount, subject to the above limitations.
Transfer requests may be made by satisfactory written or telephone request
if we have your written telephone authorization on file. A transfer will take
effect on the date the request is received at the Home Office. State Farm may,
however, defer transfers under the same conditions that we may delay paying
proceeds. See "Requesting Payments and Telephone Transactions," page __. There
is no limit on the number of transfers from and among the Subaccounts. However,
State Farm reserves the right to impose a $25 transfer processing fee on
each transfer in a Policy Year in excess of twelve. For purposes of assessing
the transfer processing fee, each transfer request is considered one transfer,
regardless of the number of Subaccounts affected by the transfer. Any unused
"free" transfers do not carry over to the next Policy Year. State Farm reserves
the right to modify, restrict, suspend or eliminate the transfer privileges,
including telephone transfer privileges, at any time, for any reason.
DOLLAR-COST AVERAGING. The dollar-cost averaging program permits you to
systematically transfer on a monthly, quarterly, semi-annual, or annual basis a
set dollar amount from the Subaccount investing in the Money Market Fund or the
Subaccount investing in the Bond Fund to any Subaccounts and/or the Fixed
Account. The dollar-cost averaging method of investment is designed to reduce
the risk of making purchases only when the price of Accumulation Units is high,
but you should carefully consider your financial ability to continue the program
over a long enough period of time to purchase units when their value is low as
well as when it is high. Dollar-cost averaging does not assure a profit or
protect against a loss.
You may elect to participate in the dollar-cost averaging program at any
time before the Annuity Date by sending us a written request. The minimum
transfer amount is $100 from the Money Market Subaccount or the Bond Subaccount,
as applicable. Once elected, it remains in effect from the date we receive your
request until the Annuity Date or until the value of the Subaccount from which
transfers are being made is depleted or until you cancel the program by written
request or by telephone if we have your telephone authorization on file. You can
request changes in writing or by phone, if we have your telephone authorization
on file. There is no additional charge for dollar-cost averaging. A transfer
under this program is not considered a transfer for purposes of assessing a
transfer charge. We reserve the right to discontinue offering the dollar-cost
averaging program at any time and for any reason.
PORTFOLIO REBALANCING PROGRAM. Once your money has been allocated among the
Subaccounts, the performance of each Subaccount may cause your allocation to
shift. You may instruct us to automatically reallocate on a monthly, quarterly,
semi-annual, or annual basis your
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<PAGE>
Policy Accumulation Value to return to the percentages specified in your
allocation instructions. You may elect to participate in this program at any
time before the Annuity Date by sending a written request to our Home Office.
Your request will be effective when we receive it. Your percentage allocations
must be in whole percentages and be at least 1% per allocation. You may start
and stop portfolio rebalancing at any time and make changes to your allocations
by written or telephone request, if we have your telephone authorization on
file. There is no additional charge for using this program. A transfer under
this program is not considered a transfer for purposes of assessing a transfer
processing fee. We reserve the right to discontinue offering the program at any
time and for any reason. Portfolio rebalancing does not guarantee a profit or
protect against loss. The portfolio rebalancing program is not available while
you are participating in the dollar-cost averaging program.
POLICY ACCUMULATION VALUE. The Policy Accumulation Value serves as a
starting point for calculating certain values under a Policy. It is the
aggregate of the Subaccount Policy Accumulation Values and the Fixed Policy
Accumulation Value credited to the Policy. The Policy Accumulation Value is
determined first on the Policy Date and thereafter on each Valuation Day. The
Policy Accumulation Value will vary to reflect the performance of the
Subaccounts to which premiums have been allocated, interest credited on amounts
allocated to the Fixed Account, charges, transfers, withdrawals, and full
surrenders. It may be more or less than premiums paid.
CASH SURRENDER VALUE. The Cash Surrender Value on a Valuation Day is the
Policy Accumulation Value, reduced by any applicable surrender charge that would
be deducted if the Policy were surrendered that day and any applicable Annual
Administrative Fee.
SUBACCOUNT POLICY ACCUMULATION VALUE. On any Valuation Day, the Subaccount
Policy Accumulation Value in a Subaccount is equal to the number of Accumulation
Units attributable to that Subaccount multiplied by the Accumulation Unit Value
for that Subaccount for that Valuation Day. When you allocate an amount to a
Subaccount, either by premium allocation or transfer of Policy Accumulation
Value, your Policy is credited with Accumulation Units in that Subaccount. The
number of Accumulation Units is determined by dividing the amount allocated or
transferred to the Subaccount by the Subaccount's Accumulation Unit Value for
that Valuation Day. Similarly, when an amount is transferred from a Subaccount,
a withdrawal is taken from the Subaccount, or the Policy is surrendered, the
number of Accumulation Units is determined by dividing the amount transferred,
withdrawn or surrendered by the Subaccount's Accumulation Unit Value for that
Valuation Day.
ACCUMULATION UNIT VALUES. A Subaccount's Accumulation Unit Value is the
value of its Accumulation Unit. Accumulation Unit Values vary to reflect the
investment experience of the underlying Fund, and may increase or decrease from
one Valuation Day to the next. The Accumulation Unit Value for each Subaccount
was arbitrarily set at $10 when the Subaccount was established. For each
Valuation Period after the date of establishment, the Accumulation Unit Value is
determined by multiplying the Accumulation Unit Value for a Subaccount for the
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<PAGE>
prior Valuation Period by the net investment factor for the Subaccount for the
current Valuation Period.
NET INVESTMENT FACTOR. The net investment factor is an index used to
measure the investment performance of a Subaccount from one Valuation Period to
the next. The net investment factor for any Subaccount for any Valuation Period
reflects the change in the net asset value per share of the Fund held in the
Subaccount from one Valuation Period to the next, adjusted for the daily
deduction of the mortality and expense risk charge from assets in the
Subaccount. If any "ex-dividend" date occurs during the Valuation Period, the
per share amount of any dividend or capital gain distribution is taken into
account. Also, if any taxes need to be reserved, a per share charge or credit
for any taxes reserved for, which is determined by us to have resulted from the
operations of the Subaccount, is taken into account.
FIXED POLICY ACCUMULATION VALUE. The Fixed Policy Accumulation Value on any
date after the Policy Date is equal to: (1) the sum of the following amounts in
the Fixed Account: premium allocations, Policy Accumulation Value transfers, and
interest accruals (if the date is a Policy Anniversary it also includes any
dividend payments); minus (2) the sum of any withdrawals or transfers (including
any withdrawal processing or transfer processing fee) from the Fixed Account, as
well as the applicable portion of the Annual Administrative Fee.
5. WHAT ARE THE EXPENSES UNDER THE POLICY?
State Farm deducts the charges described below. The charges are for the
services and benefits provided, costs and expenses incurred and risks assumed by
State Farm under or in connection with the Policies. Services and benefits
provided by State Farm include: the ability for Owners to make withdrawals and
surrenders under the Policy; the Annuitant's Death Benefit; the available
investment options, including dollar cost averaging, portfolio rebalancing, and
systematic withdrawal programs; administration of the annuity options available
under the Policy; and the distribution of various reports to Owners. Costs and
expenses incurred by State Farm include those associated with various overhead
and other expenses associated with providing the services and benefits provided
by the Policy, sales and marketing expenses, and other costs of doing business.
Risks assumed by State Farm include the risks that Annuitants may live for a
longer period of time than estimated when the annuity factors under the Policy
were established, the amount of the Annuitants' Death Benefit will be greater
than Policy Accumulation Value, and the risks that the costs of providing the
services and benefits under the Policies will exceed the charges deducted.
SURRENDER CHARGE
If you make a withdrawal or surrender the Policy during the first seven
Policy Years, State Farm may deduct a surrender charge calculated as a
percentage of the amount withdrawn or surrendered. The applicable percentage is
7% in the first Policy Year, and declines by 1% in each following Policy Year,
until it reaches 0% in the eighth Policy Year. We may also deduct a surrender
charge when you take annuity payments or when proceeds are paid upon the Owner's
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<PAGE>
death (unless the Owner is also the Annuitant). However, we will not deduct a
surrender charge on a withdrawal or surrender, on annuitization, or on payment
when an Owner dies, if the Policy has been in force at least five Policy Years
and the applicable proceeds are applied under Annuity Options 1, 2, or 3. See
"What are my annuity options?," page __. No surrender charge is deducted when a
Death Benefit is paid upon the Annuitant's death, regardless of how many Policy
Years have elapsed or how the Death Benefit is paid. See "Does the Policy have a
Death Benefit?," page __.
If the Policy is surrendered, the surrender charge is deducted from the
Policy Accumulation Value in determining the Cash Surrender Value. If a
withdrawal is taken, the Surrender Charge is deducted from the Policy
Accumulation Value remaining after you have been paid the amount requested, and
the surrender charge will be calculated as the applicable percentage of the
total amount withdrawn. Unless you specify otherwise, we will deduct the
surrender charge from each Subaccount and the Fixed Account pro-rata. Each
Policy Year, you may withdraw a "Free Withdrawal Amount" without incurring a
surrender charge. For a table of surrender charges and a description of the Free
Withdrawal Amount, see the "Fee Table," page __.
EXAMPLE OF CALCULATION OF SURRENDER CHARGE. Assume the applicable surrender
charge percentage is 7% and you have requested a withdrawal of $100. You will
receive $100 and the surrender charge is $7.53, for a total withdrawal of
$107.53.
WAIVER OF SURRENDER CHARGE. We will not deduct a surrender charge if, at
the time we receive a request for a withdrawal or a surrender, we have received
due proof that the Annuitant is "Terminally Ill" or has been confined
continuously to an "Eligible Hospital" or "Eligible Nursing Home" for at least
three months before the date we receive the request. "Terminally Ill,"
"Eligible Hospital," and "Eligible Nursing Home" are defined in the Policy.
ANNUAL ADMINISTRATIVE FEE
We will deduct an annual administrative fee (1) on each Policy Anniversary,
(2) on the day of any surrender if the surrender is not on the Policy
Anniversary, and (3) on the Annuity Date if the Annuity Date is not on the
Policy Anniversary. We will waive this fee if total premiums of at least $50,000
have been paid under a Policy at the time the Annual Administrative Fee would
have otherwise been deducted. The fee will be deducted from each Subaccount and
the Fixed Account pro-rata.
TRANSFER PROCESSING FEE
We reserve the right to deduct a transfer processing fee of $25 for the
13th and each subsequent transfer during a Policy Year. For the purpose of
assessing the transfer processing fee, each written or telephone request is
considered to be one transfer, regardless of the number of Subaccounts affected
by the transfer. The transfer processing fee will be deducted from the
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<PAGE>
Subaccount or the Fixed Account from which the transfer is made. If a transfer
is made from more than one Subaccount and/or the Fixed Account at the same time,
the transfer fee would be deducted pro-rata from the Subaccounts and/or the
Fixed Account. We reserve the right to waive the transfer processing fee.
MORTALITY AND EXPENSE RISK CHARGE
State Farm currently deducts a daily charge from the assets in the
Subaccounts attributable to the Policies at an effective annual rate of 1.15% of
net assets. This charge is guaranteed not to exceed an effective annual rate of
1.25% of net assets. This charge does not apply to Fixed Policy Accumulation
Value attributable to the Policies. This charge is factored into the net
investment factor. See "Net Investment Factor," page ___.
FUND EXPENSES
Because the Variable Account purchases shares or units of the various
Funds, the net assets of the Variable Account will reflect the investment
advisory fees and other operating expenses incurred by the Funds. A table of
each Fund's advisory fees and other expenses can be found in the front of this
prospectus in the Fee Table. For a description of each Fund's expenses, advisory
fees and other expenses, see the prospectus for the State Fund.
6. HOW WILL MY INVESTMENT IN THE POLICY BE TAXED?
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisors should be consulted for more
complete information. This discussion is based upon State Farm's understanding
of the present Federal income tax laws. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to how
they may be interpreted by the Internal Revenue Service (the "IRS").
The Policy may be purchased on a non-tax-qualified basis ("Non-Qualified
Policy") or purchased on a tax-qualified basis ("Qualified Policy"). Qualified
Policies are designed for use by individuals whose premium payments are
comprised solely of proceeds from and/or contributions under retirement plans
that are intended to qualify as plans entitled to special income tax treatment
under Sections 401(a), 403(b), or 408 of the Code. The ultimate effect of
federal income taxes on the amounts held under a Policy, or annuity payments,
depends on the type of retirement plan, on the tax and employment status of the
individual concerned, and on our tax status. In addition, certain requirements
must be satisfied in purchasing a Qualified Policy
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with proceeds from a tax-qualified plan and receiving distributions from a
Qualified Policy in order to continue receiving favorable tax treatment. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into our Policy administration procedures. Owners, participants and
Beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Policies comply with applicable law.
Therefore, purchasers of Qualified Policies should seek competent legal and tax
advice regarding the suitability of a Policy for their situation. The following
discussion assumes that Qualified Policies are purchased with proceeds from
and/or contributions under retirement plans that qualify for the intended
special federal income tax treatment.
TAX STATUS OF THE POLICIES
DIVERSIFICATION REQUIREMENTS. The Code requires that the investments of the
Variable Account be "adequately diversified" in order for the Policies to be
treated as annuity contracts for Federal income tax purposes. It is intended
that the Variable Account, through the Funds, will satisfy these diversification
requirements.
In certain circumstances, owners of variable annuity contracts have been
considered for Federal income tax purposes to be the owners of the assets of the
Variable Account supporting their contracts due to their ability to exercise
investment control over those assets. When this is the case, the contract owners
have been currently taxed on income and gains attributable to the variable
account assets. There is little guidance in this area, and some features of the
Policies, such as the flexibility of an Owner to allocate premium payments and
transfer Policy Accumulation Values, have not been explicitly addressed in
published rulings. While State Farm believes that the Policies do not give
Owners investment control over Variable Account assets, State Farm reserves the
right to modify the Policies as necessary to prevent an Owner from being treated
as the owner of the Variable Account assets supporting the Policy.
REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for
federal income tax purposes, the Code requires any Non-Qualified Policy to
contain certain provisions specifying how your interest in the Policy will be
distributed in the event of your death. The Non-Qualified Policies contain
provisions that are intended to comply with these Code requirements, although no
regulations interpreting these requirements have yet been issued. We intend to
review such provisions and modify them if necessary to assure that they comply
with the applicable requirements when such requirements are clarified by
regulation or otherwise.
Other rules may apply to Qualified Policies.
The following discussion assumes that the Policies will qualify as annuity
contracts for Federal income tax purposes.
TAX TREATMENT OF ANNUITIES
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IN GENERAL. We believe that if you are a natural person you will not be
taxed on increases in the value of a Policy until a distribution occurs or until
annuity payments begin. (For these purposes, the agreement to assign or pledge
any portion of the Policy Accumulation Value, and, in the case of a Qualified
Policy, any portion of an interest in the qualified plan, generally will be
treated as a distribution.)
TAXATION OF NON-QUALIFIED POLICIES.
NON-NATURAL PERSON. The Owner of any annuity contract who is not a natural
person generally must include in income any increase in the excess of the Policy
Accumulation Value over the "investment in the contract" (generally, the
premiums or other consideration paid for the contract) during the taxable year.
There are some exceptions to this rule and a prospective Owner that is not a
natural person may wish to discuss these with a tax advisor. The following
discussion generally applies to Policies owned by natural persons.
WITHDRAWALS. When a withdrawal from a Non-Qualified Policy occurs, the
amount received will be treated as ordinary income subject to tax up to an
amount equal to the excess (if any) of the Policy Accumulation Value immediately
before the distribution over the Owner's investment in the Policy at that time.
In the case of a surrender under a Non-Qualified Policy, the amount
received generally will be taxable only to the extent it exceeds the Owner's
investment in the Contract.
PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution from a
Non-Qualified Policy, there may be imposed a federal tax penalty equal to ten
percent of the amount treated as income. In general, however, there is no
penalty on distributions:
. made on or after the taxpayer reaches age 59 1/2;
. made on or after the death of an Owner;
. attributable to the taxpayer's becoming disabled; or
. made as part of a series of substantially equal periodic payments for
the life (or life expectancy) of the taxpayer.
Other exceptions may be applicable under certain circumstances and
special rules may be applicable in connection with the exceptions enumerated
above. A tax advisor should be consulted with regard to exceptions from the
penalty tax.
ANNUITY PAYMENTS. Although tax consequences may vary depending on the
payment option elected under an annuity contract, a portion of each annuity
payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an annuity payment is generally determined in a
manner that is designed to allow you to recover your investment in the Policy
ratably on a tax-free basis over the expected stream of annuity payments, as
determined when annuity payments start. Once your investment in the Policy has
been fully recovered, however, the full amount of each annuity payment is
subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Policy because of your death or the death of the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (I) if
distributed in a lump sum, they are taxed in the same
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manner as a surrender of the contract, or (ii) if distributed under a payment
option, they are taxed in the same way as annuity payments.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A POLICY. A transfer or assignment
of ownership of a Policy, the designation of an Annuitant, the selection of
certain Annuity Dates, or the exchange of a Policy may result in certain tax
consequences to you that are not discussed herein. An Owner contemplating any
such transfer, assignment or exchange, should consult a tax advisor as to the
tax consequences.
WITHHOLDING. Annuity distributions are generally subject to withholding for
the recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.
MULTIPLE POLICIES. All annuity contracts that are issued by State Farm (or
its affiliates) to the same Owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in such
Owner's income when a taxable distribution occurs.
TAXATION OF QUALIFIED POLICIES
The Policies are designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Policies with
the various types of qualified retirement plans. Policy Owners, Annuitants, and
Beneficiaries are cautioned that the rights of any person to any benefits under
these qualified retirement plans may be subject to the terms and conditions of
the plans themselves, regardless of the terms and conditions of the Policy, but
we shall not be bound by the terms and conditions of such plans to the extent
such terms contradict the Policy, unless the Company consents.
WITHDRAWALS. When a withdrawal from a Qualified Policy occurs, a pro rata
portion of the amount received is taxable, generally based on the ratio of the
Owner's investment in the
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Policy (generally, the premiums or other consideration paid for the Policy) to
the participant's total accrued benefit balance under the retirement plan. For
Qualified Policies, the investment in the contract can be zero. Distributions
from certain qualified plans are generally subject to mandatory withholding.
