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File Nos. 333-26505 and 811-08209
As Filed with the Securities and Exchange Commission on February 24, 1999
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
(Exact Name of Trust)
UNITED INVESTORS LIFE INSURANCE COMPANY
(Name of Depositor)
2001 Third Avenue South
Birmingham, Alabama 35233
(Complete address of depositor's principal executive offices)
Name and address of Agent for service: Copy to:
John H. Livingston, Esquire Frederick R. Bellamy, Esq.
United Investors Life Insurance Company Sutherland Asbill & Brennan LLP
2001 Third Avenue South 1275 Pennsylvania Avenue, N.W.
Birmingham, Alabama 35233 Washington, DC 20004-2415
--------------------------------
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)of Rule 485
[ ] on ________ pursuant to paragraph (b)of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[x] on April 30, 1999 pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Title of securities being registered: Variable Life Insurance Policies
<PAGE>
Prospectus
May 1, 1999
Please read this prospectus carefully before investing, and keep it for
future reference. It contains important information about the Advantage Plus
variable life insurance policy, which is issued by:
United Investors Life Insurance Co.
2001 Third Avenue South
Birmingham, Alabama 35233
The SEC maintains an Internet website (http://www.sec.gov) that contains
material incorporated by reference into this prospectus and other information.
Variable life insurance policies involve certain risks, and you may lose
some or all of your investment.
. We do not guarantee how any of the investment divisions will perform.
. The policy is not a deposit or obligation of any bank, and no bank endorses
or guarantees the policy.
. Neither the U.S. Government nor any Federal agency insures your investment in
the policy.
ADVANTAGE PLUS
VARIABLE LIFE INSURANCE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
issued by
United Investors Life Insurance Company
through
United Investors Universal Life Variable Account
The policy offers 12 funding choices--one fixed account (paying a guaranteed
minimum fixed rate of interest) and eleven variable investment divisions which
invest in the following mutual fund portfolios of Target/United Funds, Inc.:
. Asset Strategy Portfolio
. Balanced Portfolio
. Bond Portfolio
. Growth Portfolio
. High Income Portfolio
. Income Portfolio
. International Portfolio
. Limited-Term Bond Portfolio
. Money Market Portfolio
. Science and Technology Portfolio
. Small Cap Portfolio
There is no guaranteed cash surrender value for amounts allocated to the
variable investment divisions. If the net cash surrender value (the cash
surrender value reduced by any loan balance) is insufficient to cover the
charges due under the policy, the policy may terminate without value.
Neither the SEC nor any state securities commission has approved or disapproved
these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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Table of Contents
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<TABLE>
<S> <C>
Summary..................................................................... 1
The Policy................................................................ 1
Payment of Premiums....................................................... 1
Funding Choices........................................................... 1
Charges and Deductions.................................................... 2
Taxes..................................................................... 3
Cash Benefits............................................................. 3
Death Benefit............................................................. 3
Termination............................................................... 3
Other Information......................................................... 4
Inquiries................................................................. 4
United Investors Universal Life Variable Account............................ 6
Target/United Funds, Inc.................................................. 6
Fund Management and Fees.................................................. 8
Fixed Account............................................................... 9
The Policy.................................................................. 9
Applying for a Policy..................................................... 9
"Free Look" Right to Cancel the Policy.................................... 9
Premiums.................................................................. 10
Transfers................................................................. 11
Dollar-Cost Averaging..................................................... 12
Surrender of the Policy................................................... 12
Partial Surrenders........................................................ 12
Loan Benefits............................................................. 13
Requesting Payments....................................................... 14
Policy Changes............................................................ 14
Reports to Owners......................................................... 15
Other Policy Provisions................................................... 15
Assignment and Change of Owner............................................ 15
Supplemental Benefits..................................................... 16
Charges and Deductions...................................................... 16
Premium Expense Charge.................................................... 17
Mortality and Expense Risk Charge......................................... 17
Monthly Deduction......................................................... 17
Surrender Charge.......................................................... 17
Partial Surrender Charge.................................................. 18
Other Charges............................................................. 18
Cost of Insurance......................................................... 18
Reduction in Charges for Certain Groups................................... 19
Policy Values............................................................... 19
Policy Value.............................................................. 19
Variable Account Value.................................................... 20
Fixed Account Value....................................................... 21
Death Benefits.............................................................. 22
Amount of Death Benefit Payable........................................... 22
Death Benefit Options..................................................... 22
</TABLE>
ii
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<TABLE>
<S> <C>
Changing the Death Benefit Option......................................... 23
Changing the Face Amount.................................................. 23
Effect of Partial Surrenders on the Death Benefit......................... 24
Beneficiary............................................................... 25
Tax Considerations.......................................................... 25
Introduction.............................................................. 25
Tax Status of the Policy.................................................. 25
Tax Treatment of Policy Benefits.......................................... 26
Taxation of United Investors.............................................. 28
Employment-Related Benefit Plans.......................................... 28
Other Information........................................................... 28
United Investors Life Insurance Company................................... 28
Sale of the Policies...................................................... 29
Changing the Variable Account............................................. 29
Voting of Portfolio Shares................................................ 30
Addition, Deletion, or Substitution of Investments........................ 30
Other Information......................................................... 31
Litigation................................................................ 31
Legal Matters............................................................. 31
Experts................................................................... 31
Financial Statements...................................................... 32
Appendix A: Surrender Charges Per $1,000 of Face Amount..................... 33
Appendix B: Hypothetical Illustrations...................................... 34
Appendix C: Directors and Officers of United Investors...................... 43
Appendix D: Glossary........................................................ 44
Appendix E: Financial Statements............................................ 45
</TABLE>
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This prospectus generally describes only the variable portion of the policy,
except where the fixed account is specifically mentioned.
Buying this policy might not be a good way of replacing your existing insurance
or adding more insurance if you already own a flexible premium variable life
insurance policy.
Certain terms and phrases used in this prospectus are explained in Appendix D.
iii
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Summary
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This is a summary of some of the more important points that you should know
and consider before purchasing the Advantage Plus variable life insurance
policy.
The Policy
The Advantage Plus variable life insurance policy is an individual flexible
premium variable life insurance policy issued by United Investors Life
Insurance Company. Among other things, the policy:
(a) provides insurance protection on the life of the insured until the policy's
maturity date.
(b) allows you to vary the amount and timing of the premiums you pay and to
change the amount of the death benefit payable under the policy.
(c) provides the opportunity for cash value build-up on a tax-deferred basis,
depending on investment performance of the underlying mutual fund
portfolios. However, there is no guaranteed policy value and you bear the
risk of poor investment performance.
(d) permits you to borrow against the policy value, to make partial surrenders,
or to surrender the policy completely. Loans and partial surrenders will
affect the policy value and may affect the death benefit and termination of
the policy.
In addition to providing life insurance, the policy provides a means of
investing for your retirement or other long-term purposes. Tax deferral allows
the entire amount you have invested (net of charges) to remain in the policy
where it can continue to produce an investment return. Therefore, your money
could grow faster than in a comparable taxable investment where current income
taxes would be due each year.
You may divide your Advantage Plus policy value among the fixed account and
eleven variable investment divisions which invest in portfolios of
Target/United Funds, Inc. We guarantee the principal and a minimum interest
rate you will receive from the fixed account. However, the value of what you
allocate to the eleven variable investment divisions is not guaranteed.
Instead, your investment in the variable investment divisions will go up or
down with the performance of the particular Target/United Funds portfolios you
select (and the deduction of charges). You will lose money on policy value
allocated to the variable investment divisions if performance is not
sufficiently positive to cover the charges under the policy.
Payment of Premiums
Although you select a premium payment plan, you are not required to follow
it. (The minimum initial premium and planned premium depend on age, sex, and
risk class of the insured, on the face amount of the policy, and on any
supplemental benefit riders to the policy.) Within limits, you can vary the
frequency and amount of premium payments and can skip planned premiums.
However, extra premiums may be required to prevent policy termination under
certain circumstances.
Funding Choices
We deduct a premium expense charge from each premium payment, and then we
allocate the net premium among the variable investment divisions and the fixed
account according to your written instructions.