Brief descriptions follow of the various types of qualified retirement
plans in connection with a Policy. We will endorse the Policy as necessary to
conform it to the requirements of such plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Section
401(a) of the Code permits corporate employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish these plans for themselves and their employees. These retirement plans
may permit the purchase of the Policies to accumulate retirement savings under
the plans. Adverse tax or other legal consequences to the plan, to the
participant, or to both may result if this Policy is assigned or transferred to
any individual as a means to provide benefit payments, unless the plan complies
with all legal requirements applicable to such benefits prior to transfer of the
Policy. Employers intending to use the Policy with such plans should seek
competent advice.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA." These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible, and on the
time when distributions may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into an IRA. Sales of the Policy for use with IRAs may be subject to special
requirements of the IRS. Employers may establish Simplified Employee Pension
(SEP) Plans to provide IRA contributions on behalf of their employees.
TAX SHELTERED ANNUITIES. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the premium payments made, within certain limits, on a Policy that
will provide an annuity for the employee's retirement. These premium payments
may be subject to FICA (social security) tax.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the Federal tax consequences
under the Policies are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this prospectus. Further, the
Federal income tax consequences discussed herein reflect our understanding of
current law, and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of Ownership or receipt of distributions
under a Policy depend on the individual circumstances of each Owner or recipient
of the distribution. A competent tax advisor should be consulted for further
information.
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7. HOW DO I ACCESS MY MONEY?
You may make withdrawals or a full surrender under the Policy. Proceeds are
also payable upon the death of the Owner or the Annuitant. See "Does the Policy
have a Death Benefit?," page ___. When you surrender the Policy or when proceeds
are payable on the death of an Owner or Annuitant, you can request that the
proceeds be paid under an annuity option. See "What are my annuity options?,"
page ___.
WITHDRAWALS
Prior to the Annuity Date, You may request to withdraw part of the Cash
-------------------------
Surrender Value at any time prior to the earlier of the Annuity Date or the date
the Annuitant dies, (If you have elected Annuity Option 4, you may request
withdrawals after the Annuity Date. See "What are my annuity options?," page
__.) Requests for withdrawals may be made in writing or by telephone, if we have
your telepone authorization on file. See "Requesting Payments and Telephone
Transactions," page __. Any withdrawal must be at $500 and must be less than the
Cash Surrender Value on the day the request for withdrawal is received at our
Home Office. We will pay you the withdrawal amount in one sum. We may defer
paying you a withdrawal attributable to the Fixed Policy Accumulation Value for
up to 6 months.
When you request a withdrawal, you can direct how the withdrawal will be
deducted from your Policy Accumulation Value. If you provide no directions, the
withdrawal will be deducted from your Policy Accumulation Value in the
Subaccounts and Fixed Account on a pro-rata basis.
SURRENDERS
You may request surrender of the Policy at any time prior to the earlier of
the Annuity Date or the date the Annuitant dies. (If you have elected Annuity
Option 4, you may request withdrawals after the Annuity Date. See "What are my
annuity options?," page __.) The Policy will terminate on the date we receive
your request or such later date as you might request. We will pay you the Cash
Surrender Value in one sum unless you choose an annuity option. After five
Policy Years, if you choose Annuity Options 1, 2, or 3, no surrender charge is
deducted. We may defer paying you the Cash Surrender Value attributable to the
Fixed Policy Accumulation Value for up to 6 months.
SYSTEMATIC WITHDRAWAL PROGRAM
The systematic withdrawal program provides an automatic monthly, quarterly,
semi-annual, or annual payment to you from the amounts you have accumulated in
the Subaccounts and/or the Fixed Account. The minimum payment is $100. To use
the program, you must maintain Policy Accumulation Value of at least $1,000. You
may elect to participate in the systematic withdrawal program at any time before
the Annuity Date by sending a written request to our Home Office. Once we have
received your request, the program will begin and will remain in effect until
your Policy Accumulation Value drops below $1,000. You may cancel or
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make changes in the program at any time by sending us a written request or by
calling us by telephone if we have your telephone authorization on file.
We will assess any applicable surrender charge on these withdrawals. See
"Surrender Charge," page __. We do not deduct any other charges for this
program. We reserve the right to discontinue offering the systematic withdrawal
program at any time and for any reason.
REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS
REQUESTING PAYMENTS. Written requests for payment (except when telephone
requests are authorized by us) must be sent to our Home Office or given to an
authorized State Farm agent for forwarding to our Home Office. We will
ordinarily pay any Death Benefit, withdrawal, or surrender proceeds within seven
days after receipt at our Home Office of all the documents required for such a
payment. The amount will be determined as of the date our Home Office receives
all required documents. A Death Benefit generally will be paid through the State
Farm Benefit Management Account,(R) an interest bearing checking account. We
will send the State Farm Benefit Management Account(R) checkbook within seven
days after we receive all required documents. A Beneficiary will have immediate
access to the proceeds by writing a check on the State Farm Benefit Management
Account.(R)
We may delay making a payment or processing a transfer request if: (1) the
disposal or valuation of the Variable Account's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists; or (2) the SEC by order permits postponement
of payment to protect State Farm's Policy Owners. We also may defer making
payments attributable to a check that has not cleared, and we may defer payment
of proceeds from the Fixed Account for a withdrawal or surrender request for up
to six months from the date we receive the request. However, Cash Surrender
Value paid under an annuity option will not be deferred.
TELEPHONE TRANSACTIONS. You may make certain requests under the Policy by
telephone if we have a written telephone authorization on file. These include
requests for transfers, withdrawals, changes in premium allocation instructions,
dollar-cost averaging changes, changes in the portfolio rebalancing program and
systematic withdrawal changes. Our Home Office will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. Such
procedures may include, among others, requiring some form of personal
identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions, and/or tape recording of
telephone instructions. Your request for telephone transactions authorizes us to
record telephone calls. If reasonable procedures are not employed, we may be
liable for any losses due to unauthorized or fraudulent instructions. If
reasonable procedures are employed, we will not be liable for any losses due to
unauthorized or fraudulent instructions.
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8. HOW IS THE PERFORMANCE OF THE POLICY PRESENTED?
We may advertise or include in sales literature yields, effective yields
and total returns for the Subaccounts. Effective yields and total returns for
the Subaccounts are based on the investment performance of the corresponding
Portfolio of the Funds. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO
NOT INDICATE OR PROJECT FUTURE PERFORMANCE. We may also advertise or include in
sales literature a Subaccount's performance compared to certain performance
rankings and indexes compiled by independent organizations, and we may present
performance rankings and indexes without such a comparison. More detailed
information about performance data appears in the Statement of Additional
Information.
The yield of the Subaccount investing in the Money Market Fund refers to
the annualized income generated by an investment in the Subaccount over a
specified seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period. The effective yield is calculated similarly but, when
annualized, the income earned by an investment in the Subaccount is assumed to
be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a Subaccount (except the Money Market Subaccount) refers to
the annualized income generated by an investment in the Subaccount over a
specified 30-day or one-month period. The yield is calculated by assuming that
the income generated by the investment during that 30-day or one-month period is
generated each period over a 12-month period.
The total return of a Subaccount refers to return quotations assuming an
investment under a Contract has been held in the Subaccount for various periods
of time. Average annual total return of a Subaccount tells you the return you
would have experienced if you allocated a $1,000 premium to a Subaccount for the
specified period. "Standardized" average annual total return reflects all
historical investment results, less all charges and deductions applied against
the Subaccount, including any surrender charge that would apply if you
terminated the Policy at the end of each period indicated, but excluding any
deductions for premium taxes. "Non-Standard" average annual total return
information may be presented, computed on the same basis as described above,
except that deductions will not include the Surrender Charge. In addition, we
may from time to time disclose average annual total return in non-standard
formats and cumulative total return for a Subaccount.
We may, from time to time, also disclose yield, standard total returns, and
non-standard total returns for the Funds. We may also disclose yield, standard
total returns, and non-standard total returns of funds or other accounts managed
by the Adviser or Subadviser with investment objectives similar to those of the
Funds, and Subaccount performance based on that performance data. Non-standard
performance will be accompanied by standard performance.
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In advertising and sales literature, the performance of each Subaccount may
be compared to the performance of other variable annuity issuers in general or
to the performance of particular types of variable annuities investing in mutual
funds, or investment series of mutual funds with investment objectives similar
to each of the Subaccounts. Advertising and sales literature may also compare
the performance of each Subaccount to the Standard & Poor's Index of 500 Common
Stocks, a widely used measure of stock performance. This unmanaged index assumes
the reinvestment of dividends but does not reflect any "deduction" for the
expense of operating or managing an investment portfolio. Other independent
ranking services and indexes may also be used as a source of performance
comparison. We may also report other information, including the effect of tax-
deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts.
9. DOES THE POLICY HAVE A DEATH BENEFIT?
If the Annuitant dies before the Annuity Date and a Death Benefit is
payable, the amount paid will be the greater of (1) the sum of all premiums paid
less any withdrawals and less any applicable surrender charges, and (2) the
Policy Accumulation Value. Both amounts will be calculated on the date we
receive due proof of the Annuitant's death. If the Death Benefit is payable and
an annuity option is chosen, the Annuity Date will be the date we receive due
proof of the Annuitant's death. The beneficiary must choose the annuity option
as well as whether the annuity payments are to be fixed or variable or a
combination of fixed and variable. See "What are my annuity options?," page ___.
If no annuity option has been chosen for the Death Benefit to be paid, or if the
annuity option chosen is not available, payment will be in one lump sum. For a
discussion of the order for payment to beneficiaries, as well as how
beneficiaries are designated, see "Annuity Payment Provision" in the Statement
of Additional Information.
If the Owner dies before the Annuity Date, unless the Owner is the
Annuitant, the Cash Surrender Value of the Policy will be payable. For a
discussion of the rules for paying the proceeds upon the death of an Owner, see
"Death of Owner" in the Statement of Additional Information.
10. WHAT OTHER INFORMATION SHOULD I KNOW?
STATE FARM AND THE VARIABLE ACCOUNT
STATE FARM LIFE INSURANCE COMPANY. State Farm is an Illinois stock life
insurance company that is wholly-owned by State Farm Mutual Automobile Insurance
Company, an Illinois mutual insurance company. State Farm's Home Office is
located at One State Farm Plaza, Bloomington, Illinois 61710. State Farm was
incorporated in 1929 and has been continuously engaged in the life insurance
business since that year. State Farm is subject to regulation by the Insurance
Department of the State of Illinois as well as by the insurance departments of
all other states and jurisdictions in which it does business. State Farm sells
insurance in 46 states and the District of Columbia. State Farm also sells
insurance in the
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Canadian provinces of Alberta, New Brunswick, and Ontario. State Farm submits
annual statements on its operations and finances to insurance officials in such
states and jurisdictions. The Policy described in this prospectus has been filed
with and, where required, approved by, insurance officials in those
jurisdictions where it is sold.
STATE FARM'S FIXED ACCOUNT OPTION. The Fixed Account is part of State
Farm's general account assets. State Farm's general account assets are used to
support our insurance and annuity obligations other than those funded by
separate accounts. Subject to applicable law, State Farm has sole discretion
over the investment of the assets of the Fixed Account.
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE
FIXED ACCOUNT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER THE 1940 ACT.
ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN ARE SUBJECT TO
THE PROVISIONS OF THESE ACTS AND, AS A RESULT, THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING
TO THE FIXED ACCOUNT. THE DISCLOSURE REGARDING THE FIXED ACCOUNT MAY, HOWEVER,
BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES
LAWS RELATING TO THE ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN A
PROSPECTUS.
THE VARIABLE ACCOUNT. State Farm established the Variable Account as a
separate investment account under Illinois law on December 9, 1996. State Farm
owns the assets in the Variable Account and is obligated to pay all benefits
under the Policies. The Variable Account is used to support the Policies as well
as for other purposes permitted by law. The Variable Account is registered with
the SEC as a unit investment trust under the 1940 Act and qualifies as a
"separate account" within the meaning of the federal securities laws. Such
registration does not involve any supervision by the SEC of the management of
the Variable Account or State Farm. State Farm has established other separate
investment accounts, of which State Farm Life Insurance Company Variable Life
Separate Account is registered with the SEC under the 1940 Act.
The Variable Account is divided into Subaccounts, each of which currently
invests in shares of a specific Fund of State Farm Variable Product Trust. These
Subaccounts buy and redeem Fund shares at net asset value without any sales
charge. Any dividend from net investment income and distribution from realized
gains from security transactions of a Fund is reinvested at net asset value in
shares of the same Fund. Income, gains and losses, realized or unrealized, of a
Subaccount are credited to or charged against that Subaccount without regard to
any other income, gains or losses of State Farm. Assets equal to the reserves
and other contract liabilities with respect to each Subaccount are not
chargeable with liabilities arising out of any other business or account of
State Farm. If the assets exceed the required reserves and other liabilities,
State Farm may transfer the excess to its general account.
The Variable Account may include other Subaccounts that are not available
under the Policy and are not otherwise discussed in this prospectus. State Farm
may substitute another
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subaccount or insurance company separate account under the Policies if, in State
Farm's judgment, investment in a Subaccount should no longer be possible or
becomes inappropriate to the purposes of the Policies, or if investment in
another subaccount or insurance company separate account is in the best interest
of Owners. No substitution may take place without notice to Owners and prior
approval of the SEC and insurance regulatory authorities, to the extent required
by the 1940 Act and applicable law.
THE STATE FARM FUND. State Farm Investment Management Corp. ("SFIM"), a
wholly-owned subsidiary of State Farm Mutual Automobile Insurance Company,
serves as investment adviser to the State Farm Fund. SFIM has engaged BZW
Barclays Global Fund Advisors as the investment sub-adviser to provide day-to-
day portfolio management for the Large Cap Equity Index Fund, the Small Cap
Equity Index Fund, and the International Equity Index Fund. For more information
concerning the investment adviser and investment sub-adviser, please see the
accompanying prospectus for the State Farm Fund.
VOTING OF FUND SHARES. State Farm is the legal owner of shares held by the
Subaccounts and as such has the right to vote on all matters submitted to
shareholders of the Funds. However, as required by law, State Farm will vote
shares held in the Subaccounts at regular and special meetings of shareholders
of the Funds in accordance with instructions received from Owners with Policy
Accumulation Value in the Subaccounts. To obtain voting instructions from
Owners, before a meeting of shareholders of the Funds, State Farm will send
Owners voting instruction materials, a voting instruction form and any other
related material. Shares held by a Subaccount for which no timely instructions
are received will be voted by State Farm in the same proportion as those shares
for which voting instructions are received. Should the applicable federal
securities laws, regulations or interpretations thereof change so as to permit
State Farm to vote shares of the Funds in its own right, State Farm may elect to
do so.
MODIFICATION
We may modify the Policy as follows: (1) to conform the Policy, our
operations, or the operation of the Variable Account to the requirements of any
law (or regulation issued by a government agency) to which we, the Policy, or
the Variable Account is subject; (2) to assure continued qualification of the
Policy as an annuity under the Code; or (3) to reflect a change in the operation
of the Variable Account, if allowed by the Policy. If we modify the Policy, we
will make the appropriate endorsement to the Policy.
DISTRIBUTION OF THE POLICIES
State Farm VP Management Corp., a subsidiary of State Farm Mutual
Automobile Insurance Company, acts as the principal underwriter of the Policies.
State Farm VP Management Corp. is a corporation organized under the laws of the
state of Delaware in 1996, is registered as a broker-dealer under the Securities
Exchange Act of 1934, and is a member of the National Association of Securities
Dealers, Inc. (the "NASD"). The Policies may not be
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available in all states. The Policies are sold by certain registered
representatives of State Farm VP Management Corp. who are also appointed and
licensed as insurance agents. These registered representatives receive
commissions for selling Policies calculated as a percentage of premiums.
Registered representatives who meet certain productivity and profitability
standards may be eligible for additional compensation.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or
the assets of the Variable Account are subject. We are not involved in any
litigation that is of material importance in relation to our total assets or
that relates to the Variable Account.
REPORTS TO POLICY OWNERS
State Farm maintains records and accounts of all transactions involving the
Policy, the Variable Account, and the Fixed Account. Each year, or more often if
required by law, you will be sent a report showing information about your Policy
for the period covered by the report. You will also be sent an annual and a
semi-annual report for each Fund underlying a Subaccount to which you have
allocated Policy Accumulation Value, as required by the 1940 Act. In addition,
when you pay premiums (other than by pre-authorized checking account deduction),
or if you make transfers or withdrawals, you will receive a confirmation of
these transactions.
FINANCIAL STATEMENTS
The audited balance sheets for the Company as of December 31, 1996 and
1995, and the related statements of income, stockholder's equity, and cash flows
for the year ended December 31, 1996, as well as the Report of the Independent
Auditors, are contained in the Statement of Additional Information. The
financial statements of the Company should be considered only as bearing on our
ability to meet our obligations under the Policies. They should not be
considered as bearing on the investment performance of the assets held in the
Variable Account.
[FINANCIAL STATEMENTS OF STATE FARM LIFE INSURANCE COMPANY TO BE INCLUDED IN
PRE-EFFECTIVE AMENDMENT.]
As of the date of this prospectus, there were no assets in the Variable
Account. Therefore, we have not provided any financial statements for the
Variable Account.
11. HOW CAN I MAKE INQUIRIES?
Inquiries regarding a policy may be made by writing to us at our Home
Office, by calling us at (800) XXX-XXXX, or by contacting an authorized State
Farm agent.
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TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the policies and the Variable Account is
contained in the Statement of Additional Information. You can obtain a free copy
of the Statement of Additional Information by writing to us at the address shown
on the front cover or by calling 1-800-___-____. The following is the Table of
Contents for the Statement of Additional Information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ACONTRACT PROVISIONS
The Policy.............................................................
Ownership..............................................................
Incontestability.......................................................
Error in Age or Sex....................................................
Participation..........................................................
Assignment.............................................................
CALCULATION OF HISTORICAL PERFORMANCE DATA..................................
Money Market Subaccount Yields.........................................
Other Subaccount Yields................................................
Average Annual Total Returns...........................................
Effect of the Annual Administration Fee on Performance Data............
Other Total Returns....................................................
Use of Indexes.........................................................
Other Information......................................................
NET INVESTMENT FACTOR.......................................................
ANNUITY PAYMENT PROVISIONS..................................................
Amount of Fixed Annuity Payments.......................................
Amount of Variable Annuity Payments....................................
Annuity Units..........................................................
Annuity Unit Value.....................................................
PAYMENT OF PROCEEDS UPON DEATH OF OWNER OR ANNUITANT........................
Death of Owner.........................................................
Death of Annuitant.....................................................
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS...........................
SAFEKEEPING OF ACCOUNT ASSETS...............................................
DISTRIBUTION OF THE POLICIES................................................
LEGAL MATTERS...............................................................
</TABLE>
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<TABLE>
<S> <C>
EXPERTS.....................................................................
OTHER INFORMATION...........................................................
FINANCIAL STATEMENTS........................................................
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
DATED _____________ __, 1996
STATE FARM VARIABLE ANNUITY POLICY
STATE FARM LIFE INSURANCE COMPANY VARIABLE ANNUITY
SEPARATE ACCOUNT
OF STATE FARM LIFE INSURANCE COMPANY
One State Farm Plaza
Bloomington, Illinois 81710-0001
--------------------
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the variable annuity policy (the "Policy") offered by
State Farm Life Insurance Company ("State Farm, "we," "us," or "our"). You may
obtain a copy of the Prospectus dated ________________ by calling 1-800-XXX-XXXX
or by writing to our Home Office at the above address. Terms used in the current
Prospectus for the Contract are incorporated into and made a part of this
Statement of Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES
FOR THE CONTRACT AND THE FUNDS.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
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ADDITIONAL CONTRACT PROVISIONS..............................................
The Policy.............................................................
Ownership..............................................................
Incontestability.......................................................
Error in Age or Sex....................................................
Participation..........................................................
Assignment.............................................................
CALCULATION OF HISTORICAL PERFORMANCE DATA..................................
Money Market Subaccount Yields.........................................
Other Subaccount Yields................................................
Average Annual Total Returns...........................................
Effect of the Annual Administration Fee on Performance Data............
Other Total Returns....................................................
Use of Indexes.........................................................
Other Information......................................................
NET INVESTMENT FACTOR.......................................................
ANNUITY PAYMENT PROVISIONS.................................................
Amount of Fixed Annuity Payments.......................................
Amount of Variable Annuity Payments....................................
Annuity Units..........................................................
Annuity Unit Value.....................................................
PAYMENT OF PROCEEDS UPON DEATH OF OWNER OR ANNUITANT........................
Death of Owner.........................................................
Death Of Annuitant.....................................................
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS...........................
SAFEKEEPING OF ACCOUNT ASSETS...............................................
DISTRIBUTION OF THE POLICIES................................................
LEGAL MATTERS...............................................................
EXPERTS.....................................................................
OTHER INFORMATION...........................................................
FINANCIAL STATEMENTS........................................................
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ADDITIONAL POLICY PROVISIONS
THE POLICY
The Policy contains the Basic Plan, any amendments, endorsements, and
riders, and a copy of the application. The Policy is the entire contract.
Only an officer has the right to change the Policy. No agent has the
authority to change the Policy or to waive any of its terms. All endorsements,
amendments, or riders must be signed by an officer to be valid.
OWNERSHIP
You, as the Owner, are named in the application. You may exercise any
provision of the Policy only by request and while the Annuitant is alive. Your
Successor Owner is named in the application if you are not the Annuitant.
You may change the Owner or Successor Owner by sending us a request while
the Annuitant is alive. We have the right to request the Policy to make the
change on it. The change will take effect the day you sign the request, but the
change will not affect any action we have taken before we receive the request. A
change of Owner or Successor Owner does not change the beneficiary designation.
No more than two Owners and/or Successor Owners can be named.
INCONTESTABILITY
We will not contest the Policy. Any rider has its own incontestability
provision.
ERROR IN AGE OR SEX
If the Annuitant's, Payee's, or second designated person's date of birth or
sex is not correct, every benefit will be such as premiums paid would have
bought at the correct age or sex, based on the rates at the date of issue. We
may require proof of the Annuitant's, Payee's, second designated person's age
and sex before annuity payments start. Any overpayment with compound interest at
6% a year will be charged against the Policy. This amount will be deducted from
any annuity payments due after the error is found. Any underpayment with
compound interest at 6% a year will be paid to you in one sum.
PARTICIPATION
We do not expect to pay dividends on the Policy. However, we may apportion
and pay dividends each year. All dividends apportioned will be derived from the
divisible surplus of our participating business. Any such dividends will be paid
only at the end of the Policy Year. There is no right to a partial or pro rated
dividend prior to the end of the Policy Year. We will
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transfer the dividend to the Policy Accumulation Value at the end of the Policy
Year. Unless specified by you, the amount transferred is allocated to each
Subaccount and the Fixed Account on a pro-rata basis.
ASSIGNMENT
You may assign the Policy or any interest in it. We will recognize an
assignment only if it is in writing and filed with us. We are not responsible
for the validity or effect of any assignment. An assignment may limit the
interest of any Beneficiary.
CALCULATION OF HISTORICAL PERFORMANCE DATA
From time to time, State Farm may disclose yields, total returns, and other
performance data of the Subaccounts and the Funds. Such performance data will be
computed, or accompanied by performance data computed, in accordance with the
standards defined by the SEC.
MONEY MARKET SUBACCOUNT YIELDS
From time to time, advertisements and sales literature may quote the
current annualized yield of the Subaccount investing in the Money Market Fund of
the State Farm Variable Product Trust (the "State Farm Fund") for a seven-day
period in a manner that does not take into consideration any realized or
unrealized gains or losses on shares of the Money Market Fund (the "Money market
Subaccount").
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Policy having a balance of one Accumulation
Unit of the Money Market Subaccount at the beginning of the period, dividing
such net change in account value by the value of the hypothetical account at the
beginning of the period to determine the base period return, and annualizing
this quotient on a 365-day basis. The net change in account value reflects: 1)
net income from the Money Market Fund attributable to the hypothetical account;
and 2) charges and deductions imposed under the Policy which are attributable to
the hypothetical account. The charges and deductions include the per unit
charges for the hypothetical account for the Annual Administrative Fee, and the
mortality and expense risk charge. For purposes of calculating current yields
for a Policy, an average per unit Annual Administrative Fee is used based on the
$30 Annual Administrative Fee. Current Yield is calculated according to the
following formula:
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Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Money Market Fund (exclusive
of realized gains or losses on the sale of securities and
unrealized appreciation and depreciation) for the seven-day
period attributable to a hypothetical account having a balance of
one Accumulation Unit.
ES = per unit expenses attributable to the hypothetical account for
the seven-day period.
UV = the unit value for the first day of the seven-day period.
/365/7/
Effective yield = (1 + ((NCS-ES)/UV)) - 1
Where:
NCS = the net change in the value of the Money Market Fund (exclusive
of realized gains or losses on the sale of securities and
unrealized appreciation and depreciation) for the seven-day
period attributable to a hypothetical account having a balance of
one Accumulation Unit.
ES = per unit expenses attributable to the hypothetical account for
the seven-day period.
UV = the unit value for the first day of the seven-day period.
Because of the charges and deductions imposed under the Policy, the yield
for the Money Market Subaccount is lower than the yield for the Money Market
Fund.
The current and effective yields on amounts held in the Money Market
Subaccount normally fluctuate on a daily basis. THEREFORE, THE DISCLOSED YIELD
FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS OR RATES OF RETURN. The Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Fund, the types and quality of portfolio
securities held by the Money Market Fund and the Money Market Fund's operating
expenses. Yields on amounts held in the Money Market Subaccount may also be
presented for periods other than a seven-day period.
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Yield calculations do not take into account the Surrender Charge that is
assessed on certain withdrawals of Policy Accumulation Value.
OTHER SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the Subaccounts (except the Money Market
Subaccount) under the Policy for 30-day or one-month periods. The annualized
yield of a Subaccount refers to income generated by the Subaccount during a 30-
day or one-month period and is assumed to be generated each period over a 12-
month period.
The yield is computed by: 1) dividing the net investment income of the Fund
attributable to the Subaccount units less Subaccount expenses for the period; by
2) the maximum offering price per unit on the last day of the period times the
daily average number of Accumulation Units outstanding for the period; by 3)
compounding that yield for a six-month period; and by 4) multiplying that result
by 2. Expenses attributable to the Subaccount include the Annual Administrative
Fee and the mortality and expense risk charge. The yield calculation assumes an
Annual Administrative Fee of $30 per Policy deducted at the end of each Policy
Year. For purposes of calculating the 30-day or one-month yield, an average
Annual Administrative Fee based on the average Policy Accumulation Value in the
Subaccount is used to determine the amount of the charge attributable to the
Subaccount for the 30-day or one-month period. The 30-day or one-month yield is
calculated according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV)) + 1)/6/ - 1)
Where:
NI = net income of the portfolio for the 30-day or one-month period
attributable to the Subaccount's Accumulation Units.
ES = expenses of the Subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the 30-
day or one-month period.
Because of the charges and deductions imposed under the Policies, the yield
for the Subaccount is lower than the yield for the corresponding Fund.
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The yield on the amounts held in the Subaccounts normally fluctuates over
time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN
INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A Subaccount's
actual yield is affected by the types and quality of portfolio securities held
by the corresponding Fund and that Fund's operating expenses.
Yield calculations do not take into account the Surrender Charge that is
assessed on certain withdrawals and surrenders of Policy Accumulation Value.
AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the Subaccounts for various
periods of time.
When a Subaccount or Fund has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Average annual total returns for other periods of time may, from time
to time, also be disclosed.
Standard average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
each of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Subaccount Unit
Values which State Farm calculates on each Valuation Day based on the
performance of the Subaccount's underlying Fund, the deductions for the
mortality and expense risk charge, and the deductions for the Annual
Administrative Fee. The calculation assumes that the Annual Administrative Fee
is $30 per year per Policy deducted at the end of each Policy Year. For purposes
of calculating average annual total return, an average per-dollar per-day Annual
Administrative Fee attributable to the hypothetical account for the period is
used. The calculation also assumes surrender of Policy Accumulation Value at the
end of the period for the return quotation taking into account the applicable
Free Withdrawal Amount. The total return is calculated according to the
following formula:
TR = ((ERV/P)/1/N/) - 1
Where:
TR = the average annual total return net of Subaccount recurring
charges.
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ERV = the ending redeemable value (net of any applicable Surrender
Charge) of the hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Subaccounts commenced
operations. Such performance information for the Subaccounts is calculated based
on the performance of the various funds and the assumption that the Subaccounts
were in existence for the same periods as those indicated for the funds, with
the level of Policy charges that were in effect at the inception of the
Subaccounts.
EFFECT OF THE ANNUAL ADMINISTRATIVE FEE ON PERFORMANCE DATA
The Policy provides for a $30 Annual Administrative Fee (waived for
Policies with respect to which total premiums paid are at least $50,000) that is
deducted from the Subaccounts and the Fixed Account pro-rata. For purposes of
reflecting the Annual Administrative Fee in yield and total return quotations,
the average Policy Accumulation Value is assumed to be $30,000, so that the
Annual Administrative Fee is 0.10%.
OTHER TOTAL RETURNS
From time to time, sales literature or advertisements may also quote
average annual total returns that do not reflect deduction of the Surrender
Charge. Other total returns are calculated in exactly the same way as average
annual total returns described above, except that the ending redeemable value of
the hypothetical account for the period is replaced with an ending value for the
period that does not take into account any charges on amounts withdrawn.
State Farm may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Subaccount recurring charges
for the period.
ERV = The ending redeemable value of the hypothetical investment at the
end of the period.
P = A hypothetical single payment of $1,000.
USE OF INDEXES
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From time to time, the performance of certain historical indexes may be
presented in advertisements or sales literature. The performance of these
indexes may be compared to the performance of certain Subaccounts or Funds, or
may be presented without such a comparison.
OTHER INFORMATION
The following is a partial list of those publications which may be cited in
the Funds' advertising shareholder materials which contain articles describing
investment results or other data relative to one or more of the Subaccounts.
Other publications may also be cited.
Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum Insurance Sales
Insurance Week Journal of Accountancy
Journal of the American Society of Journal of Commerce
CLU & ChFC
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
Wall Street Journal Working Woman
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Subaccount from one Valuation Period to the next. The Net
Investment Factor for any Subaccount for any Valuation Period is equal to (1)
divided by (2) and subtracting (3) from the result, where:
(1) is the result of:
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(a) the Net Asset Value Per Share of the Fund held in the Subaccount
determined at the end of the current Valuation Period; plus
(b) the per share amount of any dividend or capital gain distribution
made by the Fund held in the Subaccount, if the "ex-dividend"
date occurs during the Valuation period; plus or minus
(c) a per share charge or credit for any taxes reserved for
(2) is the Net Asset Value Per Share of the Fund held in the Subaccount,
determined at the end of the prior Valuation Period,
(3) is a daily factor representing the mortality and expense risk charge
deducted from the Subaccount adjusted for the number of days in the
Valuation Period. Such charge will not exceed an annual rate of 1.25%
of the daily net asset value of the Variable Account.
ANNUITY PAYMENT PROVISIONS
AMOUNT OF FIXED ANNUITY PAYMENTS. On the Annuity Date, the amount you have
chosen to apply to provide fixed annuity payments will be applied under the
annuity option you have chosen. The annuity option payment factor in effect on
the Annuity Date times that amount will be the dollar amount of each payment.
Each payment will be equal and will not change.
The annuity option payment factor used to determine the amount of the fixed
annuity payments will not be less than the guaranteed minimum annuity payment
factors shown in the Policy.
AMOUNT OF VARIABLE ANNUITY PAYMENTS. These payments will vary in amount.
The dollar amount of each payment attributable to each Subaccount is the number
of Annuity Units for each Subaccount times the Annuity Unit Value of that
Subaccount. The sum of the dollar amounts for each Subaccount is the amount of
the total variable annuity payment. The Annuity Unit Value for each payment will
be determined no earlier than five Valuation Days preceding the date the annuity
payment is due. We guarantee the payment will not vary due to changes in
mortality or expenses.
ANNUITY UNITS. On the Annuity Date, the number of Annuity Units for an
applicable Subaccount is determined by multiplying (1) by (2) and dividing the
result by (3), where:
(1) is the part of the Cash Surrender Value or Death Benefit on that date
applied under that Subaccount;
(2) is the Guaranteed Minimum Payment Factor for the Annuity Option
chosen; and
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(3) is the Annuity Unit Value for the Subaccount for the Valuation Period
ending on that date.
ANNUITY UNIT VALUE. The Annuity Unit Values for each Subaccount were
arbitrarily set initially at $10 when that Subaccount began operation.
Thereafter, the Annuity Unit Value for every Valuation Period is the Annuity
Unit Value at the end of the previous Valuation Day times the Net Investment
Factor times the Annuity Interest Factor. The Annuity Interest Factor is used to
neutralize the Assumed Investment Rate of 3 1/2% a year used to determine the
annuity option payment factors. The Assumed Investment Rate is significant in
determining the amount of each variable annuity payment and the amount by which
each variable annuity payments varies from one payment to the next.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Accumulation unit value for current
valuation period..........................................................
2. Accumulation unit value for immediately
preceding valuation period................................................
3. Annuity unit value for immediately preceding
valuation period..........................................................
4. Factor to compensate for the assumed
investment rate of 3.5%...................................................
5. Annuity unit value of current valuation
period ((1) / (2)) x (3) x (4)............................................
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
1. Number of accumulation units at Maturity Date..............................
2. Accumulation unit value....................................................
3. Adjusted Policy Accumulation Value (1)x(2).................................
4. First monthly annuity payment per $1,000
of adj. Policy Accumulation Value.........................................
5. First monthly annuity payment (3)x(4) / 1,000..............................
6. Annuity unit value.........................................................
7. Number of annuity units (5)/(6)............................................
8. Assume annuity unit value for second month equal to........................
9. Second monthly annuity payment (7)x(8).....................................
10. Assume annuity unit value for third month equal to.........................
11. Third monthly annuity payment (7)x(10).....................................
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PAYMENT OF PROCEEDS UPON DEATH OF OWNER OR ANNUITANT
DEATH OF OWNER
The Code requires the following distributions under an annuity when you
die.
(1) If you die before the Annuity Date, you are not the Annuitant, and you
either have not named a Successor Owner or your named Successor Owner
is not a living natural person, the Cash Surrender Value must be paid
within 5 years after your date of death.
(2) If you die before the Annuity Date, you are the Annuitant, and you
either have not named any beneficiary or your named beneficiary is not
a living natural person, the death benefit must be paid within 5 years
after your date of death.
(3) If you die before the Annuity Date, you are not the Annuitant, and
your sole Successor Owner is a person other than your spouse, your
Successor Owner may elect to have the Cash Surrender Value paid under
an annuity option or any other method of payment then provided by us
other than an interest only method of payment. The election must be
made and payments must start within one year after your death and must
not extend beyond the life expectancy of your Successor Owner. If no
election is made within this time, distribution will be made within
five years after your date of death.
(4) If you die before the Annuity Date, you are the Annuitant, and your
sole named surviving primary beneficiary is a person other than your
spouse, your surviving primary beneficiary may elect to have the Death
Benefit paid under an annuity option or any other method of payment
then provided by us other than an interest only method of payment. The
election must be made and payments must start within one year after
your death and must not extend beyond the life expectancy of your
primary beneficiary. If no election is made within this time,
distribution will be made within five years after your date of death.
(5) If you die before the Annuity Date, you are not the Annuitant, and
your sole Successor Owner is your surviving spouse, your surviving
spouse becomes the Owner.
(6) If you die before the Annuity Date, you are the Annuitant, and your
surviving spouse is your sole named primary beneficiary, your spouse
will replace you as Owner and may replace you as Annuitant. If your
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spouse does not elect to replace you as Annuitant, the Death Benefit
must be paid to your spouse under an annuity option or any other
method of payment then provided by us for an owner. For purposes of
the preceding sentence, the election must be made, payments must start
within one year after your death, and must not extend beyond your
spouse's life expectancy; however, if your spouse does not choose a
method of payment within this time, distribution will be made under
Annuity Option 1.
(7) If you die on or after the Annuity Date and you are not the Annuitant,
any remaining payments must be paid to your Successor Owner at least
as fast as the method of payment in effect at your death.
(8) If you die on or after the Annuity Date and you are the Annuitant, any
remaining payments must be paid to the beneficiary at least as fast as
the method of payment in effect at your death.
If you are not a living natural person, the Annuitant will be treated as
the Owner for purposes of this provision. If you are not a living natural person
and there is a change in the Annuitant, such change shall be treated as the
death of the Owner for purposes of this provision. If the Policy has two owners,
the first death of either owner is treated as the death of the owner for
purposes of this provision. For purposes of this provision, the amount of any
distribution will be determined on that date of such distribution.
Notwithstanding anything in the Policy to the contrary, the surviving joint
owner will be treated as the Successor Owner of the Policy.
DEATH OF ANNUITANT
DEATH OF ANNUITANT WHO IS NOT AN OWNER. If the Annuitant dies before the
Annuity Date while you are alive, the Death Benefit will be paid as provided in
the following provisions. If the method of payment chosen is not available or no
method of payment is chosen, payment will be in one sum.