You may allocate each premium (and your existing policy value) among
variable investment divisions which invest in the following eleven portfolios
of Target/United Funds, Inc.:
.Asset Strategy Portfolio
.Balanced Portfolio
.Bond Portfolio
.Growth Portfolio
.High Income Portfolio
.Income Portfolio
.International Portfolio
.Limited-Term Bond Portfolio
.Money Market Portfolio
.Science and Technology Portfolio
.Small Cap Portfolio
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For policies issued in California, the investment divisions which invest in
the Asset Strategy Portfolio and the High Income Portfolio are not available.
You may also allocate each premium (and your existing policy value) to the
fixed account. We guarantee your fixed account allocation will earn at least 4%
interest per year.
Charges and Deductions
We deduct a 3.5% premium expense charge from each premium payment. No sales
load is deducted from premiums.
We also make certain periodic deductions from your policy value. Each month,
we deduct the following from your policy value:
(a) the cost of insurance charge;
(b) the monthly administrative charge (currently $5.00, and guaranteed not to
exceed $7.50);
(c) a guaranteed death benefit charge ($0.01 per $1,000 of face amount) so long
as the death benefit guarantee is in effect; and
(d) any supplemental benefit charges.
Each day, we deduct a charge from the assets in the variable investment
divisions for certain mortality and expense risks we bear under the policy.
Currently, this charge is at an effective annual rate of 0.90% of those assets
during the first ten policy years and 0.70% thereafter. We guarantee not to
increase this mortality and expense risk charge above 0.90% in any policy year.
In addition, investment management fees, 12b-1 fees, and other expenses are
deducted from each portfolio of Target/United Funds, Inc. See the table below
for a summary of these portfolio expenses.
Target/United Funds, Inc. Annual Expenses(/1/)
(% of average daily net assets)
<TABLE>
<CAPTION>
Management 12b-1 Other Total Portfolio
Portfolio Fee Fees Expenses(/3/) Expenses
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Strategy 0.80% 0.25% 0.13% 1.18%
Balanced 0.60% 0.25% 0.07% 0.92%
Bond 0.53% 0.25% 0.05% 0.83%
Growth 0.70% 0.25% 0.02% 0.97%
High Income 0.65% 0.25% 0.05% 0.95%
Income 0.70% 0.25% 0.02% 0.97%
International 0.80% 0.25% 0.18% 1.23%
Limited-Term Bond 0.55% 0.25% 0.18% 0.98%
Money Market 0.50% 0.25% 0.08% 0.83%
Science and Technology 0.69% 0.25% 0.25% 1.19%
Small Cap 0.85% 0.25% 0.05% 1.15%
</TABLE>
(/1/) These expenses are deducted directly from the assets of the Target/United
Funds, Inc. portfolios and therefore reduce their net asset value. Waddell &
Reed, Inc., the investment adviser of Target/United Funds, Inc., supplied the
above information, and we have not independently verified it. See the
Target/United Funds, Inc. prospectus for more complete information.
(/2/) Each portfolio pays a service fee to Waddell & Reed, Inc., the principal
underwriter of Target/United Funds, Inc. and the policy, of no more than 0.25%
of the portfolio's average annual net assets. The fee reimburses Waddell &
Reed, Inc. for arranging to provide personal services to policy owners and to
maintain their policies. Waddell & Reed, Inc. represents that this is a Service
Plan as permitted by Rule 12b-1 under the Investment Company Act of 1940.
(/3/) Other Expenses are those incurred for the year ended December 31, 1998.
[1998 data to be provided when available]
2
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Actual expenses of Target/United Funds, Inc. may be greater or less than those
shown.
We deduct a surrender charge from the policy value upon a full surrender of
the policy before the 16th policy anniversary (or the 16th anniversary of any
increase in the policy's face amount). The surrender charge rate, which is a
stated amount per $1,000 of face amount, varies with the insured's age on the
policy's effective date (or at the time of increase in the policy's face
amount). The surrender charge is constant until the fifth policy anniversary
(or the fifth anniversary of any increase in the policy's face amount), and
then decreases annually to zero at the 16th policy anniversary (or the 16th
anniversary of any increase in the policy's face amount).
We deduct a partial surrender charge upon a partial surrender of the policy.
The partial surrender charge is a portion of the then-applicable surrender
charge, plus the lesser of $25 or 2% of the partial surrender amount.
Taxes
We intend for the policy to satisfy the definition of life insurance under
the Internal Revenue Code. Therefore, the death benefit generally should be
excludable from the gross income of its recipient. Similarly, you should not be
deemed to be in constructive receipt of the policy value, and therefore should
not be taxed on increases in the policy value until you take out a loan,
surrender the policy, or we pay the maturity benefit. Under certain
circumstances, a policy could be treated as a modified endowment contract. See
"Tax Considerations" for a discussion of when distributions, such as surrenders
and loans, from policy value could be subject to Federal income tax and penalty
tax.
Cash Benefits
Your policy value is the sum of the amounts allocated to the variable
investment divisions (variable account value) and the amount allocated to the
fixed account (fixed account value). The cash surrender value (the policy value
less any applicable surrender charges) may be substantially less than the
premiums paid.
Policy Loans. You may take loans in aggregate amounts of up to 90% of the
policy's cash surrender value. Policy loans reduce the amount available for
allocations and transfers.
Full Surrender. You may surrender the policy at any time for its net cash
surrender value. The net cash surrender value is the cash surrender value less
any loan balance.
Partial Surrender. You generally may make a partial surrender of the policy
at any time during the insured's life, provided that the policy has sufficient
net cash surrender value remaining.
Death Benefit
You must select one of two death benefit options under the policy:
(a) the greater of the policy's face amount or a multiple of its policy value;
or
(b) the greater of (i) the policy's face amount plus its policy value or (ii) a
multiple of its policy value.
Subject to certain limits, you may change the policy's face amount and death
benefit.
The policy's death benefit guarantee feature will keep the policy in force
during the death benefit guarantee period even if there is insufficient cash
surrender value to pay the cost of insurance and other periodic charges. The
death benefit guarantee remains effective so long as cumulative premiums paid
on the policy, less any partial surrenders and outstanding loan balance, equals
or exceeds (i) the minimum monthly premium multiplied by (ii) the number of
months the policy has been in force. If the death benefit guarantee ends due to
insufficient premium payments, it may not be restored by payment of additional
premiums.
The death benefit guarantee period generally ends at the insured's age 65
under death benefit option (a) or age 62 under death benefit option (b). This
period may vary in some states.
Termination
There is no minimum guaranteed policy value. The policy value may decrease
if the investment
3
<PAGE>
performance of the variable investment divisions (to which policy value is
allocated) is not sufficiently positive to cover the charges deducted under the
policy.
If the net cash surrender value (based on the policy value) becomes
insufficient to cover the monthly deduction when due and the death benefit
guarantee is not in effect, the policy will terminate without value after a
grace period, even if all planned premiums have been paid in full and on
schedule. Additional premium payments will be necessary during the grace period
to keep the policy in force if this occurs.
Other Information
Free Look: For a limited time after the policy's effective date, you may
cancel the policy and receive a full refund of all premiums paid.
Supplemental Benefits. Your policy may have one or more supplemental
benefits which are attached to the policy by rider. Each is subject to its own
requirements as to eligibility and additional cost. Among the benefits
currently available under the policy are:
(a) accelerated death benefit rider;
(b) accidental death benefit rider;
(c) children's term insurance rider;
(d) additional insured term insurance rider; and
(e) disability waiver of monthly deductions rider.
Other supplemental benefits may also be available.
Transfers: Within certain limits, you may transfer all or part of your
policy value among the variable investment divisions and the fixed account up
to 12 times in a policy year.
Dollar-Cost Averaging: Before the maturity date, you may have automatic
monthly transfers of a predetermined dollar amount made from the money market
investment division to other variable investment divisions. Certain minimums
and other restrictions apply.