If the Annuitant dies on or after the Annuity Date while you are alive, any
remaining payments must be paid to you at least as fast as the method of payment
if effect on the Annuitant's date of death.
BENEFICIARY DESIGNATION. This is as shown in the application. It includes
the name of the beneficiary and the order and method of payment. If you name
"estate" as a beneficiary, it means the executors or administrators of the last
survivor of you and all beneficiaries. If you name "children" of a person as a
beneficiary, only children born to or legally adopted by that person as of the
Annuitant's date of death will be included.
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We may relay on an affidavit as to the ages, names, and other facts about
all beneficiaries. We will incur no liability if we act on such affidavit.
CHANGE OF BENEFICIARY DESIGNATION. You may make a change while the
Annuitant is alive by sending us a request. The change will take effect the date
the request is signed and will replace previous beneficiary designations for the
Policy, but the change will not affect any action we have taken before we
receive the request. We have the right to request your Policy to make the change
on it.
After the Annuitant's death, anyone who has the right to make a withdrawal
may change the method of payment or may select one of the annuity options, and
may name a successor to their interest. The successor payee may be their estate.
ORDER OF PAYMENT. When the Annuitant dies (1) before the Annuity Date and
a death benefit is payable or (2) on or after the Annuity Date, you are the
Annuitant, and payments continue to the beneficiary, we will make such
payment(s) in equal shares to the primary beneficiaries living when payment is
made. If a primary dies after the first payment is made, we will pay that
primary's unpaid share in equal shares to the other primaries living when
payment is made. If the last primary dies, we will make payment in equal shares
to the successor beneficiaries living when payment is made. If a successor dies
while receiving payments, we will pay that successor's unpaid share in equal
shares to the other successors living when payment is made. If, at any time, no
primary or successor is alive, we will make a one sum payment in equal shares to
the final beneficiaries. If, at any time, no beneficiary is living, we will make
a one sum payment to you, if living when payment is made. Otherwise, we will
make a one sum payment to the estate of the last survivor of you and all
beneficiaries. "When payment is made" means (1) the date that a periodic payment
is due or (2) the date that a request is signed for a cash withdrawal or a one
sum payment. You may change this order of payment by sending us a request while
the Annuitant is alive.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Where permitted by applicable law, we may:
(1) create new separate accounts;
(2) combine separate accounts, including the Variable Account;
(3) add new Subaccounts to or remove existing Subaccounts from the
Variable Account or combine Subaccounts;
(4) make any Subaccount available to such classes of policies as we may
determine;
(5) add new funds or remove existing funds;
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(6) substitute new funds for any existing Fund if shares of the Fund are
no longer available for investment or if we determine investment in a
Fund is no longer appropriate in the light of the purposes of the
Variable Account;
(7) deregister the Variable Account under the Act if such registration is
no longer required; and
(8) operate the Variable Account as a management investment company under
the Act or in any other form permitted by law.
The investment policy of the Variable Account will only be changed with the
approval of the insurance supervisory official of the state in Illinois, our
State of domicile. The investment policy of the Variable Account is to invest in
one or more investment companies. The process for such approval is on file.
SAFEKEEPING OF ACCOUNT ASSETS
State Farm holds the title to the assets of the Subaccount. The assets are
kept physically segregated and held separate and apart from State Farm's General
Account assets and from the assets in any other separate account.
Records are maintained of all purchases and redemptions of Fund shares held
by each of the Subaccounts.
A fidelity bond in the amount of $5 million covering State Farm's
directors, officers, and employees has been issued by National Union Fire
Insurance Company.
DISTRIBUTION OF THE POLICIES
State Farm VP Management Corp., One State Farm Plaza, Bloomington, Illinois
61710, acts as the principal underwriter of the Policies. The Policies are
offered to the public on a continuous basis. We do not anticipate discontinuing
the offering of the Policies, but reserve the right to discontinue the offering.
LEGAL MATTERS
All matters relating to Illinois law pertaining to the Policies, including
the validity of the Policies and State Farm's authority to issue the Policies,
have been passed upon by William A. Montgomery, Vice-President and Counsel of
State Farm. Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has
provided advice on certain matters relating to the federal securities laws.
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EXPERTS
The balance sheets of State Farm Life Insurance Company as of December 31,
1996 and 1995, and the related statements of income, stockholder's equity, and
cash flows for each of the years in the period ended December 31, 1996,
appearing in this Statement of Additional Information have been audited by
Coopers & Lybrand, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon the authority of
such firm as experts in accounting and auditing.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended, with respect to the Policies discussed in this
Statement of Additional Information. Not all the information set forth in the
registration statement, amendments and exhibits thereto has been included in
this Statement of Additional Information. Statements contained in this Statement
of Additional Information concerning the content of the Policies and other legal
instruments are intended to be summaries. For a complete statement of the terms
of these documents, reference should be made to the instruments filed with the
SEC.
FINANCIAL STATEMENTS
[TO BE FILED BY PRE-EFFECTIVE AMENDMENT.]
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements will be included in Part B and filed by
Pre-Effective Amendment.
(b) Exhibits
(1) Resolutions of the Board of Directors of State Farm Life Insurance
Company ("State Farm") establishing the State Farm Life Insurance
Company Variable Annuity Separate Account (the "Variable Account").
(2) Not Applicable.
(3) Distribution Agreement.*
(4) (a) Form of Policy.
(b) Riders to Form of Policy
(5) Application.*
(6) (a) Articles of Incorporation of State Farm.
(b) By-Laws of State Farm.
(7) Not Applicable.
(8) Not Applicable.
(9) Opinion and Consent of Counsel.*
(10) (a) Consent of Sutherland, Asbill & Brennan.*
(b) Consent of [ACCOUNTANTS].*
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not applicable.
________________
* To be filed by Pre-Effective Amendment.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL
BUSINESS ADDRESS/*/ Position with State Farm
---------------- ------------------------
Marvin D. Bower Chairman of the Board and Director
Edward B. Rust, Jr. Director; President
Glenn A. Britt Director; Executive Vice President
Darrell W. Beernink Director; Vice President and Actuary
Charles R. Wright Director; Agency Vice President
Robert S. Eckley Director
Wendy L. Gramm Director
Roger S. Joslin Director
Kurt G. Moser Director; Vice President - Investments
George L. Perry Director
Don D Rood Director
Curtis W. Tarr Director
Vincent J. Trosino Director
Thomas E. Deighan Vice President - Life/Health Underwriting
James G. Fisher Vice President - Operations
James A. Malay Vice President - Policyholder Systems
William A. Montgomery Vice President and General Counsel
Danny L. Scott, M.D. Vice President and Medical Director
Laura P. Sullivan Vice President - Counsel; and Secretary
Dale R. Egeberg Controller
Robert Myer Vice President - Marketing Development
Roger Tompkins Vice President
James J. O'Donnell Vice President - Compliance
* The principal business address of all the persons listed above is One State
Farm Plaza, Bloomington, Illinois 61710-0001.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The following chart identifies the persons controlled by or under
common control with the Depositor or Registrant.
ITEM 27. NUMBER OF POLICY OWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
Illinois Business Corporation Act Chapter 805 Section 5/8.75 is a
comprehensive provision that defines the power of Illinois corporations to
provide for the indemnification of its officers, directors, employees and
agents. This Section also authorizes Illinois corporations to purchase and
maintain insurance on behalf of directors, officers, employees or agents of the
corporation.
The Articles of Incorporation, as amended, and the Bylaws of State
Farm Life Insurance Company do not provide for the indemnification of officers,
directors, employees or agents of the Company.
ITEM 29. PRINCIPAL UNDERWRITER
(a) State Farm VP Management Corp. ("State Farm VP") is the
registrant's principal underwriter.
<PAGE>
(b) Officers and Directors of State Farm VP.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address* With the Underwriter
- ------------------ ---------------------
<S> <C>
Edward B. Rust, Jr. [Title] **
Roger S. Joslin [Title] **
Kurt G. Moser [Title] **
Charles R. Wright [Title] **
Roger B. Tompkins [Title] **
</TABLE>
* The principal business address of all of the persons listed above is One
State Farm Plaza, Bloomington, Illinois 61710-0001.
** Information to be provided by pre-effective amendment.
ITEM 30. LOCATION OF BOOKS AND RECORDS
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by State Farm at One State Farm Plaza,
Bloomington, Illinois 61710-0001.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this
registration statement.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in the
registration statement are never more than 16 months old for as
long as purchase payments under the Policies offered herein are
being accepted.
(b) The registrant undertakes that it will include either (1) as part
of any application to purchase a Policy offered by the
prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove and send to State Farm
for a Statement of Additional Information.
(c) The registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form N-4 promptly upon written or oral
request to State Farm at the address or phone number listed in
the prospectus.
(d) State Farm represents that in connection with its offering of the
Policies as funding vehicles for retirement plans meeting the
requirements of Section 403(b) of the Internal Revenue Code of
1986, it is relying on a no-action letter dated November 28,
1988, to the American Council of Life Insurance (Ref. No. IP-6-
88) regarding Sections 22(e), 27(c)(1), and 27(d) of the
Investment Company Act of 1940, and that paragraphs numbered (1)
through (4) of that letter will be complied with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant has caused this registration statement to be signed on its
behalf, in the City of Bloomington, and the State of Illinois, on this 9th day
of December, 1996.
State Farm Life Insurance Company
Variable Annuity Separate Account (Registrant)
Attest: /s/Laura P. Sullivan By: /s/Edward B. Rust, Jr.
- ---------------------------- ------------------------------
[Name of Authorized Officer]
President
State Farm Life Insurance Company
By: State Farm Life Insurance Company
(Depositor)
Attest: /s/Laura P. Sullivan By: /s/Darrell W. Beernink
- ---------------------------- ------------------------------
Darrell W. Beernink
Vice President and Actuary
State Farm Life Insurance Company
<PAGE>
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/Edward B. Rust, Jr. President and Director December 9, 1996
- -----------------------
Edward B. Rust, Jr. (Principal Executive Officer)
/s/Darrell W. Beernink Vice President and Actuary;
- -----------------------
Darrell W. Beernink Director December 9, 1996
(Principal Financial Officer)
/s/Dale R. Egeberg Controller December 10, 1996
- -----------------------
Dale R. Egeberg (Principal Accounting Officer)
/s/Darrell W. Beernink Director December 9, 1996
- -----------------------
Darrell W. Beernink
/s/Marvin D. Bower Director December 9, 1996
- -----------------------
Marvin D. Bower
/s/Glenn A. Britt Director December 9, 1996
- -----------------------
Glenn A. Britt
/s/Robert S. Eckley Director December 9, 1996
- -----------------------
Robert S. Eckley
/s/Wendy L. Gramm Director December 9, 1996
- -----------------------
Wendy L. Gramm
/s/Roger S. Joslin Director December 9, 1996
- -----------------------
Roger S. Joslin
/s/Kurt G. Moser Director December 9, 1996
- -----------------------
Kurt G. Moser
/s/George L. Perry Director December 9, 1996
- -----------------------
George L. Perry
/s/Don D. Rood Director December 9, 1996
- -----------------------
Don D Rood
/s/Curtis W. Tarr Director December 9, 1996
- -----------------------
Curtis W. Tarr
/s/Vincent J. Trosino Director December 9, 1996
- -----------------------
Vincent J. Trosino
/s/Charles R. Wright Director December 9, 1996
- -----------------------
Charles R. Wright
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page No.*
---------
<S> <C>
1. Resolutions of the Board of Directors of State Farm
Life Insurance Company establishing the State Farm
Life Insurance Company Variable Annuity Separate
Account.
4. (a) Form of Policy.
4. (b) Riders to Form of Policy
6 (a) Articles of Incorporation of State Farm Life
Insurance Company.
6 (b) By-Laws of State Farm Life Insurance Company.
</TABLE>
_________
* Page numbers included only in manually executed original in compliance with
Rule 403(d) under the Securities Act of 1933.
<PAGE>
EXHIBIT 1
STATE FARM LIFE INSURANCE COMPANY
BOARD OF DIRECTORS RESOLUTIONS
FOR VARIABLE ANNUITY SEPARATE ACCOUNT
BE IT RESOLVED, That the Board of Directors of State Farm Life Insurance Company
(the "Company"), hereby establishes a separate account, pursuant to the
provisions of 215 ILCS 5/245.21 of the Illinois Insurance Laws, designated the
State Farm Life Insurance Company Variable Annuity Separate Account (hereinafter
the "Variable Account"), for the following use and purposes, and subject to such
conditions as hereinafter set forth; and
FURTHER RESOLVED, That the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable annuity policies
(the "Policies"), and shall constitute a funding medium to support reserve under
such Policies issued by the Company; and
FURTHER RESOLVED, That the income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account shall be credited to or charged
against the Variable Account, without regard to other income, gains or losses of
the Company; and
FURTHER RESOLVED, That the assets of the Variable Account equal to the reserves
and other liabilities under the Policies and any other policies issued through
the Variable Account may not be charged with liabilities arising out of any
other business the Company may conduct; and
FURTHER RESOLVED, That the Variable Account shall be divided into investment
Subaccounts (the "Subaccounts"), each of which shall invest in the shares of a
mutual fund portfolio, and net premiums under the Policies shall be allocated in
accordance with instructions received from owners of the Policies; and
FURTHER RESOLVED, That the President, Executive Vice President, and Vice
President - Investments are jointly authorized to add or remove any Subaccount
of the Variable Account or add or remove any mutual fund as may hereafter be
deemed necessary or appropriate; and
FURTHER RESOLVED, That the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account, without
regard to other income, gains or losses of any other Subaccount of the Variable
Account; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them with full power to act without the
others, be, and they hereby
<PAGE>
are, severally authorized to invest such amount or amounts of the Company's
cash in the Variable Account or in any Subaccount thereof or in any mutual fund
as may be deemed necessary or appropriate to facilitate the commencement of the
Variable Account's and/or the fund's operations and/or to meet any minimum
capital requirements under the Investment Company Act of 1940 (the "1940 Act");
and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, be, and they hereby are, severally authorized to transfer cash from
time to time from the Company's general account to the Variable Account, or from
the Variable Account to the general account, as deemed necessary or appropriate
and consistent with the terms of the Policies; and
FURTHER RESOLVED, That the Board of Directors of the Company reserves the right
to change the designation of the Variable Account hereafter to such other
designation as it may deem necessary or appropriate; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, with such assistance from the Company's independent certified public
accountants, legal counsel and independent consultants or others as they may
require, be, and they hereby are, severally authorized and directed to take all
action necessary to: (a) register the Variable Account as a unit investment
trust under the 1940 Act; (b) register the Policies in such amounts, which may
be an indefinite amount, as such officers of the Company shall from time to time
deem appropriate under the Securities Act of 1933 (the "1933 Act"); and (c) take
all other actions that are necessary in connection with the offering of the
Policies for sale and the operation of the Variable Account in order to comply
with the 1940 Act, the Securities Exchange Act of 1934, the 1933 Act, and other
applicable Federal laws, including the filing of any registration statements,
any undertakings, no-action requests, consents, and any applications for
exemptions from the 1940 Act or other applicable federal laws and any amendments
to the foregoing as the officers of the Company shall deem necessary or
appropriate; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, are severally authorized and empowered to prepare, execute and cause
to be filed with the Securities and EXchange Commission on behalf of the
Variable Account, and by the Company as sponsor and depositor, a Notification of
Registration on Form N-8A, a registration statement registering the Account as
an investment
-2-
<PAGE>
company under the 1940 Act and the Policies under the 1933 Act, and any and all
amendments to the foregoing on behalf of the Variable Account and the Company
and on behalf of and as attorneys-in-fact for the principal executive officer
and/or the principal financial officer and/or the principal accounting officer
and/or any other officer of the Company; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice
President-Counsel and Secretary, Vice President and Actuary, and Controller are
duly appointed as agents for service under any such registration statement and
are duly authorized to receive communications and notices from the Securities
and Exchange Commission with respect thereto; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, are severally authorized on behalf of the Variable Account and on
behalf of the Company to take any and all action that each of them may deem
necessary or advisable in order to offer and sell the Policies, including any
registrations, filings and qualifications both of the Company, its officers,
agents and employees, and of the Policies, under the insurance and securities
laws of any of the states of the United States of America or other
jurisdictions, and in connection therewith to prepare, execute, deliver and file
all such applications, requests, undertakings, reports, convenants, resolutions,
applications for exemptions, consents to service of process and other papers
and instruments as may be required under such laws, and to take any and all
further action which such officers or legal counsel of the Company may deem
necessary or desirable (including entering into whatever agreements and
contracts may be necessary) in order to maintain such registrations or
qualifications for as long as the officers or legal counsel deem it to be in
the best interests of the Variable Account and the Company; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, be, and they hereby are, severally authorized in the names and on
behalf of the Variable Account and the Company to execute and file irrevocable
written consents on the part of the Variable Account and of the Company to be
used in such states wherein such consents to service of process may be required
under the insurance or securities laws therein in connection with the
registration or qualification of the Policies and to appoint the appropriate
state official, or such other person as may be allowed by insurance or
securities laws, agent of the Variable Account and of the Company for the
purpose of receiving and accepting process; and
-3-
<PAGE>
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, be, and hereby are, severally authorized to establish procedures
under which the Company will provide voting rights for owners of the Policies
with respect to securities owned by the Variable Account; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, are hereby severally authorized to execute such agreement or
agreements as deemed necessary and appropriate (i) with State Farm VP Management
Corp. or other qualified entity under which State Farm VP Management Corp. or
such other entity will be appointed principal underwriter and distributor for
the Policies, (ii) with one or more qualified banks or other qualified entities
to provide administrative and/or custody services in connection with the
establishment and maintenance of the Variable Account and the design, issuance,
and administration of the Policies, and (iii) with the designated mutual funds
and/or the principal underwriter and distributor of those funds for the purchase
and redemption of fund shares; and
FURTHER RESOLVED, That the President, Executive Vice President, Vice President
and Actuary, and Controller, and each of them, with full power to act without
the others, are hereby severally authorized to execute and deliver such
agreements and other documents and do such acts and things as each of them may
deem necessary or desirable to carry out the foregoing resolutions and the
intent and purpose thereof.
-4-
<PAGE>
Exhibit 4(a)
[LETTERHEAD OF STATE FARM INSURANCE]
ANNUITANT JOHN J DOE
Male
[LOGO] AGE 35
POLICY NUMBER LF-0000-0000
POLICY DATE October 15, 1997
This policy is based on the application and the payment of the initial premium
shown on page 3. State Farm Life Insurance Company will pay benefits according
to the terms of this policy.