Illustrations: Sample projections of hypothetical death benefits and policy
values are in Appendix B to this prospectus. These projections may help you:
(a) understand (i) the long-term effects of different levels of investment
performance and (ii) the charges and deductions under the policy; and
(b) compare the policy to other life insurance policies.
The projections also show the value of the annual premiums accumulated with
interest and demonstrate that the policy value may be low (compared to the
premiums plus accumulated interest) if the policy is surrendered in the early
policy years. Therefore, the policy should not be purchased as a short-term
investment.
Age: A number of policy provisions depend on the insured's age. This usually
means the insured's attained age, which is the actual age on the last policy
anniversary. During part of each policy year, attained age is one year less
than actual age. This may be better for you since it could mean, for example,
lower cost of insurance charges and a higher death benefit.
Financial Information: Our financial statements, and financial statements
for the variable investment divisions, are in Appendix E to this prospectus.
Inquiries
If you have questions about your policy or need to make changes, contact
your financial representative who sold you the policy, or contact us at:
United Investors Life Insurance Company
Administrative Office
5525 LBJ Freeway, Suite 500
P. O. Box 219065
Dallas, Texas 75221-9065
Telephone: (800) 451-6923
4
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The policy is not available in all states. This prospectus does not offer
the policies in any jurisdiction where they cannot be lawfully sold. You should
rely only on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
NOTE: Because this is a summary, it does not contain all the information
that may be important to you. You should read this entire prospectus and the
Target/United Funds, Inc. prospectus carefully before investing.
5
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United Investors Universal Life Variable Account
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The variable investment divisions are "sub-accounts" or divisions of the
United Investors Universal Life Variable Account (the "Variable Account"). We
established the Variable Account as a segregated asset account on April 18,
1997. The Variable Account will receive and invest the premiums allocated to
the variable investment divisions. Our Variable Account is currently divided
into eleven investment divisions. Each division invests exclusively in shares
of a single portfolio of Target/United Funds, Inc. Income, gains and losses
arising from the assets of each investment division are credited to or charged
against that division without regard to income, gains or losses from any other
investment division of the Variable Account or arising out of any other
business we may conduct.
The assets in the Variable Account are our property. However, the assets
allocated to the variable investment divisions under the policy are not
chargeable with liabilities arising out of any other business that we may
conduct. The Variable Account is registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act"). It meets the
definition of a "separate account" under the Federal securities law. However,
the SEC does not supervise the management or investment practices or policies
of the Variable Account or us.
Target/United Funds, Inc.
The Variable Account invests in shares of Target/United Funds, Inc., a
mutual fund with the following investment portfolios:
1. Asset Strategy Portfolio;
2. Balanced Portfolio;
3. Bond Portfolio;
4. Growth Portfolio;
5. High Income Portfolio;
6. Income Portfolio;
7. International Portfolio;
8. Limited-Term Bond Portfolio;
9. Money Market Portfolio;
10. Science and Technology Portfolio; and
11. Small Cap Portfolio.
The assets of each portfolio of Target/United Funds, Inc. are separate from the
assets of the other portfolios. Thus, each portfolio operates separately, and
the income, gains, or losses of one portfolio have no effect on the investment
performance of any other portfolio.
6
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The investment objectives and policies of each portfolio are summarized
below. There is no assurance that any of the portfolios will achieve their
stated objectives. More detailed information, including a description of risks,
is in the Target/United Funds, Inc. prospectus, which accompanies this
prospectus.
<TABLE>
<CAPTION>
Portfolio Investment Objective and Certain Policies
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<S> <C>
Asset Strategy The Asset Strategy Portfolio seeks high total return over the long
term. It diversifies among stocks, bonds, and short-term
instruments, both in the United States and abroad.
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Balanced The Balanced Portfolio primarily seeks current income with a
secondary goal of long-term appreciation of capital by investing in
a variety of securities, including debt securities, common stocks
and preferred stocks.
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Bond The Bond Portfolio seeks current income with an emphasis on
preservation of capital. It invests primarily in debt securities of
varying yields, qualities, and maturities.
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Growth The Growth Portfolio primarily seeks capital growth. As a secondary
goal it seeks current income. It invests primarily in common stocks
or securities convertible into common stocks.
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High Income The High Income Portfolio primarily seeks high current income. As a
secondary goal it seeks capital growth when consistent with the
primary goal. It invests primarily in high-yield, high risk fixed-
income securities (commonly known as "junk bonds"), but may have up
to 20% of its assets in common stocks. High-yield fixed-income
securities may have an increased risk of default and greater market
price volatility than higher rated securities due to various
circumstances. (See "Debt Securities" in the Target/United Funds,
Inc. prospectus for a further description of the risk factors.)
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Income The Income Portfolio primarily seeks to maintain current income,
subject to market conditions, with a secondary goal of capital
growth. It invests primarily in common stocks or securities
convertible into common stocks that have a record of paying regular
dividends on common stock or have the potential for capital growth
or that may be expected to resist market decline.
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International The International Portfolio primarily seeks long-term appreciation
of capital with a secondary goal of current income by investing
primarily in securities issued by companies or governments of any
nation.
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Limited-Term Bond The Limited-Term Bond Portfolio seeks a high level of current
income consistent with preservation of capital by investing
primarily in debt securities of investment grade, including debt
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. The portfolio seeks to maintain a
dollar-weighted average maturity of its portfolio of two to five
years.
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Money Market The Money Market Portfolio seeks to maximize current income
consistent with stability of principal. It may invest in money
market securities such as bank obligations and instruments secured
by bank obligations, commercial paper and corporate debt
obligations and obligations of the U.S. and Canadian Governments or
their respective agencies and instrumentalities. Investments in the
money market portfolio are neither insured nor guaranteed by the
U.S. Government. There is no assurance that the portfolio will be
able to maintain a net asset value of $1.00 per share.
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</TABLE>
7
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<TABLE>
<CAPTION>
Portfolio Investment Objective and Certain Policies
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<S> <C>
Science and Technology The Science and Technology Portfolio seeks long-term capital growth
through investments primarily in science and technology securities.
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Small Cap The Small Cap Portfolio seeks capital growth through a diversified
holding of securities, primarily in the common stocks of, or
securities convertible into the common stocks of, relatively new or
unseasoned companies, companies which are in their early stages of
development or smaller companies positioned in new and emerging
industries where the opportunity for rapid growth is above average.
</TABLE>
Target/United Funds, Inc. is designed to provide an investment vehicle for
variable annuity and variable life insurance contracts issued by various
insurance companies. For more information about the risks associated with the
use of the same funding vehicle for both variable annuity and variable life
insurance contracts of various insurance companies, see the Target/United
Funds, Inc. prospectus.
Fund Management and Fees
Waddell & Reed Investment Management Company, the manager of Target/United
Funds, Inc., provides investment advisory services to its portfolios. The
manager is a wholly-owned subsidiary of Waddell & Reed, Inc., which is a
wholly-owned subsidiary of Waddell & Reed Financial Services, Inc., a holding
company. Waddell & Reed Financial Services, Inc. is a wholly-owned subsidiary
of Waddell & Reed Financial, Inc., a publicly held company. The manager
provides investment advice to and supervises investments of a number of mutual
funds. The manager maintains a large staff of experienced investment personnel
and a full complement of related support facilities. Each Target/United Funds
portfolio pays the manager a fee for managing its investments. The fee
consists of two elements:
(i) a specific fee computed each day on the portfolio's net asset value at
the following annual rates; and
<TABLE>
<CAPTION>
Portfolio Specific Fee (%)
--------- ----------------
<S> <C>
Asset Strategy............................................. 0.30%
Balanced................................................... 0.10%
Bond....................................................... 0.03%
Growth..................................................... 0.20%
High Income................................................ 0.15%
Income..................................................... 0.20%
International.............................................. 0.30%
Limited-Term Bond.......................................... 0.05%
Money Market............................................... 0.00%
Science and Technology..................................... 0.20%
Small Cap.................................................. 0.35%
</TABLE>
(ii) the portfolio's proportionate share of a base fee computed each day on
the combined net asset values of all the portfolios at the following
annual rates:
<TABLE>
<CAPTION>
Group Net Asset
Level ($ millions) Base Fee (%)
------------------ ------------
<S> <C>
<$750........................................................... 0.51%
$750 - $1,500................................................... 0.49%
$1,500 - $2,250................................................. 0.47%
>$2,250......................................................... 0.45%
</TABLE>
The base fee is computed on the combined net asset value of all eleven
portfolios of Target/United Funds, Inc. For 1998, the base fee rate was 0. %.