10-Day Right to Examine the Policy. This policy may be returned within 10 days
of its receipt for a refund of the greater of (1) all premiums paid and (2) the
Policy Accumulation Value. Return may be made to State Farm Life Insurance
Company or one of its authorized agents. If returned, this policy will be void
from the policy date.
Read this policy with care. This is a legal contract between the Owner and
State Farm Life Insurance Company.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS POLICY MAY INCREASE OR
DECREASE DEPENDING ON THE INVESTMENT PERFORMANCE OF THE SUBACCOUNTS. A DEATH
BENEFIT IS PROVIDED. THE PART OF THE POLICY ACCUMULATION VALUE IN THE
SUBACCOUNTS IS NOT GUARANTEED.
/s/ Laura P. Sullivan /s/ Edward B. Rust Jr.
Secretary President
- --------------------------------------------------------------------------------
BASIC PLAN DESCRIPTION
DEFERRED VARIABLE ANNUITY.
Flexible premiums are payable until the Annuity Date while the Annuitant is
alive. Payment intervals for annuity payments start on the Annuity Date. This
policy is participating.
- --------------------------------------------------------------------------------
Page 1
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Policy Identification....................................................................... 3
Schedule of Benefits........................................................................ 3
Premium..................................................................................... 3
Interest Rates.............................................................................. 3
Investment Options.......................................................................... 3
Premium Allocation.......................................................................... 3
Charges and Fees............................................................................ 4
Definitions................................................................................. 5
Ownership................................................................................... 7
Owner. Change of Owner/Successor Owner.
Successor Owner.
Premium..................................................................................... 7
Payment of Premiums. Paid-up Annuity.
Variable Account............................................................................ 7
Variable Account. Accumulation Units.
Subaccounts. Accumulation Unit Value.
Changes to the Variable Account. Net Investment Factor.
Variable Policy Accumulation Value.
Fixed Account............................................................................... 9
Fixed Policy Accumulation Value. Interest Credited.
Allocations and Transfers................................................................... 10
Premium Allocation. Fixed Account Transfer Restrictions.
Transfer Right.
Surrenders and Withdrawals.................................................................. 10
Surrenders. Withdrawals.
Fees and Charges............................................................................ 11
Surrender Charge. Transfer Processing Fee.
Annual Administrative Fee.
Annuity Payment............................................................................. 12
Annuity Payments. Evidence of Living.
Annuity Options. Amount of Fixed Annuity Payments.
Basis of Computation. Amount of Variable Annuity Payments.
Payment Interval. Annuity Units.
Proof of Age and Sex. Annuity Unit Value.
Death Benefit............................................................................... 14
Death Benefit. Death of Owner.
Death of Annuitant.
Beneficiary................................................................................. 16
Beneficiary Designation. Order of Payment.
Change of Beneficiary Designation.
General..................................................................................... 16
The Contract. Error in Age or Sex.
Transaction Delay. Incontestability.
Minimum Value. Annual Report.
Assignment. Participation.
</TABLE>
The Application and any Riders and Endorsements follow page 18.
Page 2
<PAGE>
P O L I C Y I D E N T I F I C A T I O N
Annuitant JOHN J DOE Age 45
(Male)
Policy Number LF-0000-0000
Policy Date October 15, 1997
Issue Date October 15, 1997
S C H E D U L E O F B E N E F I T S
Form Description
97040 Basic Plan
(Deferred Variable Annuity)
P R E M I U M
Initial Premium: $1,000.00
I N T E R E S T R A T E S
The current interest rate applied to the part of the Initial Premium allocated
to the Fixed Account until October 15, 1998 is 4.90% a year. The current
interest rate and guarantee period when a subsequent part of the premium
allocated to the Fixed Account is received will be applied to that premium. At
the end of this and each subsequent guarantee period, a new current interest
rate and guarantee period are applicable. Each guarantee period will be at
least one year.
Guaranteed Interest Rate for the Fixed Account: 3%
A L L O C A T I O N O P T I O N S
Fixed Account
State Farm Life Insurance Company Variable Annuity Separate Account
Subaccounts that invest in Funds of the State Farm Variable Product Trust:
Large Cap Equity Index Fund Subaccount
Small Cap Equity Index Subaccount
Stock and Bond Balanced Subaccount
Bond Subaccount
Money Market Subaccount
International Equity Index Subaccount
Continued on Next Page
Page 3
<PAGE>
Continued from Page 3
P R E M I U M A L L O C A T I O N
To the end of the day on November 3, 1997 (presumed end of free-look period):
Fixed Account 100%
Starting at the end of the day on November 3, 1997 (presumed end of free-look
period):
Large Cap Equity Index Subaccount 15%
Small Cap Equity Index Subaccount 15%
Stock and Bond Balanced Subaccount 15%
Bond Subaccount 15%
Money Market Subaccount 15%
International Equity Index Subaccount 15%
Fixed Account 10%
Minimum percent of each premium allocated to a Subaccount or to the Fixed
Account: 1%.
Minimum Transfer Amount: $250
Minimum Withdrawal Amount: $500
Page 3 Continued
<PAGE>
C H A R G E S A N D F E E S
Maximum Annual Administrative Fee: $30
Maximum Transfer Processing Fee after first 12 in a policy year: $25
Table of Surrender Charges
<TABLE>
<CAPTION>
Surrender
Policy Charge
Year Percentage
<S> <C>
1 7
2 6
3 5
4 4
5 3
6 2
7 1
8 & over 0
</TABLE>
Page 4
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
WE, US, and OUR refer to State Farm Life Insurance Company.
YOU and YOUR refer to the Owner.
ACCUMULATION UNIT. A unit of measure used to calculate the Variable Policy
Accumulation Value.
ANNUITY DATE. You may choose this date which can be no later than the Final
ANNUITY DATE. If a death benefit is payable and an annuity option is chosen,
the Annuity Date will be the date we receive due proof of the Annuitant's Death.
Payment intervals start on this date. The first annuity payment is at the end
of the first payment interval.
ANNUITY UNIT. A unit of measure used to calculate the Variable Annuity Payments.
CASH SURRENDER VALUE. The Policy Accumulation Value less any applicable
Surrender Charge and less any applicable Annual Administrative Fee.
CODE. The U.S. Internal Revenue Code.
DOLLARS. Any money we pay, or which is paid to us, must be in United States
dollars.
EFFECTIVE DATE. Coverage starts on this date.
FINAL ANNUITY DATE. The policy anniversary when the Annuitant is age 95.
ELIGIBLE HOSPITAL. An institution meeting one of the following requirements:
(1) It is accredited as a hospital under the Hospital Accreditation Program of
the Joint Commission on Accreditation of Healthcare Organizations; or
(2) It is legally operated, has 24-hour a day supervision by a staff of
doctors, has 24-hour a day nursing service by a registered graduate nurse,
and either:
(a) It mainly provides general inpatient medical care and treatment of
sick and injured persons by the use of medical, diagnostic, and major
surgical facilities and all such facilities are located in it or under
its control; or
(b) It mainly provides specialized inpatient medical care and treatment of
sick or injured persons by the use of medical and diagnostic
facilities (including x-ray and laboratory) and all such facilities
are located in, are under its control, or are available to it under a
written agreement with a hospital (as defined above) or with a
specialized provider of these facilities.
An eligible hospital is not an institution, or part of one, that furnishes
mainly homelike or custodial care, or training in the routines of daily living
or is mainly a school.
ELIGIBLE NURSING HOME. An institution or special nursing unit of a hospital
meeting at least one of the following requirements:
(1) It is Medicare approved as a provider of skilled nursing care services;
(2) It is licensed as a skilled nursing home or as an intermediate care
facility by the state it is located in; or
(3) It meets all of the following requirements:
(a) It is licensed as a nursing home by the state it is located in;
(b) Its main function is to provide skilled, intermediate, or custodial
nursing care;
(c) It is engaged in providing continuous room and board accommodations to
3 or more persons;
(d) It is under the supervision of a registered nurse (RN) or licensed
practical nurse (LPN);
(e) It maintains a daily medical record of each patient; and
(f) It maintains control and records for all medications dispensed.
An institution primarily providing residential facilities is not an eligible
nursing home.
FIXED ACCOUNT. Part of our General Account to which the Policy Accumulation
Value may be transferred or premium payments may be allocated under a policy.
Page 5
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENT. Annuity payment supported by the General Account.
Payment does not vary in amount from one payment to the next.
FIXED POLICY ACCUMULATION VALUE. The Policy Accumulation Value in the Fixed
Account.
FUND. Any open-end management investment company or investment portfolio
thereof, or unit investment trust or series, thereof, in which a Subaccount
invests.
GENERAL ACCOUNT. Our assets not allocated to the Variable Account or any other
separate account.
NET ASSET VALUE PER SHARE. The value per share of any Fund on any Valuation Day.
The method of computing the Net Asset Value Per Share is described in the
prospectus for the Funds.
PAYEE. If the Annuitant dies prior to the Annuity Date and a death benefit is
payable, the beneficiaries shown in the application, unless changed. If you
cash surrender this policy, the persons that you have named. A payee can be
other than a natural person only if we agree.
POLICY ACCUMULATION VALUE. The sum of the Variable Policy Accumulation Value and
the Fixed Policy Accumulation Value.
POLICY DATE. The effective date of this policy.
POLICY MONTH, YEAR, OR ANNIVERSARY. A policy month, year, or anniversary is
measured from the policy date.
REQUEST. A written request signed by the person making the request. Such
request must be sent to and be in a form acceptable to us. We may, in our sole
discretion, accept telephone requests in connection with certain transactions.
We may also, in our sole discretion, adopt rules and procedures from time to
time for telephone requests.
RIDER. Any benefit, other than the Basic Plan, made a part of this policy.
SEC. The U.S. Securities and Exchange Commission.
SUBACCOUNT. A subdivision of the Variable Account, the assets of which are
invested in a corresponding Fund.
SUBACCOUNT POLICY ACCUMULATION VALUE. The Policy Accumulation Value in a
Subaccount as defined in the Accumulation Unit Value provision.
TERMINALLY ILL. An annuitant with a life expectancy of 12 months or less. Proof
of terminal illness must include a certification by a licensed physician.
VALUATION DAY. For each Subaccount, each day on which the New York Stock
Exchange is open for business except for certain holidays listed in the
Prospectus and days on which a Subaccount's corresponding Fund does not value
its shares.
VALUATION PERIOD. The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
VARIABLE ACCOUNT. Our separate account named on page 3.
VARIABLE ANNUITY PAYMENT. Annuity payment that may vary in amount from one
payment to the next with the investment experience of one or more Subaccounts
chosen by you to support such payments.
VARIABLE POLICY ACCUMULATION VALUE. The sum of all Subaccount Policy
Accumulation Values.
Page 6
<PAGE>
- --------------------------------------------------------------------------------
OWNERSHIP PROVISIONS
- --------------------------------------------------------------------------------
OWNER. You, as the Owner, are named in the application. You may exercise any
policy provision only by request and while the Annuitant is alive.
SUCCESSOR OWNER. Your Successor Owner is named in the application if you are not
the Annuitant.
CHANGE OF OWNER/SUCCESSOR OWNER. You may change the Owner or Successor Owner by
sending us a request while the Annuitant is alive. We have the right to request
this policy to make the change on it. The change will take effect the date you
sign the request, but the change will not affect any action we have taken before
we receive the request. A change of owner or successor owner does not change the
beneficiary designation. No more than two owners and/or successor owners can be
named.
- --------------------------------------------------------------------------------
PREMIUM PROVISIONS
- --------------------------------------------------------------------------------
PAYMENT OF PREMIUMS. You may pay premiums at our Home Office, a regional office,
or to one of our authorized agents. We will give you a receipt signed by one of
our officers, if you request one.
The initial premium is shown on page 3 and is due on the policy date. Premiums
may be paid at any time before the Annuity Date even if you have discontinued
premium payments. After payment of the initial premium, premium payments are
not required to continue this policy in force. Each premium must be at least
$50. The total premium paid in a policy year after the first may not exceed
$30,000, unless we set a higher limit.
PAID-UP ANNUITY. If (1) on a policy anniversary, no premium has been received in
the past year or (2) at any time you discontinue premium payments, the policy
will be continued as a paid-up deferred variable annuity.
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT. The Variable Account is registered with the SEC as a unit
investment trust under the Investment Company Act of 1940, as amended (the
"Act"). The Variable Account is also subject to the laws of the state in which
this policy is delivered. We own the assets of the Variable Account; however,
these assets are held separately from our other assets and are not part of our
General Account. The assets of the Variable Account are used to support the
operation of and provide the variable values and benefits for this policy and
similar policies. The part of the assets of the Variable Account equal to the
reserves and other policy liabilities of the Variable Account are not chargeable
with liabilities from any other business in which we take part. We have the
right to transfer to our General Account any assets of the Variable Account that
are in excess of such reserves and other liabilities.
SUBACCOUNTS. The Variable Account consists of Subaccounts. The income, gains
and losses, realized and unrealized, from the assets allocated to the Subaccount
are credited to or charged against such Subaccount, without regard to our other
income, gains or losses. Those Subaccounts currently available under this
policy on the policy date are shown on page 3. Each Subaccount invests
exclusively in shares of a corresponding Fund. Shares of a Fund are bought and
redeemed for a Subaccount at their net asset value. Any amounts of income,
dividends, and gains distributed from the shares of a Fund are reinvested in
additional shares of that Fund at net asset value. The dollar amounts of values
and benefits of this policy supported by the Variable Account depend on the
investment performance of the Subaccounts selected by you. We do not guarantee
the investment performance of the Subaccounts. You bear the full investment
risk for the Subaccount Policy Accumulation Value in the Subaccounts you have
chosen.
Page 7
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
CHANGES TO THE VARIABLE ACCOUNT. Where permitted by applicable law, we may:
(1) create new separate accounts;
(2) combine separate accounts, including the Variable Account;
(3) add new Subaccounts to or remove existing Subaccounts from the Variable
Account or combine Subaccounts;
(4) make any Subaccount available to such classes of policies as we may
determine;
(5) add new Funds or remove existing Funds;
(6) substitute new Funds for any existing Fund if shares of the Fund are no
longer available for investment or if we determine investment in a Fund
is no longer appropriate in the light of the purposes of the Variable
Account;
(7) deregister the Variable Account under the Act if such registration is no
longer required; and
(8) operate the Variable Account as a management investment company under the
Act or in any other form permitted by law.
The investment policy of the Variable Account will only be changed with the
approval of the insurance supervisory official of the state in Illinois, our
state of domicile. The investment policy of the Variable Account is to invest
in one or more investment companies. The process for such approval is on file.
VARIABLE POLICY ACCUMULATION VALUE. The Variable Policy Accumulation Value
reflects:
(1) the net investment experience of the Subaccounts to which it is
allocated,
(2) any premium payments allocated to the Subaccounts,
(3) any dividend transferred to the Subaccounts,
(4) transfers of Policy Accumulation Value in or out of the Subaccounts and
any applicable transfer charge deducted,
(5) the deduction of the part of the Annual Administrative Fee allocated to
the Subaccounts,
(6) any withdrawals of the Variable Policy Accumulation Value, and
(7) any applicable surrender charges deducted from the Subaccounts.
There is no guaranteed minimum Variable Policy Accumulation Value.
ACCUMULATION UNITS. For each Subaccount, premium payments allocated to a
Subaccount or amounts of Policy Accumulation Value or dividends transferred to a
Subaccount are converted into Accumulation Units. The number of Accumulation
Units credited to a policy equals the dollar amount directed to each Subaccount
divided by the value of the Accumulation Unit for that Subaccount for the
Valuation Period as of which the dollar amount is invested in the Subaccount.
Any dollar amount directed to a Subaccount increases the number of Accumulation
Units of that Subaccount credited to the policy.
Certain events will cancel an appropriate number of Accumulation Units of a
Subaccount credited to a policy:
(1) withdrawals of Subaccount Policy Accumulation Value from a Subaccount and
any applicable surrender charges deducted,
(2) transfers of Subaccount Policy Accumulation Value from a Subaccount and
any applicable transfer processing fee deducted;
(3) surrender of the policy;
(4) payment of the Death Benefit;
(5) application of the Variable Accumulation Value to an annuity payment
option on the Annuity Date; and
(6) deduction of the part of the Annual Administrative Fee allocated to a
Subaccount.
Accumulation Units are cancelled as of the end of the Valuation Period in which
the event occurs.
ACCUMULATION UNIT VALUE. The Accumulation Unit values for each Subaccount were
arbitrarily set initially at $10 when that Subaccount began operation.
Thereafter, the Accumulation Unit value for every Valuation Period is the
Accumulation Unit value at the end of the previous Valuation Day times the Net
Investment Factor. The Subaccount Accumulation Value on any day equals the
number of Accumulation Units attributable to the policy times the Accumulation
Unit Value for that Subaccount on that day.
Page 8
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
NET INVESTMENT FACTOR. The Net Investment Factor is an index applied to measure
the investment performance of a Subaccount from one Valuation Period to the
next. The Net Investment Factor for any Subaccount for any Valuation Period is
equal to (1) divided by (2) and subtracting (3) from the result, where:
(1) is the result of:
(a) the Net Asset Value Per Share of the Fund held in the Subaccount,
determined at the end of the current Valuation Period; plus
(b) the per share amount of any dividend or capital gain distribution
made by the Fund held in the Subaccount, if the "ex-dividend" date
occurs during the Valuation Period; plus or minus
(c) a per share charge or credit for any taxes reserved for.
(2) is the Net Asset Value Per Share of the Fund held in the Subaccount,
determined at the end of the prior Valuation Period.
(3) is a daily factor representing the mortality and expense risk charge
deducted from the Subaccount adjusted for the number of days in the
Valuation Period. Such charge will not exceed an annual rate of 1.25% of
the daily net asset value of the Variable Account.
- --------------------------------------------------------------------------------
FIXED ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
FIXED POLICY ACCUMULATION VALUE. The Fixed Policy Accumulation Value on the
policy date is zero.
The Fixed Policy Accumulation Value on any other day equals:
(1) aggregate premium payments allocated to the Fixed Account; plus
(2) Policy Accumulation Value transferred to the Fixed Account; plus
(3) interest credited to the Fixed Account; plus
(4) any dividend transferred to the Fixed Account; less
(5) any withdrawals and any applicable surrender charges deducted from the
Fixed Account; less
(6) transfers and any applicable transfer processing fee deducted from the
Fixed Account; less
(7) the part of the Annual Administrative Fees deducted from the Fixed Policy
Accumulation Value.
INTEREST CREDITED. Each interest rate is expressed as an effective annual
interest rate. We guarantee to credit interest to the Fixed Policy Accumulation
Value at an effective annual rate of not less than the Guaranteed Interest Rate
shown on page 3. The current interest rate is the Guaranteed Interest Rate plus
any excess interest rate. The current interest rate and the guarantee period
for that rate are determined periodically. Each guarantee period will be at
least one year.