[1998 rate to be provided when available]
8
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Fixed Account
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The funding choice guaranteeing your principal and a minimum fixed rate of
interest is called the "fixed account." It is not registered under the
Securities Act of 1933, and it is not registered as an investment company under
the Investment Company Act of 1940. Accordingly, neither the fixed account nor
any interests therein are subject to the provisions or restrictions of these
Federal securities laws, and the disclosure regarding the fixed account has not
been reviewed by the staff of the SEC.
The fixed account is part of our general account assets. It is not a
separate account. Amounts allocated to the fixed account are credited with
interest 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 4%.
The current interest rate is the guaranteed minimum interest rate plus any
excess interest rate. The current interest rate is determined periodically. The
current interest rate will be guaranteed for at least a one-year period. You
assume the risk that interest credited may not exceed the guaranteed minimum
rate of 4% per year. We may credit interest at a rate in excess of 4% per year,
but any excess interest credited will be determined in our sole discretion. The
policy owner assumes the risk that interest credited to the fixed account may
not exceed 4% per year. The fixed account may not be available in all states.
Our general account assets are used to support our insurance and annuity
obligations other than those funded by separate accounts. Subject to applicable
law, we have sole discretion over the investment of the assets of the fixed
account.
As the policy owner, you determine the allocation of policy value to the
fixed account. There are significant limits on your right to transfer policy
value into and out of the fixed account. (See "Transfers.")
The Policy
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Applying for a Policy
To purchase a policy, you must complete an application, submit it to our
administrative office (at the address listed on page 5 of this prospectus), and
pay an initial premium which varies by age, sex and risk class. (See "Premiums"
below). The initial premium must be paid prior to the policy's effective date.
(We will only accept a premium that complies with our underwriting rules.)
Coverage becomes effective as of the policy's effective date. If the proposed
insured dies before the policy's effective date, our sole obligation will be to
return the premium paid plus any interest earned on it (unless a temporary
insurance agreement is in effect).
Generally, we will issue a policy covering an insured up to attained age 75
(on the policy's effective date) if evidence of insurability satisfies our
underwriting rules. Evidence of insurability may include, among other things, a
medical examination of the insured. We may, in our sole discretion, issue a
policy covering an insured over age 75. We reserve the right not to accept an
application for any lawful reason.
"Free Look" Right to Cancel the Policy
During the "free look" period, you may cancel your policy and receive a
refund of all premiums paid. The "free look" period expires the later of:
(a) 20 days after you receive your policy; or
(b) 45 days after you sign the application for the policy.
Some states may require a longer period or a different refund amount. In
order to cancel the policy, you must return it by mail or other delivery before
the end of the "free look" period to our administrative office or to the agent
who sold it to you.
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Premiums
The premium amounts sufficient to fund a policy depend on a number of
factors, such as:
(a) the age, sex and risk class of the proposed insured;
(b) the face amount of the policy; and
(c) any supplemental benefits under the policy.
The initial premium must be at least equal to the minimum monthly premium.
After the initial premium is paid, additional premiums may be paid in any
amount and at any time. We may require that any additional premiums be at least
a specified amount. We will give you 90 days' advance written notice if we
establish such a minimum.
Total premiums paid in a policy year may not exceed guideline premium
limitations for life insurance set forth in the Internal Revenue Code. We
reserve the right to reject any premium that would result in the policy being
disqualified as life insurance under the Code and will refund any rejected
premium. (See "Tax Considerations.")
Planned Premiums. When you apply for a policy, you select a quarterly, semi-
annual or annual premium payment plan. You may also arrange for premiums to be
paid monthly via automatic deduction from your checking account or other
payment methods approved by us. You are not required to pay premiums in
accordance with this premium plan; rather, you can pay more or less than
planned premiums (subject to the $25 minimum), or skip a planned premium
entirely. You can change the amount of planned premiums and payment
arrangements, or switch payment frequencies, whenever you want by providing
satisfactory written instructions to our administrative office. Such changes
will be effective upon our receipt of the instructions. If you increase the
policy's face amount, then a change in the amount of planned premiums may be
advisable, depending on the policy value at that time and the amount of the
increase requested. (See "Changing the Face Amount.")
Premiums to Prevent Termination. If you do not pay planned premiums or if
the investment performance of the policy's variable investment divisions is not
sufficient, your policy may terminate without value. Policy termination depends
on (i) whether the net cash surrender value is sufficient to cover the monthly
deduction when due and (ii) whether the death benefit guarantee is in effect.
If the death benefit guarantee is not in effect on a monthly anniversary and
either
(a) the net cash surrender value is less than the monthly deduction, or
(b) the loan balance exceeds the cash surrender value,
the policy will terminate without value unless additional premiums are paid.
(See "Monthly Deduction" and "Death Benefit Guarantee.")
You will have a 61-day grace period to pay a premium sufficient to cover the
monthly deduction. We will send notice of the amount required to be paid during
the grace period to your last known address (and to any assignee of record).
The grace period will begin when the notice is sent, and your policy will
remain in effect during the grace period. (See "Amount of Death Benefit
Payable" and "Effect of Policy Loan.") The grace period premium required to be
paid will be sufficient to keep the policy in force for three months regardless
of investment performance. The payment required will not exceed:
(a) the amount by which the loan balance exceeds the cash surrender value;
plus
(b) any accrued and unpaid monthly deductions as of the date of the notice;
plus
(c) an amount sufficient to cover the next two monthly deductions.
If the grace period premium has not been paid before the end of the 61-day
grace period, your policy will terminate. It will have no value, and no
benefits will be payable. (See "Other Policy Provisions" for a
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discussion of your reinstatement rights.) If the insured should die during the
grace period before the grace period premium is paid, the death benefit will
still be payable to the beneficiary, although the amount paid will reflect a
reduction for any monthly deductions due on or before the date of the insured's
death and for any loan balance.
Death Benefit Guarantee. During the death benefit guarantee period, the
death benefit is guaranteed to remain in effect so long as cumulative premiums
paid, less any partial surrenders and any loan balance, are at least equal to
(i) the minimum monthly premium, multiplied by (ii) the number of months the
policy has been in force. If this requirement is met, the policy will remain in
force, regardless of the sufficiency of net cash surrender value to cover
monthly deductions. If the minimum monthly premium has changed since the
policy's effective date, the total premium amount required will be based on
each minimum monthly premium amount and the number of months for which each
applied. If the death benefit guarantee ends due to insufficient premium
payments, it may not be restored by payment of additional premiums.
For death benefit option A, the death benefit guarantee period lasts five
years or until the insured's attained age 65, whichever is later. For death
benefit option B, the period is the later of three years or until the insured's
attained age 62. However, for policies sold in Massachusetts the death benefit
guarantee period is five years for both option A and option B.
Crediting Premiums to the Policy. Between the date your initial premium is
received and the policy's effective date, we will credit interest on the
initial premium as if it had been invested in the variable investment division
investing in the money market portfolio. On the policy's effective date, the
initial net premium, plus any accrued interest on that amount, will be credited
to the policy. Any additional premium received will be credited to the policy
on the date we receive it, or the next business day thereafter.
Net Premium Allocations. When you apply for a policy, you specify the
percentage (from 0% to 100%) of net premium payments to be allocated to each
variable investment division and to the fixed account. You can change the
allocation percentages at any time by sending satisfactory written instructions
to our administrative office. The change will apply to all premiums received
after we receive your instructions, unless you instruct otherwise. Net premium
payment allocations must be in percentages totaling 100%, and each allocation
percentage must be a whole number.
Transfers
At any time after the end of the "free look" period, you may transfer all or
part of your variable account value to one or more of the other variable
investment divisions or to the fixed account up to 12 times in a policy year.
There is no charge for making transfers. You may transfer all or part of your
fixed account value to one or more variable investment divisions only once each
policy year, and the maximum amount you can transfer out of the fixed account
is the greater of:
(a) 25% of the prior policy anniversary's unloaned fixed account value; or
(b) the amount of the prior policy year's transfer.
If a transfer is made from the fixed account to a variable investment division,
no transfer from that variable investment division to the fixed account may be
made for six months after the transfer date. The minimum amount that may be
transferred out of a variable investment division or the fixed account is $100,
or, if less, the policy value in the variable investment division or in the
fixed account. The amount remaining must be at least $100, or we will transfer
the total value.
Transfer requests may be made by satisfactory written or telephone request
(if we have your written authorization for telephone requests on file). A
transfer will take effect on the date we receive the request at our
administrative office if it is received by 4:00 p.m. Eastern time; otherwise it
will take effect on the following business day. We may, however, defer
transfers under the same conditions that we may delay paying proceeds.
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(See "Requesting Payments.") We reserve the right to modify, restrict, suspend
or eliminate the transfer privileges, including telephone transfer privileges,
at any time, for any reason.
We have the authority to honor any telephone transfer request believed to be
authentic. We employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. For example, you may be required to use
a personal identification number to initiate a telephone transfer. We will not
be liable for the consequences of a fraudulent telephone transfer request we
believe to be authentic when we have followed those procedures. As a result,
you bear the risk of loss arising from such a fraudulent request if you give us
authorization for telephone transfers.
Dollar-Cost Averaging
The dollar-cost averaging program permits you to systematically transfer a
set dollar amount from the money market investment division to the other
variable investment divisions on a monthly basis prior to the policy's maturity
date. The minimum automatic transfer amount is $100. If the transfer is to be
made to more than one variable investment division, a minimum of $25 must be
transferred to each variable investment division selected. The dollar-cost
averaging method of investment is designed to reduce the risk of making
purchases only when the price of 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 by sending a written request to our administrative office. Once elected,
dollar-cost averaging remains in effect from the date we receive your request
until the value of the money market investment division under your policy is
depleted, or until you cancel your participation in the program by written
request or by telephone. There is no additional charge for dollar-cost
averaging. A transfer under this program is not counted as a transfer for
purposes of the 12-transfer limit discussed above. We reserve the right to
discontinue offering the dollar-cost averaging program at any time and for any
reason. A second method of dollar-cost averaging is for you to allocate monthly
premiums directly to the variable investment divisions you desire.
Surrender of the Policy
You may surrender your policy at any time for its net cash surrender value.
(See "Requesting Payments.") The net cash surrender value is the policy value
minus any surrender charge and minus any loan balance. A surrender charge may
apply. (See "Surrender Charge.") Your policy will terminate and cease to be in
force when it is surrendered. It cannot later be reinstated if it has been
surrendered for its net cash surrender value. Surrendering the policy may have
tax consequences. (See "Tax Considerations.")
Partial Surrenders
You may make partial surrenders under your policy at any time during the
insured's life and before the policy has terminated. (See "Requesting
Payments.") Requests for partial surrenders must be made in writing. The
minimum partial surrender amount is $100. The amount remaining after a partial
surrender must be at least $300. A partial surrender charge will be deducted
from your policy value along with the partial surrender amount requested.
The partial surrender charge is:
(a) the lesser of $25 or 2% of the partial surrender amount; plus
(b) a portion of the surrender charge equal to (i) the percentage of the
net cash surrender value requested, multiplied by (ii) the surrender
charge then in effect.
When you request a partial surrender, you should tell us what funding
choices the policy value should be deducted from. If you provide no directions,
the partial surrender amount and partial surrender charge will be
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<PAGE>
deducted from your policy value in the variable investment divisions and the
fixed account on a pro rata basis. If death benefit option A is in effect, a
partial surrender may reduce the face amount of your policy. (See "Effect of
Partial Surrenders on the Death Benefit.") Partial surrenders may have tax
consequences. (See "Tax Considerations.")
Loan Benefits
You may borrow up to 90% of your cash surrender value at any time by
submitting a written request to our administrative office. (This percentage may
vary in some states.) The cash surrender value is the policy value less any
applicable surrender charges. Outstanding loans, including accrued interest,
reduce the amount available for new loans. The minimum loan amount is $200.
Your policy may terminate if the loan balance becomes greater than the cash
surrender value. (See "Premiums to Prevent Termination.") Policy loans may have
income tax consequences. (See "Tax Considerations.")
When a loan is made, an amount equal to the requested loan and any loan
interest is transferred from the variable account value to the fixed account.
The amount to be transferred will be deducted from each variable investment
division in the same proportion that the value of each variable investment
division bears to your variable account value unless you specify one or more
variable investment divisions from which the loan is to be made.
Interest. We will charge interest daily on any outstanding loan at an
effective annual rate of 6.0%. Interest is due and payable at the end of each
policy year while a loan is outstanding. Interest paid on a policy loan
generally is not tax-deductible. If, on any policy anniversary, interest
accrued since the last policy anniversary has not been paid, the amount of the
interest is added to the loan and becomes part of the outstanding loan balance.
Interest will be deducted from the variable investment divisions in the same
proportion that the value of each variable investment division bears to your
variable account value. On each monthly anniversary, the loaned amount will be
credited with interest at a minimum guaranteed effective annual rate of 4.0%.
We may also credit additional interest (currently up to an effective annual
rate of 2%) on the preferred loan amount. Your loan will be divided into two
parts: the preferred loan amount and the non-preferred loan amount. The
preferred loan amount is equal to the amount of the loan balance that does not
exceed the policy value minus the total premiums paid (excluding any premiums
paid during a grace period). The non-preferred loan amount is equal to any
portion of the loan balance that exceeds the preferred loan amount.
Loan Repayment. You may repay all or part of your loan balance at any time
while the insured is living and the policy is in force. Loan repayments must be
at least $200 each (or the outstanding loan balance, if less). Upon repayment
of the loan balance, the portion of the repayment allocated to a variable
investment division will be transferred from the fixed account to increase the
value in that variable investment division. The repayment will be allocated
among the variable investment divisions and the fixed account based on the
instructions for net premium allocations then in effect unless you give us
other instructions. Any payment received when a loan is outstanding will be
treated as a premium unless you tell us it is a loan repayment.
Effect of Policy Loan. A policy loan will affect your policy in several ways
over time, whether or not it is repaid, because the investment results of the
variable investment divisions may be less than or greater than the net interest
rate credited on the amount transferred to the fixed account securing the loan.
First, by comparison to a policy under which no loan has been made, your policy
value will be less if this fixed account net interest rate is less than the
investment return of the applicable variable investment divisions and greater
if the fixed account net interest rate is higher than the investment return of
the applicable variable investment divisions.
Second, if the death benefit becomes payable while a policy loan is
outstanding, the loan balance will be deducted in calculating the death benefit
proceeds.
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Third, your policy will terminate if the loan balance exceeds the cash
surrender value on any monthly anniversary and the death benefit guarantee is
not in effect. We will send you, and any assignee of record, notice of the
termination. You will have a 61-day grace period to pay a sufficient
additional premium to avoid termination. If your policy terminates, there may
be tax consequences.
The tax treatment of the preferred loan amount is unclear, so consult your
tax advisor before taking a loan.
Requesting Payments
Written requests for payment must be sent to our administrative office or
given to an authorized United Investors agent for forwarding to this office.
We will ordinarily pay any death benefit, loan amount, net cash surrender
value or partial surrender amounts within seven days after we receive at our
administrative office all the documents required for such a payment. Other
than the death benefit, which is determined as of the date of the insured's
death, the amount of any payment will be determined as of the date our
administrative office receives all required documents.
Telephone requests may be allowed by us in certain circumstances.