The current interest rate and guarantee period for the Initial Premium is shown
on page 3. At the end of this and each subsequent guarantee period, a new
current interest rate and guarantee period are applicable.
The current interest rate and guarantee period in effect when a subsequent part
of the premium is received and allocated to the Fixed Account or the date Policy
Accumulation Value is transferred to the Fixed Account will be applied to that
amount. At the end of this and each subsequent guarantee period, a new current
interest rate and guarantee period are applicable.
Page 9
<PAGE>
- --------------------------------------------------------------------------------
ALLOCATION AND TRANSFERS PROVISIONS
- --------------------------------------------------------------------------------
ALLOCATION OF PREMIUM. You may allocate premium payments among the Subaccounts
and the Fixed Account.
The allocation for the Initial Premium and any premiums we receive prior to the
end of the free-look period is shown on page 3. For purposes of this provision,
we presume your free-look period will end on the date shown on page 3. On that
date, any Policy Accumulation Value will be transferred to the Subaccounts and
the Fixed Account on a pro-rata basis using your Premium allocation instructions
in effect at that time. Any additional premium received will be allocated
according to your allocation instructions in the application or in a subsequent
request.
Allocation instructions must be in whole percentages. The minimum amount we can
allocate to any Subaccount or the Fixed Account is shown on page 3 as a percent
of any premium. We reserve the right to set additional limitations on premium
allocations.
TRANSFER RIGHT. While the Annuitant is alive and on or before the Annuity Date,
you may request to transfer all or part of any Subaccount Policy Accumulation
Value to another Subaccount(s) (subject to availability) or to the Fixed
Account, or transfer all or part of the Fixed Policy Accumulation Value to any
Subaccount(s), (subject to availability and restrictions). Transfers are subject
to the lesser of:
(1) the minimum transfer amount shown on page 3 and
(2) the entire Subaccount Policy Accumulation Value or Fixed Policy
Accumulation Value, and the additional restrictions on transfers from the
Fixed Policy Accumulation Value.
While the Annuitant is alive and after the Annuity Date, you may request to
transfer Annuity Units from one Subaccount to another Subaccount no more than 4
times a year.
We reserve the right to modify, restrict, suspend, or eliminate the transfer
right at any time, for any reason.
FIXED ACCOUNT TRANSFER RESTRICTIONS. On or before the Annuity Date, you may
transfer all or part of the Fixed Policy Accumulation Value to a Subaccount,
subject to the following:
(1) You may make only one transfer each policy year from the Fixed Account to
one or more Subaccounts. Such a transfer must be made within 30 days
after the policy anniversary. An unused transfer does not carry over to
the next year; and
(2) The maximum transfer amount is the greater of 25% of the Fixed Policy
Accumulation Value on the date of the transfer or $1,000, unless waived
by us.
After the Annuity Date, any Cash Surrender Value used to provide fixed income
payments may not be transferred to provide Annuity Units in any Subaccount; and
any Cash Surrender Value used to provide variable income payments may not be
transferred to provide fixed income payments.
- --------------------------------------------------------------------------------
SURRENDERS AND WITHDRAWALS PROVISIONS
- --------------------------------------------------------------------------------
SURRENDERS. You may request surrender of this policy at any time prior to the
earlier of the Annuity Date or the date the Annuitant dies. This policy will
terminate on the date we receive your request or on a later date if you so
request it. We will pay you the Cash Surrender Value in one sum unless you
choose an annuity option or another method of payment then available. The Cash
Surrender Value of this policy is its Policy Accumulation Value less any
applicable surrender charge less any applicable Annual Administrative Fee. See
the Surrender Charge provision regarding the surrender charges applicable. We
may defer payment from the Fixed Account of any Cash Surrender Value for up to 6
months after receiving your request unless paid under Annuity Option 1, 2, or 3.
Page 10
<PAGE>
- --------------------------------------------------------------------------------
SURRENDERS AND WITHDRAWALS PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
WITHDRAWALS. Prior to the Annuity Date, you may request to withdraw part of the
Cash Surrender Value. The amount you request to withdraw must be at least the
minimum withdrawal amount shown on page 3 and must be less than the Cash
Surrender Value. The total amount withdrawn will include the amount you request
plus any applicable surrender charge. The surrender charge is based on the
schedule of surrender charges and the total amount withdrawn, which includes the
surrender charge. We may defer payment from the Fixed Account of any withdrawal
for up to 6 months after receiving your request.
Unless you request otherwise, amounts withdrawn and any applicable surrender
charges deducted are taken from Subaccount Policy Accumulation Values and Fixed
Policy Accumulation Value on a pro-rata basis.
- --------------------------------------------------------------------------------
FEES AND CHARGES PROVISIONS
- --------------------------------------------------------------------------------
SURRENDER CHARGE. The surrender charge percentages are shown on page 4. A
surrender charge may be applicable if you surrender the policy or make a
withdrawal. If you surrender the policy, the surrender charge is deducted from
Policy Accumulation Value. If you request a withdrawal, the applicable surrender
charge is deducted from the total amount withdrawn. The total surrender charge
deducted cannot exceed 8 1/2 % of the total premiums paid.
There is no surrender charge after the end of the first five policy years if the
Cash Surrender Value is then paid under Annuity Option 1, 2, or 3.
After the first policy year, a total of 10% of the Policy Accumulation Value on
the previous policy anniversary may be withdrawn in a policy year without a
deduction for a surrender charge. The 10% of Policy Accumulation Value that may
be withdrawn in a policy year without a deduction for a surrender charge is not
cumulative from one policy year to the next.
There is no surrender charge if, at the time we receive a request to surrender
or withdraw, we receive due proof that the Annuitant is Terminally Ill or has
been confined to an Eligible Hospital or Eligible Nursing Home continuously for
at least 3 months before the date we receive the request.
ANNUAL ADMINISTRATIVE FEE. We will deduct an administrative fee on
(1) each policy anniversary,
(2) the day of any surrender if the surrender is not on the policy
anniversary, or
(3) the Annuity Date if the Annuity Date is not on the policy anniversary.
The maximum is shown on page 3. We may deduct a smaller amount.
The fee will be deducted from Subaccount Accumulation Values and Fixed Account
Accumulation Values on a pro-rata basis.
TRANSFER PROCESSING FEE. A number of transfers during each policy year are free
as shown on page 4. We reserve the right to assess a transfer fee for each
transfer in excess of that number during a policy year. The maximum fee is
shown on page 4. For the purpose of assessing this fee, each request of
transfer is considered one transfer, regardless of the number of Subaccounts
affected by the transfer. This fee is deducted on a pro-rata basis from each
Subaccount and the Fixed Account from which you request a transfer.
Page 11
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
ANNUITY PAYMENTS. On or before the Final Annuity Date, an Annuity Date must be
chosen. If a death benefit is payable and an annuity option is chosen, the
Annuity Date will be the date we receive due proof of the Annuitant's Death.
The annuity option and whether annuity payments will be variable, fixed, or a
combination of variable and fixed must be chosen on or before the Annuity Date.
On the Annuity Date, the Cash Surrender Value or the Death Benefit will be used
to provide annuity payments. On the Final Annuity Date, we will use Annuity
Option 1 for payment of the Cash Surrender Value if no choice is made. Unless
otherwise requested, any part of the Cash Surrender Value or Death Benefit
attributable to any Subaccount Policy Accumulation Value will be used to
determine Annuity Units under that Subaccount; and any part of the Cash
Surrender Value or Death Benefit attributable to the Fixed Policy Accumulation
Value will be used to provide a fixed annuity income. If this policy has been
in force for at least five policy years and Annuity Option 1, 2 or 3 are used,
no surrender charge will be deducted from the Policy Accumulation Value.
ANNUITY OPTIONS. The available annuity options are:
ANNUITY OPTION 1 - LIFE ANNUITY. Payments attributable to the Cash
Surrender Value will be made to you at the end of each payment interval as long
as the Annuitant lives. Payments attributable the Death Benefit will be made to
the Payee at the end of each payment interval as long as the Payee lives. The
present value of payments may not be withdrawn.
- --------------------------------------------------------------------------------
ANNUITY OPTION 1
- --------------------------------------------------------------------------------
Guaranteed minimum monthly payment factors per $1000. Payment factors for ages
and payment intervals not shown will be given, if requested.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Exact
Age Male Female
- --------------------------------------------------------------------------------
<S> <C> <C>
50 $4.34 $4.02
55 4.70 4.31
60 5.17 4.69
65 5.82 5.20
70 6.73 5.90
75 8.01 6.92
80 9.80 8.43
85 12.34 10.70
90 15.81 14.08
95 20.44 18.79
- --------------------------------------------------------------------------------
</TABLE>
ANNUITY OPTION 2 - Life Annuity with Certain Period. Payments attributable
to the Cash Surrender Value will be made to you at the end of each payment
interval as long as the Annuitant lives or to the end of the certain period, if
longer. Payments attributable to the Death Benefit will be made to the Payee at
the end of each payment interval as long as the Payee lives or the end of the
certain period, if longer. The present value of any payments may not be
withdrawn unless the Annuitant or Payee dies. The certain period can be any
number of years from 5 to 20. The number of years must be chosen if this annuity
option is chosen.
- --------------------------------------------------------------------------------
ANNUITY OPTION 2
- --------------------------------------------------------------------------------
Guaranteed minimum monthly payment factors per $1000 for a life annuity with a 0
year certain period. Payment factors for ages, payment intervals, and certain
periods not shown will be given, if requested.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Exact
Age Male Female
- --------------------------------------------------------------------------------
<S> <C> <C>
50 $4.30 $4.01
55 4.64 4.28
60 5.07 4.64
65 5.63 5.11
70 6.34 5.73
75 7.17 6.52
80 8.05 7.48
85 8.82 8.45
90 9.37 9.19
95 9.69 9.61
- --------------------------------------------------------------------------------
</TABLE>
Page 12
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
ANNUITY OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY. Payments
attributable to the Cash Surrender Value will be paid to you at the end of each
payment interval as long as at least the Annuitant or a second designated person
is alive. Payments attributable to the Death Benefit will be paid to the Payee
at the end of each payment interval as long as at least the Payee or a second
designated person is alive. The second designated person must be named by you on
or before the Annuity Date. The present value of any payments may not be
withdrawn.
- --------------------------------------------------------------------------------
ANNUITY OPTION 3
- --------------------------------------------------------------------------------
Guaranteed minimum monthly payment factors per $1000. Payment factors for age
combinations and payment intervals not shown will be given, if requested.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EXACT FEMALE
AGE 60 65 70 75
MALE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
60 $4.27 $4.47 $4.66 $4.82
65 4.39 4.66 4.93 5.19
70 4.49 4.82 5.20 5.58
75 4.56 4.95 5.42 5.95
- --------------------------------------------------------------------------------
</TABLE>
ANNUITY OPTION 4 - FIXED YEARS. Payments attributable to the Cash Surrender
Value will be made to you at the end of each payment interval for the number of
years chosen. Payments attributable to the Death Benefit will be made to Payee
at the end of each payment interval for the number of years chosen. The number
of years can be from 5 to 30. Withdrawals can be made in addition to the
payments under this option. If a withdrawal is made, the number of remaining
payments will be reduced.
- -------------------------------------------------------------------------------
ANNUITY OPTION 4
- -------------------------------------------------------------------------------
Guaranteed minimum monthly payment factors per $1000 for the number of years
chosen. Payments for years not shown will be given, if requested.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS PAYMENTS YEARS PAYMENTS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $84.90 8 $11.93
2 43.18 9 10.78
3 29.28 10 9.86
4 22.33 15 7.12
5 18.17 20 5.77
6 15.39 25 4.98
7 13.41 30 4.46
- --------------------------------------------------------------------------------
</TABLE>
BASIS OF COMPUTATION. The Guaranteed Minimum Annuity Option Payment Factors for
Options 1, 2, and 3 are based on an interest rate of 3 1/2% a year (Assumed
Investment Rate), the 1983a Individual Annuity Mortality Table with ages set
back 4 years, the exact age and sex of the Annuitant or Payee on the Annuity
Date, and, if applicable, the exact age and sex of the second designated person
on the Annuity Date. The Guaranteed Minimum Annuity Option Payment Factors for
Option 4 are based on an interest rate of 3 1/2% a year (Assumed Investment
Rate). The factors are used to determine the number of Annuity Units and the
guaranteed minimum amount of the fixed annuity payments.
Any present values will be based on the interest rate used in determining the
number of Annuity Units and the amount of the fixed annuity payments. The
factors for other payment intervals will be furnished on request.
PAYMENT INTERVAL. You may choose to have payments made at the end of 1, 3, 6, or
12 month intervals. If any payment would be less than $100, we may change the
payment interval to the next longer interval. If, on the Annuity Date, the
payment for the 12 month interval is less than $100, we may pay the Cash
Surrender Value or Death Benefit on that date in one sum.
PROOF OF AGE AND SEX. We may require proof of the age and sex of the Annuitant
or Payee and the second designated person before any payments are made.
EVIDENCE OF LIVING. We may require satisfactors proof that the Annuitant is
liviv when each payment is due. If proof is required, payments will stop until
such proof is given. If any payment is made by check and the Annuitant
personally endorses the check on or after the date on which such payment is due,
no other proof will be required.
Page 13
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
AMOUNT OF FIXED ANNUITY PAYMENTS. On the Annuity Date, the amount you have
chosen to apply to provide fixed annuity payments will be applied under the
annuity option you have chosen. The annuity option payment factor in effect on
the Annuity Date times that amount will be the dollar amount of each payment.
Each payment will be equal and will not change.
The annuity option payment factor used to determine the amount of the fixed
annuity payments will not be less than the guaranteed minimum annuity payment
factors.
AMOUNT OF VARIABLE ANNUITY PAYMENTS. These payments will vary in amount. The
dollar amount of each payment attributable to each Subaccount is the number of
Annuity Units for each Subaccount times the Annuity Unit Value of that
Subaccount. The sum of the dollar amounts for each Subaccount is the amount of
the total variable annuity payment. The Annuity Unit Value for each payment
will be determined no earlier than five Valuation Days preceding the date the
annuity payment is due. We guarantee the payment will not vary due to changes
in mortality or expenses.
ANNUITY UNITS. On the Annuity Date, the number of Annuity Units for an
applicable Subaccount is determined by multiplying (1) by (2) and dividing the
result by (3), where:
(1) is the part of the Cash Surrender Value or Death Benefit on that date
applied under that Subaccount;
(2) is the Guaranteed Minimum Payment Factor for the Annuity Option
chosen; and
(3) is the Annuity Unit Value for that Subaccount for the Valuation Period
ending on that date.
ANNUITY UNIT VALUE. The Annuity Unit Values for each Subaccount were arbitrarily
set initially at $10 when that Subaccount began operation. Thereafter, the
Annuity Unit Value for every Valuation Period is the Annuity Unit value at the
end of the previous Valuation Day times the Net Investment Factor times the
Annuity Interest Factor. The Annuity Interest Factor is used to neutralize the
Assumed Investment Rate of 3 1/2% a year used to determine the Guaranteed
Minimum Payment Factor. The Assumed Investment Rate is significant in
determining the amount of each variable annuity payment and the amount by which
each variable annuity payments varies from one payment to the next.
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH BENEFIT. If the Annuitant dies before the Annuity Date and a death benefit
is payable, the amount paid will be the greater of:
(1) the sum of all premiums paid less any withdrawals and any applicable
surrender charges deducted, or
(2) the Policy Accumulation Value.
Both will be determined on the date we receive due proof of the Annuitant's
death.
DEATH OF ANNUITANT. If the Annuitant dies before the Annuity Date while you are
alive, the Death Benefit will be paid as provided in the Beneficiary Provisions.
If the method of payment chosen is not available or no method of payment is
chosen, payment will be in one sum.
If the Annuitant dies on or after the Annuity Date while you are alive, any
remaining payments must be paid to you at least as fast as the method of payment
in effect on the Annuitant's date of death.
PAGE 14
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
DEATH OF OWNER. The Code requires certain distributions under an annuiy when
you die. This provision will override any inconsistent provisions in the
policy.
(1) If you die before the Annuity Date, you are not the Annuitant, and you
either have not named a Successor Owner or your named Successor Owner
is not a living natural person, the Cash Surrender Value must be paid
within five years after your date of death.
(2) If you die before the Annuity Date, you are the Annuitant, and you
either have not named any beneficiary or your named beneficiary is not
a living natural person, the Death Benefit must be paid within five
years after your date of death.
(3) If you die before the Annuity Date, you are not the Annuitant, and
your sole Successor Owner is a person other than your spouse, your
Successor Owner may elect to have the Cash Surrender Value paid under
an annuity option or any other method of payment then provided by us
other than an interest only method of payment. The election must be
made and payments must start within one year after your death and must
not extend beyond the life expectancy of your Successor Owner. If no
election is made within this time, distribution will be made within
five years after your date of death.
(4) If you die before the Annuity Date, you are the Annuitant, and your
sole named surviving primary beneficiary is a person other than your
spouse, your surviving primary beneficiary may elect to have the Death
Benefit paid under an annuity option or any other method of payment
then provided by us other than an interest only method of payment. The
election must be made and payments must start within one year after
your death and must not extend beyond the life expectancy of your
primary beneficiary. If no election is made within this time,
distribution will be made within five years after your date of death.
(5) If you die before the Annuity Date, you are not the Annuitant, and
your sole Successor Owner is your surviving spouse, your surviving
spouse becomes the Owner.
(6) If you die before the Annuity Date, you are the Annuitant, and your
surviving spouse is your sole named primary beneficiary, your spouse
will replace you as Owner and may replace you as Annuitant. If your
spouse does not elect to replace you as Annuitant, the Death Benefit
must be paid to your spouse under an annuity option or any other
method of payment then provided by us for an owner. For purposes of
the preceding sentence, the election must be made, payments must start
within one year after your death, and must not extend beyond your
spouse's life expectancy; however, if your spouse does not choose a
method of payment within this time, distribution will be made under
Annuity Option 1.
(7) If you die on or after the Annuity Date and you are not the Annuitant,
any remaining payments must be paid to your Successor Owner at least
as fast as the method of payment in effect at your death.
(8) If you die on or after the Annuity Date and you are the Annuitant, any
remaining payments must be paid to the beneficiary at least as fast as
the method of payment in effect at your death.