We may delay making a payment of any amount from the variable investment
divisions or processing a transfer request if:
(a) the disposal or valuation of the Variable Account's assets is not
reasonably practicable because
(i) the New York Stock Exchange is closed for other than a regular
holiday or weekend,
(ii) trading is restricted by the SEC, or
(iii) the SEC declares that an emergency exists; or
(b) the SEC by order permits postponement of payment to protect our policy
owners.
We may defer payment of proceeds from the fixed account for up to six months
from the date we receive the request. If we defer payment for more than 30
days, we will pay interest on the amount deferred at an effective annual rate
of at least 4%. However, we will not defer payment of a withdrawal or policy
loan requested to pay a premium due on a United Investors policy. We also may
defer making payments attributable to a premium check that has not cleared
your bank.
The policy offers a wide variety of optional ways of receiving proceeds
payable under the policy other than in a lump sum. An authorized United
Investors agent can explain these options to you. None of these options varies
with the investment performance of a variable investment division because they
are all forms of fixed-benefit annuities.
Policy Changes
We may make changes in the policy at any time if we believe the changes are
necessary:
(a) to assure compliance at all times with the definition of life insurance
prescribed by the Internal Revenue Code;
(b) to make the policy, our operations, or the operation of the Variable
Account conform with any law or regulation issued by any government
agency to which they are subject; or
(c) to reflect a change in the operation of the Variable Account, if
allowed by the policy.
Only an officer of United Investors has the right to change the policy. No
agent has the authority to change the policy or waive any of its terms. All
endorsements, amendments, or riders must be signed by one of our officers to
be valid.
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Reports to Owners
At least once a year, 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 portfolio underlying a variable
investment division to which you have allocated net premiums or transferred
policy value, as required by the 1940 Act. In addition you will receive a
written confirmation of each transaction when you pay premiums, make a partial
surrender, make transfers, or take out a policy loan.
Other Policy Provisions
The policy contains provisions addressing the following matters:
Dividends. The policy is non-participating. This means that no dividends
will be paid on the policy. The policy will not share in our profits or surplus
earnings.
Incontestability. After the policy has been in force during the insured's
lifetime for a period of two years from the policy's effective date, the policy
limits our right to contest the policy as issued, except for material
misstatements contained in any application. This also applies to reinstatements
and increases in the face amount, for two years after the reinstatement date or
effective date of the increase.
Suicide Exclusion. The policy limits the death benefit if the insured dies
by suicide, generally within two years after the policy's effective date or
effective date of the increase. In this instance, our liability will be limited
to the total premiums paid less any partial surrenders and any loan balance.
Reinstatement. The policy may be reinstated at any time within five years
after the policy has terminated at the end of the grace period. To reinstate
the policy, the policy owner must:
(a) submit an application for reinstatement;
(b) provide evidence of insurability satisfactory to us;
(c) pay or agree to reinstatement of any loan balance; and
(d) pay the premium required to reinstate the policy.
The reinstatement date for the policy will be the monthly anniversary on or
following the day we approve the application for reinstatement. (See the policy
form for additional information.)
Misstatement of Age or Sex. The death benefit will be adjusted if the
insured's age or sex has been misstated in the application. The benefits paid
will be those which the last monthly cost of insurance charge would have
provided at the correct age and sex.
Paid-Up Insurance Option. If premium payments cease, insurance under the
policy and any supplemental benefits provided by rider will continue as
provided under the grace period provisions described under "Premiums to Prevent
Termination." The policy will not continue beyond its maturity date. Any
supplemental benefits added by a rider will not continue beyond the termination
date described in the rider.
Entire Contract. The entire contract is made up of the policy and the
written application. All statements made in the application, in the absence of
fraud, are considered representations and not warranties. We can use only the
statements made in the written application to defend a claim or void the
policy.
Assignment and Change of Owner
You may assign the policy subject to its terms. We will not be deemed to
know of an assignment unless we receive a written copy of it at our
administrative office. We assume no responsibility for the validity or effect
of any assignment. In certain circumstances, an assignment may be a taxable
event. (See "Tax Considerations" below.) You may change the policy owner by
sending a written request to us while the
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insured is alive and the policy is in force. 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 policy owner may have tax
consequences. (See "Tax Considerations.") A change of policy owner does not
change the beneficiary designation. (See "Beneficiary.") Any such assignment or
change must be in a written form acceptable to us.
Supplemental Benefits
Your policy may have supplemental benefits which are attached to the policy
by rider. A charge will be deducted monthly from your policy value for certain
supplemental benefits. Each supplemental benefit is subject to its own
requirements as to eligibility and cost. You may cancel supplemental benefits
at any time. More details will be included in your policy if you choose any of
these benefits. From time to time, we may make available supplemental benefits
other than those listed below. Contact your agent or our administrative office
for a complete list of the supplemental benefits available.
Accelerated Death Benefit Rider. This benefit allows accelerated payment of
up to 75% of the death benefit (in a lump sum only) while the insured is still
alive, if the insured is diagnosed as having a terminal illness expected to
cause death within 12 months (unless a shorter period is required by state
law). There is no charge for this rider prior to the time the accelerated
benefits are paid.
Accidental Death Benefit Rider. This benefit will be paid if the insured
dies as a result of an accident before age 70.
Children's Term Insurance Rider. This benefit allows you to add death
benefit coverage for your children.
Additional Insured Term Insurance Rider. This benefit allows you to provide
for death benefits on up to five family members (spouse and/or children).
Disability Waiver of Monthly Deduction Rider. The benefit provides for
waiver of monthly deductions after the insured has been totally disabled for
six months. The disability must commence after the policy's effective date and
prior to age 60. The waiver continues as long as total disability continues.
Charges and Deductions
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We deduct the charges described below from your policy. Certain of the
charges depend on a number of variables, and are illustrated in the
hypothetical illustrations depicted in this prospectus. The charges are for the
services and benefits provided, costs and expenses incurred and risks assumed
by us under or in connection with the policy. We intend to make a profit from
these charges.
Services and benefits we provide include:
(a) the death benefits, cash and loan benefits provided by the policy;
(b) funding choices, including net premium allocations, dollar-cost
averaging programs;
(c) administration of various elective options under the policy; and
(d) the distribution of various reports to policy owners.
Costs and expenses we incur include:
(a) those associated with underwriting applications and changes in face
amount and riders;
(b) various overhead and other expenses associated with providing the
services and benefits provided by the policy;
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(c) sales and marketing expenses; and
(d) other costs of doing business, such as Federal, state and local premium
and other taxes and fees.
Risks we assume include the risks that:
(a) insureds may live for a shorter period of time than estimated,
resulting in the payment of greater death benefits than expected; and
(b) the costs of providing the services and benefits under the policy will
exceed the charges deducted.
Premium Expense Charge
We deduct a 3.5% charge from each premium before allocating the resulting
net premium to the policy value. This charge is deducted for state premium
taxes and Federal income tax treatment of deferred acquisition costs.
Mortality and Expense Risk Charge
We deduct a daily charge from assets in the variable investment divisions
for certain mortality and expense risks we bear. This charge is currently at an
effective annual rate of 0.90% of Variable Account assets during the first ten
policy years, and at an effective annual rate of 0.70% thereafter. The maximum
mortality and expense risk charge is 0.90% of Variable Account assets for all
policy years. The mortality and expense risk charge does not apply to fixed
account assets. Our profit, if any, from this charge may be used for any
purpose, including distribution expenses.
Monthly Deduction
We deduct a monthly deduction from your policy value on the policy's
effective date and on each monthly anniversary. This charge is deducted from
the Variable Account and the fixed account on a pro rata basis. The monthly
deduction for each policy consists of:
(a) the cost of insurance charge discussed below;
(b) a monthly administrative charge (currently this is $5.00 per month; it
may increase to a maximum charge of $7.50 per month);
(c) the guaranteed death benefit charge ($0.01 per $1,000 of the policy's
face amount) as long as the death benefit guarantee remains in effect;
and
(d) charges for any supplemental benefits added by riders to the policy.
(See "Supplemental Benefits.")
Surrender Charge
If you surrender the policy before the end of the 16th policy year, we will
deduct a surrender charge based on its face amount at issue. We also deduct the
surrender charge if you surrender the policy before the end of the 16th year
following an increase in its face amount (based on the amount of the increase).