If you are not a living natural person, the Annuitant will be treated as the
Owner for purposes of this provision. If you are not a living natural person
and there is a change in the Annuitant, such change shall be treated as the
death of the Owner for purposes of this provision. If this policy has two
owners, the first death of either owner is treated as death of the owner for
purposes of this provision. For purposes of this provision, the amount of any
distribution will be determined on the date of such distribution.
Notwithstanding anything in the policy to the contrary, the surviving joint
owner will be treated as the Successor Owner of the policy.
Future endorsements may also be necessary to maintain this policy's
qualification as an annuity. This includes endorsements required due to changes
in the Code. Such endorsements will be sent to you.
PAGE 15
<PAGE>
- --------------------------------------------------------------------------------
BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
BENEFICIARY DESIGNATION. This is as shown in the application. It includes the
name of the beneficiary and the order and method of payment. If you name
"estate" as a beneficiary, it means the executors or administrators of the last
survivor of you and all beneficiaries. If you name "children" of a person as a
beneficiary, only children born to or legally adopted by that person as of the
Annuitant's date of death will be included.
We may rely on an affidavit as to the ages, names, and other facts about all
beneficiaries. We will incur no liability if we act on such affidavit.
CHANGE OF BENEFICIARY DESIGNATION. You may make a change while the Annuitant is
alive by sending us a request. The change will take effect on the date the
request is signed and will replace previous beneficiary designations for this
policy, but the change will not affect any action we have taken before we
receive the request. We have the right to request your policy to make the
change on it.
After the Annuitant's death, anyone who has the right to make a withdrawal may
change the method of payment or may select one of the annuity options, and may
name a successor to their interest. The successor payee may be their estate.
ORDER OF PAYMENT. When the Annuitant dies
(1) before the Annuity Date and a death benefit is payable or
(2) on or after the Annuity Date, you are the Annuitant, and payments
continue to the beneficiary,
we will make such payment(s) in equal shares to the primary
beneficiaries living when payment is made. If a primary dies after the first
payment is made, we will pay that primary's unpaid share in equal shares to the
other primaries living when payment is made. If the last primary dies, we will
make payment in equal shares to the successor beneficiaries living when payment
is made. If a successor dies while receiving payments, we will pay that
successor's unpaid share in equal shares to the other successors living when
payment is made. If, at any time, no primary or successor is alive, we will
make a one sum payment in equal shares to the final beneficiaries. If, at any
time, no beneficiary is living, we will make a one sum payment to you, if living
when payment is made. Otherwise, we will make a one sum payment to the estate
of the last survivor of you and all beneficiaries. "When payment is made" means
(1) the date that a periodic payment is due or
(2) the date that a request is signed for a cash withdrawal or a one sum
payment.
You may change this order of payment by sending us a request while the Annuitant
is alive.
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GENERAL PROVISIONS
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THE CONTRACT. The policy contains the Basic Plan, any amendments, endorsements,
and riders, and a copy of the application. The policy is the entire contract.
Only an officer has the right to change this policy. No agent has the authority
to change the policy or to waive any of its terms. All endorsements,
amendments, or riders must be signed by an officer to be valid.
We may modify this policy as follows after we notify you:
(1) conform the policy or our operations or the operation of the Variable
Account to the requirements of any law (or regulation issued by a
government agency) to which we, this policy, or the Variable Account
is subject.
(2) assure continued qualification of this policy as an annuity under the
Code; or
(3) reflect a change in the operation of the Variable Account, if allowed
by this policy.
If we modify this policy, we will make the appropriate endorsement to this
policy. If any provision of this policy conflicts with the law of a
jurisdiction that governs this policy, the provision is deemed to be amended to
conform with such law.
PAGE 16
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GENERAL PROVISIONS (CONTINUED)
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TRANSACTION DELAY. Any payment from the Subaccounts will usually be made within
7 days of receipt of the request for payment. However, we may defer:
(1) payment from the Subaccounts of Cash Surrender Value or a withdrawal,
(2) payment of any part of the Death Benefit, and
(3) transfer from a Subaccount if:
(1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings); or
(2) the SEC permits, by an order, the postponement for the protection of
owners; or
(3) the SEC requires that trade be restricted or declares an emergency; or
(4) the SEC determines an emergency exists that would make the disposal of
securities held in the Variable Account or the determination of their
value not reasonably practicable.
We may defer payment from the Fixed Account of any Cash Surrender Value or
withdrawal or transfer for up to 6 months from the date we receive your request.
However, any Cash Surrender Value paid under an annuity option will not be
deferred.
If we defer any such payment for 30 days or more, we will pay interest in
addition to such payment. Such interest accrues from the date the payment
becomes payable to the date of payment at 3 1/2% per year or the rate and time
required by law, if greater.
MINIMUM VALUE. The paid-up annuity, Cash Surrender Value, and Death Benefit of
this policy are at least as large as those required by law where it is
delivered.
ASSIGNMENT. You may assign this policy or any interest in it. We will recognize
an assignment only if it is in writing and filed with us. We are not
responsible for the validity or effect of any assignment. An assignment may
limit the interest of any beneficiary.
ERROR IN AGE OR SEX. If the Annuitant's, Payee's, or second designated person's
date of birth or sex is not correct, every benefit will be such as premiums paid
would have bought at the correct age or sex, based on the rates at the date of
issue. We may require proof of the Annuitant's, Payee's, second designated
person's age and sex before annuity payments start. Any overpayment with
compound interest at 6% a year will be charged against this policy. This amount
will be deducted from any annuity payments due after the error is found. Any
underpayment with compound interest at 6% a year will be paid to you in one sum.
INCONTESTABILITY. We will not contest this policy. Any rider has its own
incontestability provision.
ANNUAL REPORT. Each year, or more often if required by law, we will send you a
report. This report will show:
(1) the period covered by the report;
(2) the number of Accumulation Units or Annuity Units credited to this
policy and the dollar value of such units;
(3) the current Policy Accumulation Value and the Cash Surrender Value;
(4) the current Variable Policy Accumulation Value showing each Subaccount
Policy Accumulation Value and the Fixed Policy Accumulation Value;
(5) the amount of the Death Benefit as of the date of the report;
(6) any premiums paid, any dividends paid, and any deductions, including
withdrawals, applicable surrender charges, the annual administrative
fee, and any transfer processing fee, made since the last report; and
(7) any other information required by law.
You may request additional copies of reports from us, but we reserve the right
to charge a fee for additional copies.
PARTICIPATION. We do not expect to pay dividends on this policy; however, we may
apportion and pay dividends each year. All dividends apportioned will be
derived from the divisible surplus of our participating business. Any such
dividends will be paid only at the end of the Policy Year. There is no right to
a partial or pro rated dividend prior to the end of the Policy Year. We will
transfer the dividend to the Policy Accumulation Value at the end of the Policy
Year. Unless specified by you, the amount transferred is allocated to each
Subaccount and the Fixed Account on a pro-rata basis.
PAGE 17
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PAGE 18
<PAGE>
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BASIC PLAN DESCRIPTION
DEFERRED VARIABLE ANNUITY.
Flexible premiums are payable until the Annuity Date while the Annuitant is
alive. Payment intervals for annuity payments start on the Annuity Date. This
policy is participating.
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<PAGE>
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ADDITIONAL DEPOSIT BENEFIT RIDER - ANNUITY
- --------------------------------------------------------------------------------
GENERAL. This rider is a part of your policy. Only certain policy provisions
are a part of this rider. They are "Definitions," "Ownership," "The Contract,"
and "Assignment."
BENEFIT. You may make an additional deposit to this policy when it is
surrendered. The deposit less the expense charge will be added to the Cash
Surrender Value. This total will then be paid under the annuity option or
method of payment chosen.
DEPOSIT LIMIT. The deposit may not exceed 4 times the Policy Accumulation Value.
EXPENSE CHARGE. The expense charge is 3% of the deposit plus the lesser of 2% of
the deposit or $100.
EFFECTIVE DATE OF THIS RIDER. This is the policy date.
STATE FARM LIFE INSURANCE COMPANY
/s/Edward B. Rust Jr
President
/s/Laura P. Sullivan
Secretary
<PAGE>
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ENDORSEMENTS
- --------------------------------------------------------------------------------
This policy is amended by deleting the Change of Owner/Successor Owner provision
and replacing it with the following:
CHANGE OF OWNER/SUCCESSOR OWNER. You may change the Owner or Successor Owner to
another natural person by sending us a request while the Annuitant is alive. We
have the right to request this policy to make the change on it. The change will
take effect the date you sign the request, but the change will not affect any
action we have taken before we receive the request. A change of owner or
successor owner does not change the beneficiary designation. No more than two
owners and/or successor owners can be named.
EFFECTIVE DATE OF THIS ENDORSEMENT. This is the policy date shown on page 3 of
this policy.
STATE FARM LIFE INSURANCE COMPANY
/s/Edward B. Rust Jr
President
/s/Laura P. Sullivan
Secretary
<PAGE>
EXHIBIT 4(B)
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TAX-SHELTERED ANNUITY ENDORSEMENT
- --------------------------------------------------------------------------------
PURPOSE. To conform this policy to the tax-sheltered annuity requirements of
Internal Revenue Code (the "Code") Section 403(b), any other relevant Code
Sections, and applicable Internal Revenue Service regulations and rulings. If
terms in this Endorsement are inconsistent with terms in the policy, the terms
in the Endorsement shall prevail.
RESTRICTION ON BENEFIT PAYMENTS. Payment of benefits, which are attributable to
premiums paid pursuant to a salary reduction agreement as defined in Code
Section 402(g)(3)(C), may not be made unless the employee/annuitant has: become
disabled as defined in Code Section 72(m)(7), attained age 59 1/2, separated
from service with the employer, died, or incurred a hardship. (No distribution
of any income attributable to such contributions may be made in the case of a
distribution on account of hardship.) This restriction on benefit payments
applies only to payments which are attributable to policy proceeds other than
those in existence on December 31, 1988.
REQUIRED DISTRIBUTION RULES:
ARTICLE I
Notwithstanding any provision of this agreement to the contrary, the
distribution of an employee/annuitant's interest shall be made in accordance
with the minimum distribution requirements of section 403(b)(10) and 401(a)(9)
of the Code, including the incidental death benefit provisions of section
401(a)(9)(G) of the Code, and the regulations thereunder, including the minimum
distribution incidental benefit requirements of section 1.401(a)(9)-2 of the
Proposed Income Tax Regulations. Payments must be made periodically in intervals
no longer than one year. In addition, payments must be either nonincreasing or
they may increase only as provided in Q&A F-3 of section 1.401(a)(9)-1 of the
proposed regulations.
ARTICLE II
The employee/annuitant's entire interest in the policy must be distributed, or
begin to be distributed, by the employee/annuitant's required beginning date,
which is April 1 following the calendar year in which the employee/annuitant
reaches age 70 1/2. For each succeeding year, a distribution must be made on or
before December 31. By the required beginning date, the employee/annuitant may
elect to have the balance in the policy distributed in one of the following
forms:
(a) a single sum payment;
(b) equal or substantially equal payments over the life of the
employee/annuitant;
(c) equal or substantially equal payments over the lives of the
employee/annuitant and his or her designated beneficiary;
(d) equal or substantially equal payments over a specified period that may not
be longer than the employee/annuitant's life expectancy;
(e) equal or substantially equal payments over a specified period that may not
be longer than the joint life and last survivor expectancy of the
employee/annuitant and his or her designated beneficiary.
ARTICLE III
If the employee/annuitant dies before his or her entire interest is distributed,
the entire remaining interest will be distributed as follows:
(a) If the employee/annuitant dies on or after distributions have begun, the
entire remaining interest must be distributed at least as rapidly as under the
method of distribution in effect at the time of death of the employee/annuitant.
(b) If the employee/annuitant dies before distributions have begun under
Article II above, the entire remaining interest must be distributed as elected
by the employee/annuitant or, if the employee/annuitant has not so elected, as
elected by the beneficiary or beneficiaries, as follows:
(1) by December 31st of the year containing the fifth anniversary of the
employee/annuitant's death; or
(2) in equal or substantially equal payments over the life expectancy of
the designated beneficiary or beneficiaries starting by December 31st of the
year following the year of the employee/annuitant's death. If, however, the
beneficiary is the employee/annuitant's surviving spouse, then this distribution
is not required to begin before the later of December 31st of the calendar year
immediately following the
<PAGE>
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TAX-SHELTERED ANNUITY ENDORSEMENT (CONTINUED)
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REQUIRED DISTRIBUTION RULES (CONTINUED)
ARTICLE III (CONTINUED)
calendar year of the employee/annuitant's death, or December 31st of the
calendar year in which the employee/annuitant would have attained age 70 1/2 .
Distributions under this article are considered to have begun if distributions
are made on account of the employee/annuitant reaching his or her required
beginning date or, if prior to the required beginning date, distributions
irrevocably commence to the employee/annuitant over a period permitted and in an
annuity form acceptable under section 1.401(a)(9) of the proposed regulations.
ARTICLE IV
(a) Unless otherwise elected by the employee/annuitant prior to the
commencement of distributions under Article II above or, if applicable, by the
surviving spouse where the employee/annuitant dies before distributions have
commenced, life expectancies of an employee/annuitant or spouse beneficiary
shall be recalculated annually for purposes of distributions under Article II
and Article III above. (Life expectancy is computed by use of the expected
return multiples in Table V and VI of section 1.72-9 of the Income Tax
Regulations.)
(b) An election not to recalculate shall be irrevocable and shall apply to all
subsequent years. The life expectancy of a nonspouse beneficiary shall not be
recalculated. Under this approach, life expectancy will be calculated using the
attained age of an individual during the calendar year in which the
employee/annuitant attains age 70 1/2. Payments for the subsequent years shall
be calculated based on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year life expectancy was first
calculated.
ARTICLE V
An employee/annuitant may satisfy the minimum distribution requirements under
sections 403(b)(10) and 401(a)(9) of the Code by receiving a distribution from
one Tax-Sheltered Annuity that is equal to the amount required to satisfy the
minimum distribution requirements for two or more Tax-Sheltered Annuities.
DIRECT ROLLOVER OF DISTRIBUTIONS:
(a) This section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of this agreement to the contrary that would
otherwise limit a distributee's election under this section, a distributee may
elect, at the time and in the manner prescribed, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) Definitions:
(1) Eligible Rollover Distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under sections 403(b)(10) and 401(a)(9) of the Code, and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
(2) Eligible Retirement Plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, or an annuity
contract described in section 403(b) of the Code which accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(3) Distributee: A distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
<PAGE>
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TAX-SHELTERED ANNUITY ENDORSEMENT (CONTINUED)
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DIRECT ROLLOVER DISTRIBUTIONS (CONTINUED)
(4) Direct Rollover: A direct rollover is a payment by this plan to the
eligible retirement plan specified by the distributee.
(c) If a distribution is one to which sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than 30 days after the notice
required under section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(1) the distributee is clearly informed that the distributee has a right
to a period of at least 30 days not to elect a distribution (and, if applicable,
a particular distribution option), and
(2) the distributee, after receiving the notice, affirmatively elects a
distribution.
NOT TRANSFERABLE. This policy may not be sold, assigned or pledged to anyone
other than us.
NONFORFEITABLE. The interest of the employee/annuitant is nonforfeitable. This
policy is for the exclusive benefit of the employee/annuitant and his or her
beneficiary.
LIMITS ON CONTRIBUTIONS:
(a) Contributions to this policy shall not exceed the annual contribution
limitations of section 415 of the Code or the maximum exclusion allowance
prescribed by section 403(b) of the Code.
(b) Contributions made by elective deferral shall be limited to the annual
elective deferral limits provided under section 402(g) of the Code.
EFFECTIVE DATE OF THIS ENDORSEMENT. This is effective on the later of January 1,
1989, or the policy date.
STATE FARM LIFE INSURANCE COMPANY
/s/ Edward B. Rust Jr.
President
/s/ Laura P. Sullivan
Secretary
<PAGE>
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INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
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The Internal Revenue Code requires certain restrictions on policy provisions to
make this policy an Individual Retirement Annuity. This endorsement controls if
its wording conflicts with policy wording. Changes in the Internal Revenue Code,
regulations, and Revenue Rulings may require changes to be made to this
endorsement. Any such changes will be sent to you.
PREMIUM PROVISIONS. Except in the case of a rollover contribution (as permitted
by section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3)), or a contribution to a
Simplified Employee Pension Program, the total premiums paid for any taxable
year may not exceed $2,000.
OWNER. The Annuitant is the Owner. Ownership cannot be changed or forfeited. An
irrevocable beneficiary may not be named.
NOT TRANSFERABLE. You cannot transfer ownership of this policy or assign, sell,
or pledge any interest in it.
REQUIRED DISTRIBUTION RULES:
ARTICLE I
Notwithstanding any provision of this agreement to the contrary, the
distribution of an individual's interest shall be made in accordance with
minimum distribution requirements of section 401(a)(9) of the Code, including
the incidental death benefit provisions of section 401(a)(9)(G) of the Code, and
the regulations thereunder, including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations. Payments must be made periodically in intervals no longer than one
year. In addition, payments must be either nonincreasing or they may increase
only as provided in Q&A F-3 of section 1.401(a)(9)-1 of the proposed
regulations.
ARTICLE II
The Owner's entire interest in the policy must be distributed, or begin to be
distributed, by the Owner's required beginning date, which is April 1 following
the calendar year in which the Owner reaches age 70 1/2. For each succeeding
year, a distribution must be made on or before December 31. By the required
beginning date, the Owner may elect to have the balance in the policy
distributed in one of the following forms:
(a) a single sum payment;
(b) equal or substantially equal payments over the life of the Owner;
(c) equal or substantially equal payments over the lives of the Owner and
his or her designated beneficiary;
(d) equal or substantially equal payments over a specified period that may
not be longer than the Owner's life expectancy;
(e) equal or substantially equal payments over a specified period that may
not be longer than the joint life and last survivor expectancy of the Owner and
his or her designated beneficiary.
ARTICLE III
If the Owner dies before his or her entire interest is distributed, the entire
remaining interest will be distributed as follows:
(a) If the Owner dies on or after distributions have begun under Article
II above, the entire remaining interest must be distributed at least as rapidly
as provided under Article II.
(b) If the Owner dies before distributions have begun under Article II
above, the entire remaining interest must be distributed as elected by the Owner
or, if the Owner has not so elected, as elected by the beneficiary or
beneficiaries, as follows:
(1) by December 31st of the year containing the fifth anniversary of the
Owner's death; or
(2) in equal or substantially equal payments over the life expectancy of
the designated beneficiary or beneficiaries starting by December 31st of the
year following the year of the Owner's death. If, however, the beneficiary is
the Owner's surviving spouse, then this distribution is not required to begin
before the later of December 31st of the calendar year immediately following the
calendar year of the Owner's death, or December 31st of the calendar year in
which the Owner would have attained age 70 1/2.
<PAGE>
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INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT (CONTINUED)
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REQUIRED DISTRIBUTION RULES (CONTINUED)
ARTICLE III (CONTINUED)
Distributions under this article are considered to have begun if distributions
are made on account of the Owner reaching his or her required beginning date or,
if prior to the required beginning date, distributions irrevocably commence to
the Owner over a period permitted and in an annuity form acceptable under
section 1.401(a)(9) of the proposed regulations.
ARTICLE IV
(a) Unless otherwise elected by the Owner prior to the commencement of
distributions under Article II above or, if applicable, by the surviving spouse
where the Owner dies before distributions have commenced, life expectancies of
an Owner or spouse beneficiary shall be recalculated annually for purposes of
distributions under Article II and Article III above. (Life expectancy is
computed by use of the expected return multiples in Table V and VI of section
1.72-9 of the Income Tax Regulations.)
(b) An election not to recalculate shall be irrevocable and shall apply to all
subsequent years. The life expectancy of a nonspouse beneficiary shall not be
recalculated. Under this approach, life expectancy will be calculated using the
attained age of an individual during the calendar year in which the Owner
attains age 70 1/2. Payments for the subsequent years shall be calculated based
on such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
ARTICLE V
An individual may satisfy the minimum distribution requirements under sections
408(a)(6) and 408(b)(3) of the Code by receiving a distribution from one IRA
that is equal to the amount required to satisfy the minimum distribution
requirements for two or more IRAs. For this purpose, the Owner of two or more
IRAs may use the 'alternate method' described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above.
EFFECTIVE DATE OF THIS ENDORSEMENT. This is the policy date.
STATE FARM LIFE INSURANCE COMPANY
/s/ Edward B. Rust Jr.
President
/s/ Laura P. Sullivan
Secretary
<PAGE>
EXHIBIT 1.A(6)(a)
ARTICLES OF AMENDMENT
of
STATE FARM LIFE INSURANCE COMPANY
The Articles of Incorporation, as amended, of STATE FARM LIFE INSURANCE
COMPANY, a stock company organized under the laws of the State of Illinois, are
as follows:
ARTICLES OF INCORPORATION OF STATE FARM LIFE INSURANCE COMPANY
ARTICLE I
The name of the Corporation shall be State Farm Life Insurance Company.
ARTICLE II
The principal office of the Corporation for transacting business shall be
located at Bloomington, McLean County, Illinois.
ARTICLE III
The period of duration of the Corporation shall be perpetual.
ARTICLE IV
The kinds of insurance in which the Corporation proposes to engage are: (a)
Insurance on the lives of persons and every insurance appertaining thereto or
connected therewith and granting, purchasing or disposing of annuities as
provided in Subsection (a) of Class 1 of Section 4 of Article I of the Illinois
Insurance Code; (b) Insurance against bodily injury, disablement or death by
accident and against disablement resulting from sickness or old age and every
insurance appertaining thereto as provided in Subsection (b) of Class 1 of
Section 4 of Article I of the Illinois Insurance Code.
ARTICLE V
The Corporation also proposes to engage in the rendering of services
related to functions involved in the operation of its insurance business,
including but not limited to, actuarial, data processing, accounting, claims,
risk appraisal, collection services, financial services and any other business
activity reasonably complementary or supplementary to its authorized insurance
business.
ARTICLE VI
The corporate powers shall be exercised by a Board of Directors, the number
of whom, within the minimum and maximum limits authorized by
<PAGE>
law shall be as provided in the Bylaws. All Directors shall be at least
twenty-one years of age and at least three Directors shall be residents and
citizens of Illinois. All Directors shall be elected annually in the manner
provided by law. Vacancies in the Board of Directors may be filled by the
shareholders for the balance of the term at a special meeting of shareholders
called for that purpose. Shareholders may vote in person or by proxy at all
meetings of shareholders as provided in Bylaws.
ARTICLE VII
The amount of the capital stock of the Corporation shall be Three Million
Dollars ($3,000,000) divided into thirty thousand (30,000) shares of the par
value of One Hundred Dollars ($100.00) each.
ARTICLE VIII
The corporate powers shall be exercised by and its business and affairs
shall be under the control of the Board of Directors which shall have the power
to make, alter, amend and repeal Bylaws and regulations for the government of
the officers and the general conduct of the business and affairs of the
Corporation.
Dated this 10th day of December, 1979.
STATE FARM LIFE INSURANCE COMPANY
By /s/ Edward B. Rust
-------------------------------
Edward B. Rust, President
ATTEST:
/s/ C.R. Charlson Jr.
- -----------------------------------
C.R. Charlson, Jr., Secretary
(Corporate Seal) APPROVED this 28th day of
----
December A.D., 1979.
--------
/s/ Philip R.O'Connor
---------------------------------
Philip R.O'Connor
Acting Director of Insurance
<PAGE>
Exhibit 1.A(6)(b)
B Y L A W S
of the
STATE FARM LIFE INSURANCE COMPANY
(Amended as of March 9, 1992)
ARTICLE I
NAME, LOCATION, PURPOSE, AND PLAN
Section 1. The name of the Company shall be State Farm Life Insurance
Company.
Section 2. The principal office and principal place of business of
the Company shall be located at Bloomington, McLean County, Illinois.
Section 3. The objects and purposes of the Company are to transact
life, accident and health insurance and related services, as set forth in the
Articles of Incorporation.
Section 4. The Company shall be conducted upon the stock plan and may
issue insurance policies and annuity contracts upon either the participating or
non-participating plan as may be determined from time to time by the Board of
Directors.
ARTICLE II
CORPORATE SEAL
A seal with the words "State Farm Life Insurance Company, Corporate
Seal, Bloomington, Illinois" upon it shall be the corporate seal of the Company,
which shall be in the custody of the Secretary of the Board of Directors.
ARTICLE III
OFFICERS, THEIR ELECTION OR APPOINTMENT,
TERMS AND POWERS
Section 1. (a) The elective officers of the Company shall consist of
a Chairman of the Board of Directors, a President and an Executive Vice
President. Such officers shall be elected at the Annual Meeting of the Board of
Directors. All such officers shall be Directors. Any such office becoming vacant
may be filled for the unexpired term by the Board of Direc-
<PAGE>
tors. In its discretion, the Board of Directors, by a vote of the majority
thereof, may leave unfilled for any period it may fix by resolution, any office,
except that of President and Executive Vice President. Any Director may be an
officer, and two or more offices, except those of President and Executive Vice
President, may be held by the same person.
(b) The Board of Directors shall appoint a Secretary of
the Board of Directors and a Secretary of the Company, and in addition, may
appoint a Treasurer of the Company, one or more Senior Vice Presidents, Vice
Presidents, Counsel, Actuaries, Controllers, Medical Directors, Mathematicians,
Statisticians, Auditors, Secretaries, Assistant Secretaries, Assistant
Treasurers, and other officers, and fix the title, duties, and term of
appointment of each. Such appointive officers may be appointed or removed by the
Board of Directors at any meeting.
Section 2. The Chairman of the Board of Directors shall preside at
all meetings of the Stockholders and of the Board of Directors, and by virtue of
his office shall be a member of the Executive Committee and of the Investment
Committee. In the absence of the President, he shall act as the chief executive
officer.
Section 3. The President shall be the chief executive officer of the
Company and by virtue of his office, shall be a member of the Executive
Committee and of the Investment Committee. In the absence of the Chairman of the
Board, the President shall preside at all meetings of the Stockholders and of
the Board of Directors. He may sign and execute all authorized bonds, checks,
contracts or other obligations in the name of the Company, and shall have such
other powers and perform such other duties as may be from time to time assigned
to him by the Board of Directors.
Section 4. The Executive Vice President shall be the chief
administrative officer and shall have such other powers and perform such other
duties as may be assigned to him by the Board of Directors. In the absence of
the Chairman of the Board and the President, the Executive Vice President shall
preside at all meetings of the Stockholders and of the Board of Directors. In
the absence of the President and the Chairman of the Board, the Executive Vice
President shall act as the chief executive officer.
Section 5. The Secretary of the Board of Directors shall keep
accurate minutes of all Meetings of the Stockholders and of all Meetings of the
Board of Directors, and shall give notice of all meetings requiring notice and
shall perform all other usual duties incident to the office.
Section 6. The Chairman of the Board of Directors and such other
officers and persons as may be designated by the Board of Directors shall
furnish, at the expense of the Company, surety bonds in such amount and form as
may be required by the
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Board of Directors.
Section 7. Subject to the requirements and limitations of Section 245
of the Illinois Insurance Code, the officers of the Company shall receive such
salary or compensation as shall be fixed by the Board of Directors.
ARTICLE IV
BOARD OF DIRECTORS, THEIR ELECTION, TERMS AND POWERS
Section 1. The corporate powers of the Company shall be exercised by
a Board of Directors consisting of thirteen natural persons.
Section 2. The total number of Directors shall be elected by a
majority vote of the Stockholders at each Annual Meeting of the Stockholders,
and all Directors shall serve until the next succeeding Annual Meeting of the
Stockholders, or until their successors are elected and qualified. Any vacancy
in the Board of Directors may be filled for the unexpired term by a majority
vote of the Stockholders at a Special Meeting of Stockholders called for that
purpose.
Section 3. Each Director shall be at least twenty-one years of age.
All nominations for Directors shall be filed in writing with the Secretary of
the Board of Directors at least fifteen days prior to the date of election. If
nominations are not so filed, consent of the owners of two-thirds of the Shares
of stock represented at the meeting shall be required to consider the same.
Section 4. All regular elections of Directors shall be held at Annual
Meetings of the Stockholders. In all elections of Directors, each share of stock
shall be entitled to as many votes as there are Directors to be elected and each
shareholder shall be entitled to cumulate his votes for one candidate or to so
distribute them among two or more candidates as he deems appropriate.
Section 5. At least three of the Directors shall be residents and
citizens of the State of Illinois.
Section 6. (a) The Board of Directors shall have the general control
and management of the business and affairs of the Company. They shall have power
to make, alter, amend and repeal Bylaws and rules and regulations and to take
all other action necessary or desirable for the proper transaction and conduct
of the business and affairs of the Company.
(b) The Board of Directors at its Annual Meeting may by
resolution adopted by a majority of the whole Board,
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appoint an Executive Committee consisting of the Chairman of the Board of
Directors, the President and three other Directors who may be officers. Such
Executive Committee shall serve until the next Annual Meeting of the Board of
Directors. Vacancies on such committee may be filled by the Board of Directors
at any meeting. A majority of the Executive Committee shall be residents of
Illinois. Meetings of the Committee may be called by the Chairman of the Board
of Directors, the President, or any three members of the committee. Three
members shall constitute a quorum for the transaction of business. The Executive
Committee shall have and exercise between meetings of the Board of Directors the
authority of the Board of Directors in the management of the Company but shall
not have power to amend the Articles of Incorporation or the Bylaws. The
Executive Committee shall keep a written record of their transactions and shall
report the same to the Board of Directors at regular meetings of the Board.
(c) There shall be an Investment Committee consisting of
the Chairman of the Board of Directors, the President and two other Directors
who may be officers. Such other Directors shall be chosen at the Annual Meeting
of the Board of Directors to serve until the next Annual Meeting of the same.
Vacancies on such Committee may be filled by the Board of Directors at any
meetings. Meetings of the Investment Committee may be called by the Chairman of
the Board of Directors, the President, or any two members of the committee. Two
members of the committee shall constitute a quorum for the transaction of
business. The Investment Committee shall have power to invest the assets of the
Company in investments authorized by law and shall have power to sell or
exchange the same. The Investment committee shall keep a written record of their
transactions and shall report the same to the Board of Directors at regular
meetings of the Board.
Section 7. The Board of Directors shall approve the terms and
conditions of all agency agreements, but agency appointments shall be made by
or under the direction of the officers of the Company.
Section 8. Subject to the requirements and limitations of Section 245
of the Illinois Insurance Code, the members of the Board of Directors, except
such members as may also be officers of the Company, shall receive their actual
expenses and such per diem or compensation as fixed by the Board of Directors
for attending meetings of the Board or meetings of the Committees of the Board.
ARTICLE V
ANNUAL AND SPECIAL MEETINGS OF STOCKHOLDERS
Section 1. The Annual Meeting of Stockholders shall
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be held the Second Monday in March at the hour of 1:00 p.m. at the Home Office
of the Company unless the Directors shall elect to change the date or the time
or the place of such meeting. Notice of the Annual Meeting stating the time and
place thereof shall be mailed or delivered personally to each Stockholder at his
last known address at least ten days prior thereto. Annual Meetings of
Stockholders may be held without such notice when all Stockholders are present
and sign waiver of notice.
Section 2. Special meetings of the Stockholders may be called by the
Chairman of the Board or by the President and shall be called upon either
written request of a majority of the total number of Directors or written
request of persons holding a majority of the stock outstanding. Notice of such
special meetings, stating the time, place and purpose thereof, shall be mailed
or delivered personally to each Stockholder at his last known address at least
ten days prior thereto and no business shall be transacted at any such special
meeting except that stated in the written notice thereof. Special meetings of
Stockholders may be held without such notice when all are present and sign
waiver of notice.
Section 3. Stockholders representing a majority of the stock
outstanding, present in person or by proxy, in any meetings of Stockholders
shall constitute a quorum but a lesser number may adjourn to another time. A
majority of the quorum present in person or by proxy at any meeting of
Stockholders shall govern any proceeding not herein or by law requiring a
different vote. Proxies shall be in writing and shall be filed with the
Secretary of the Board of Directors at least ten days prior to the date of
meeting at which such proxies are to be voted.
ARTICLE VI
ANNUAL AND SPECIAL MEETINGS
OF THE BOARD OF DIRECTORS
Section 1. The Annual Meeting of the Board of Directors shall be held
at the Home Office of the Company immediately following the adjournment of the
Annual Meeting of the Stockholders or as soon thereafter as practicable unless
the Directors shall elect to change the date or the time or the place of such
meeting, in which case, but not otherwise, due notice shall be mailed to each
Director as in the case of Special Meetings of the Directors. Regular quarterly
meetings shall be held at such place and at such times as may be fixed by the
Board. Notice of such Regular meetings shall not be required.
Section 2. Special Meetings of the Board of Directors may be called
by the Chairman of the Board or by the President and shall be called by either
of them upon written request of a majority of the total number of Directors.
Notice of Special
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Meetings, stating the time and place thereof, shall be mailed or delivered
personally to each Director at least five days prior thereto but neither the
business to be transacted nor the purpose of such meetings need be stated in the
notice. Special Meetings may be held without such notice when all Directors
are present and sign waiver of notice which need not state the business to be
transacted or the purpose of the meeting. Attendance of a Director at any such
meeting shall constitute a waiver of notice except where a Director appears for
the express purpose of objecting that the meeting is not lawfully called or
convened.
Section 3. A majority of the total number of Directors shall
constitute a quorum at all meetings but a lesser number may adjourn to another
time. A majority vote of the quorum present at any meeting shall govern all
proceedings not herein or by law requiring a different vote.
ARTICLE VII
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 1. The Company shall cause to be issued to each Stockholder a
certificate representing the number of shares of capital stock owned in the
Company. The certificates shall be numbered consecutively and be in such form,
not inconsistent with the laws of the State of Illinois, as may be adopted by
the Board of Directors. The certificates shall be signed by the President or the
Executive Vice President and the Secretary of the Board of Directors and shall
have affixed thereto the corporate seal. No certificate shall be issued without
a knowledge of the apparent title of the person to whom it is issued.
Section 2. The shares of the capital stock of the Company shall be
transferable only upon the books of the Company by the owner in person or by the
legal representative of such owner, and, upon any such transfer being made, the
old certificate shall be surrendered to the person in charge of the stock and
transfer books and ledger or to such other person as the Board of Directors may
designate, who shall cancel the same and thereupon issue a new certificate or
certificates therefor.
Section 3. The transfer books shall be closed for a period of fifteen
days prior to the date set for any Annual Meeting and for such period of time
prior to the date set for the payment of dividends to Stockholders as the Board
of Directors may, from time to time, determine and during such period no stock
shall be transferred.
Section 4. The Board of Directors may appoint a transfer agent or
registrar of transfers and thereafter may require all stock certificates to bear
the signature of such transfer agent or registrar of transfers. Until otherwise
changed by the
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Board of Directors the Secretary of the Board of Directors shall act as transfer
agent and registrar of transfers.
Section 5. The Company shall be entitled to treat the registered
holder of any share as the absolute holder thereof and accordingly, shall not be
bound to recognize any equitable or any other claim thereto or interest therein,
on the part of any other person, whether or not it shall have express or other
notice thereof, save as expressly provided by the statutes of the state of
Illinois.
Section 6. The Board of Directors shall also have the power and
authority to make any rules and regulations they may deem expedient concerning
the issue, transfer and registration of the certificates for the shares of the
capital stock of the Company.
Section 7. Any person, claiming a certificate of stock of the Company
to be lost or destroyed, shall make affidavit of the fact and file the same with
the Secretary of the Board of Directors, accompanied by a signed application for
a new certificate. Such person shall also advertise such lost certificate if the
Board of Directors shall so require and shall give the Company a bond of
indemnity with one or more sureties satisfactory to the Board of Directors and
in an amount, which in their judgment, shall be sufficient to save the Company
from loss, and thereupon the proper officers may cause to be issued a new
certificate of like tenor with the one alleged to be lost or destroyed, but the
Board of Directors may refuse the issuance of such new certificate.
Section 8. Each certificate, representing a share or shares of the
capital stock, shall have stamped or printed thereon, when and as issued, the
amount actually received therefor or the words "Fully Paid and Non-Assessable."
ARTICLE VIII
DIVIDENDS
Subject to the limitations provided by law, the Board of Directors may
set apart from time to time, such part of the net earnings, savings or profits
of the Company as they in their discretion may deem proper for any or all of the
following purposes:
(a) For a reserve fund to meet contingencies; (b) For dividends to participating
policyholders; (c) For dividends to Stockholders. The Board of Directors shall
fix the time or times when any such amounts set apart for dividends to
participating policyholders or Stockholders shall be due and payable. Any
amounts set apart for dividends to participating policyholders shall be
equitably apportioned among such policyholders.
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ARTICLE IX
FISCAL YEAR
The fiscal year of the Company shall begin on the first day of January
and terminate on the thirty-first day of December of each year.
ARTICLE X
AMENDMENT OF BYLAWS
These Bylaws may be amended by the Board of Directors at any regular
or special meeting by a two-thirds vote of the entire number of Directors.
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