The surrender charge will be deducted before any surrender proceeds are paid. A
pro rata portion of the surrender charge will also be deducted for any face
amount decreases.
The surrender charge varies based on the insured's age on the policy's
effective date or at the time of an increase in face amount, and is calculated
as an amount per $1,000 of face amount. The surrender charge remains level for
the first five policy years (or the first five years after a face amount
increase) and declines each year thereafter until it reaches zero at the end of
the 16th policy year (or at the end of the 16th year after a face amount
increase).
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During the first five policy years (or first five years after a face amount
increase) the surrender charge per $1,000 of face amount is as follows for
selected ages of the insured:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Insured's Age at Issue: 25 35 45 50 55 65 75
- ----------------------------------------------------------------------------------------
Charge per $1,000 $6.00 $7.00 $8.75 $10.00 $11.50 $16.75 $26.00
of Face Amount:
</TABLE>
For example, if a 50-year old purchases a policy insuring his or her own
life with a $100,000 face amount and completely surrenders it within five
years, the surrender charge would be $1,000 ($10.00 per $1,000 of face amount,
applied to $100,000 of face amount). (See Appendix A for a complete list of
applicable surrender charges.)
Although the surrender charge (as a percentage of face amount) increases
with the insured's issue age, the surrender charge as a percentage of premiums
could actually decrease as the insured's issue age increases. This occurs
because the premiums required for a specified face amount are higher for an
insured with an older issue age than for an insured with a younger issue age.
This means that for the same premium an older insured's policy is likely to
have a lower face amount. Therefore the surrender charge for an insured with an
older issue age could actually represent a lower portion of the premiums than
it does for an insured with younger issue age.
Partial Surrender Charge
A partial surrender charge equal to (a) the lesser of $25 or 2% of the
partial surrender amount, plus (b) a portion of the surrender charge, will
apply to each partial surrender. The portion of the surrender charge is (i) the
percentage of the net cash surrender value requested, multiplied by (ii) the
surrender charge then in effect. This charge will be deducted from your policy
value along with the partial surrender amount. (See "Partial Surrenders.")
Other Charges
For a description of the investment advisory fees and other expenses
incurred by the Portfolios, see the "Summary" on page 2 of this prospectus and
the accompanying prospectus for Target/United Funds, Inc.
Cost of Insurance
The cost of insurance is the primary charge for the death benefit provided
by your policy. The cost of insurance charge depends on a number of variables
that cause the charge to vary from policy to policy and from monthly
anniversary to monthly anniversary. The cost of insurance charge is equal to
(a) multiplied by the result of (b) minus (c) where:
(a) is the cost of insurance rate divided by 1,000;
(b) is the death benefit at the beginning of the policy month divided by
1.0032737; and
(c) is the policy value at the beginning of the policy month.
The policy value used in this calculation is the policy value before
deduction of the monthly cost of insurance charge and cost of insurance for any
disability waiver of monthly deductions rider, but after monthly deductions for
any other riders and charges.
The cost of insurance rate is the rate applied to the insurance under the
policy to determine the monthly cost of insurance charge. The cost of insurance
rate is based on the insured's attained age, sex, and applicable risk class as
well as the duration of the policy. We currently place insureds in the
following risk classes (available for male or female) when we issue the policy,
based on our underwriting:
. Preferred;
. Standard Non-Tobacco;
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. Standard Tobacco;
. Substandard Non-Tobacco; and
. Substandard Tobacco.
The original risk class applies to the policy's initial face amount. If an
increase in face amount is approved, a different risk class may apply to the
increase, based on the insured's circumstances at the time of the increase. If
you have selected death benefit option A, and if there have been any increases
in the face amount, the policy value will be considered a part of the initial
face amount when the charge is calculated. If the policy value exceeds the
initial face amount, the excess will be considered part of the increases in
face amount in the order of the increases.
We guarantee that the cost of insurance rates used to calculate the monthly
cost of insurance charge will not exceed the maximum cost of insurance rates
set forth in the policy. The maximum cost of insurance rates are based on the
1980 Commissioners Standard Ordinary Mortality Tables, Male or Female, Smoker
or Non-Smoker, Age Last Birthday, or a multiple thereof for substandard
classes. (See "Hypothetical Illustrations" for examples showing the effects of
the cost of insurance charge.)
Reduction in Charges for Certain Groups
We may waive or reduce the administrative charge, the guaranteed death
benefit charge, the premium expense charge, and the surrender charges on
policies that have been sold to:
(a) our employees and sales representatives, or those of our affiliates or
distributors of the policy; or
(b) individuals or groups of individuals where the sale of the policy
results in savings of administrative or commission expenses.
Policy Values
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Policy Value
The policy value serves as a starting point for calculating values under a
policy. The policy value is the sum of the variable account value and the fixed
account value credited to the policy. The policy value is determined first on
the policy's effective date and thereafter on each business day. On the
maturity date, the proceeds payable under a policy are equal to the policy
value less any loan balance. The policy value will vary to reflect:
(a) the performance of the variable investment divisions to which amounts
have been allocated;
(b) interest credited on amounts allocated to the fixed account and loan
balance;
(c) charges;
(d) transfers;
(e) partial surrenders; and
(f) policy loans (including loan repayments).
The policy value may be more or less than premiums paid.
The cash surrender value is the policy value reduced by any surrender
charge.
The net cash surrender value is the cash surrender value reduced by any loan
balance. You will receive only the net cash surrender value if you surrender
your policy.
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Variable Account Value
The variable account value is the sum of the values of the variable
investment divisions under the policy. On the policy's effective date, the
value of each variable investment division is equal to:
(a) the initial net premium allocated to that variable investment division;
plus
(b) any accrued interest from the date of receipt of the premium to the
policy's effective date; minus
(c) the portion of the first month's monthly deduction allocated to that
variable investment division.
On any business day thereafter, the value of each variable investment division
is equal to:
(a) the value of the variable investment division on the preceding business
day, multiplied by the appropriate net investment factor (described
below) for the current business day; plus
(b) the sum of all net premiums allocated to the variable investment
division since the previous business day; plus
(c) the sum of all loan repayments allocated to the variable investment
division since the previous business day; plus
(d) the amount of any transfers from other variable investment divisions or
the fixed account to the variable investment division since the
previous business day; minus
(e) the amount of any transfers to other variable investment divisions or
to the fixed account, including amounts transferred to secure a policy
loan, from the variable investment division since the previous business
day; minus
(f) the portion of any partial surrenders (including surrender charges) or
charges for any face amount decreases allocated to the variable
investment division since the previous business day; minus
(g) the portion of the monthly deduction allocated to the variable
investment division since the previous business day.
Unit Values. When you allocate an amount to a variable investment division,
either by net premium allocation, transfer of policy value or repayment of a
policy loan, your policy is credited with units in that variable investment
division. The number of units is determined by dividing (i) the amount
allocated, transferred or repaid to the variable investment division by (ii)
the variable investment division's unit value for the business day when the
allocation, transfer or repayment is effected. The number of units credited to
a policy will decrease when:
(a) the allocated portion of the monthly deduction is taken from the
variable investment division;
(b) a policy loan is taken from the variable investment division;
(c) an amount is transferred from the variable investment division; or
(d) a partial surrender is taken from the variable investment division.
The number of the variable investment division's units may also decrease if the
policy's face amount is decreased.
A variable investment division's unit value is an index we use to measure
investment performance. Each variable investment division's unit value varies
to reflect the investment experience of its underlying portfolio, and may
increase or decrease from one business day to the next. Each variable
investment division's unit value
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<PAGE>
was arbitrarily set at $1.00 when the variable investment division was
established. The unit value is determined on each business day by multiplying
the unit value for the variable investment division on the prior business day
by the variable investment division's net investment factor for the current
business day.
Net Investment Factor. The net investment factor is an index used to measure
the investment performance of a variable investment division from one business
day to the next. The net investment factor for any variable investment division
for any business day is determined by dividing (a) by (b) and subtracting (c)
from the result, where:
(a) is:
(1) the net asset value per share of the portfolio shares held in the
variable investment division determined at the end of the current
business day; plus
(2) the per share amount of any dividend or capital gain distributions
on the portfolio shares held in the variable investment division, if
the "ex-dividend" date occurs during the current business day; plus
or minus
(3) a charge or credit for any taxes reserved for the current business
day which we determine to have resulted from the investment
operations of the variable investment division;
(b) is:
(1) the net asset value per share of the portfolio shares held in the
variable investment division, determined at the end of the last
prior business day; plus or minus
(2) the charge or credit for any taxes reserved for the last prior
business day; and
(c) is a deduction for the current mortality and expense risk charge.
Fixed Account Value
On the policy's effective date, the fixed account value is equal to:
(a) the initial net premium allocated to the fixed account; plus
(b) any accrued interest from the date of receipt of the premium to the
policy's effective date; minus
(c) the portion of the first month's monthly deduction allocated to the
fixed account.
On any monthly anniversary thereafter, the fixed account value is equal to:
(a) the fixed account value on the preceding monthly anniversary; plus
(b) the sum of all net premiums allocated to the fixed account since the
previous monthly anniversary; plus
(c) the sum of all policy loan repayments allocated to the fixed account
since the previous monthly anniversary; plus
(d) total interest credited to the fixed account since the previous monthly
anniversary; plus
(e) the amount of any transfers from the variable investment divisions to
the fixed account, including amounts transferred to secure policy
loans, since the previous monthly anniversary; minus
(f) the amount of any transfers from the fixed account to the variable
investment divisions since the previous monthly anniversary; minus
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(g) the portion of any partial surrenders (including surrender charges) or
charges for any face amount decreases allocated to the fixed account
since the previous monthly anniversary; minus
(h) the portion of the monthly deduction allocated to the fixed account
since the previous monthly anniversary.
Death Benefits
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If the insured dies while the policy is in force and prior to the policy's
maturity date, we will pay the death benefit when we receive satisfactory proof
at our administrative office of the insured's death. (See "Requesting
Payments.") The death benefit will be paid to the beneficiary.
Amount of Death Benefit Payable
The amount of death benefit payable is:
(a) the amount of insurance determined under the death benefit option in
effect on the date of the insured's death; plus
(b) any supplemental benefits provided by riders; minus
(c) any loan balance on that date; minus
(d) any past due monthly deductions (if death occurred during a grace
period).
Under certain circumstances, the amount of the death benefit may be further
adjusted. (See "Incontestability" and "Misstatement of Age or Sex.")
Death Benefit Options
The amount of insurance depends on the death benefit option in effect on the
date of death.
Death Benefit Option A. The death benefit (amount of insurance) under option
A is the greater of:
(1) the face amount at the beginning of the policy month when the death
occurs; or
(2) the policy value on the date of death, multiplied by the applicable
factor from the table of death benefit factors below.
Under option A, the death benefit ordinarily will not change.
Death Benefit Option B. The death benefit under option B is the greater of:
(1) the face amount at the beginning of the policy month when the death
occurs, plus the policy value on the date of death; or
(2) the policy value on the date of death, multiplied by the applicable
factor from the table of death benefit factors below.
Under option B, the death benefit will vary directly with your policy value.
(To see how and when investment performance of the policy may begin to affect
the death benefit, please see the hypothetical illustrations.)
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Death Benefit Factors. The death benefit factor is a multiple that ranges
between two-and-one-half times and one times the policy value. It is 2.50 up to
the insured's attained age 40 and declines thereafter as the insured's age
increases, as specified in the following table.
<TABLE>
<CAPTION>
Attained Attained Attained Attained
Age Factor Age Factor Age Factor Age Factor
-------- ------ -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
41 2.43 51 1.78 61 1.28 71 1.13
42 2.36 52 1.71 62 1.26 72 1.11
43 2.29 53 1.64 63 1.24 73 1.09
44 2.22 54 1.57 64 1.22 74 1.07
45 2.15 55 1.50 65 1.20 75-90 1.05
46 2.09 56 1.46 66 1.19 91 1.04
47 2.03 57 1.42 67 1.18 92 1.03
48 1.97 58 1.38 68 1.17 93 1.02
49 1.91 59 1.34 69 1.16 94 1.01
50 1.85 60 1.30 70 1.15 95+ 1.00
</TABLE>
The death benefit factors are based on current requirements under the
Internal Revenue Code. We reserve the right to change the table if the death
benefit factors currently in effect become inconsistent with any Federal income
tax laws and/or regulations.
Changing the Death Benefit Option
You select the death benefit option when you apply for the policy. After the
policy has been in force at least one year, you may change the death benefit
option on your policy, subject to the following rules:
(a) each change must be submitted by written request received by our
administrative office;
(b) once you change the death benefit option, you cannot change it again
for one year;
(c) if you change the death benefit option from A to B, the total death
benefit will remain the same, and the policy's face amount will be
decreased by an amount equal to the policy value on the date of the
change;
(d) if you change the death benefit option from B to A, the total death
benefit will remain the same, and the face amount will be increased by
an amount equal to the policy value on the date of the change. The risk
class for the last face amount portion to go into effect which is still
in force will apply to the face amount increase.
The effective date of the change will be the monthly anniversary on or
following the date when we approve the request for the change. We will send you
revised policy data pages reflecting the new death benefit option and the
effective date of the change. Changing the death benefit option may have tax
consequences. (See "Tax Considerations.")
Changing the Face Amount
You select the policy's face amount when you apply for the policy. After the
policy has been in force at least one year, you may change the face amount on
any monthly anniversary subject to the following requirements. The minimum face
amount after the first policy year is $50,000. Once you change the face amount,
you cannot change it again for one year. No change will be permitted that may
disqualify your policy as a life insurance contract under the Internal Revenue
Code. Changing the face amount of the policy may have tax consequences. (See
"Tax Considerations" below.)
Increasing the Face Amount. To increase the policy's face amount, you must:
(a) submit an application for the increase;
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(b) submit proof satisfactory to us that the insured is an insurable risk;
and
(c) pay any additional premium that is required.
The face amount cannot be increased after the insured's attained age 75.
Each face amount increase must be at least $25,000. A face amount increase will
take effect on the monthly anniversary on or following the day we approve the
application for the increase.
The risk class that applies for any face amount increase may be different
from the risk class that applies for the policy's initial face amount or any
other face amount increase. Upon an increase in face amount, the minimum
monthly premium will be increased, and additional surrender charges equal to
the face amount increase (in $1,000s) multiplied by the surrender charge
factors listed above under "Surrender Charge" will apply for 16 years following
the increase. If the face amount is increased, the cost of insurance will also
increase due to the increased death benefit.
Decreasing the Face Amount. You may decrease the policy's face amount by
submitting a written request. The face amount may not be decreased below the
policy's minimum face amount. The minimum monthly premium for your policy will
be reduced to reflect the decrease. Any decrease will take effect on the later
of:
(a) the monthly anniversary on or following the day we receive the request;
or
(b) the monthly anniversary one year after the date of the last change in
face amount.
A face amount decrease will be used to reduce any previous face amount
increases then in effect starting with the latest increase and continuing in
the reverse order in which the increases were made. If any portion of the
decrease is left after all face amount increases have been reduced, it will be
used to reduce the policy's initial face amount.
We will deduct a charge from the policy value each time the policy's face
amount is decreased. The amount of this charge is the lesser of:
(a) the reduction percentage multiplied by the surrender charge for each
face amount portion reduced; or
(b) the policy value when the decrease is made.
The reduction percentage for each face amount portion reduced is the amount
of the face amount decrease divided by the face amount in effect before the
decrease. The charge will be deducted for each face amount portion reduced.
After the face amount is decreased, future surrender charges for each face
amount portion for which a charge is deducted will be reduced by the surrender
charges shown for that face amount portion, multiplied by the reduction
percentage.
Effect of Partial Surrenders on the Death Benefit
A partial surrender will affect your policy's death benefit in the following
respects:
(a) If death benefit option A is in effect, the policy's face amount will
be reduced by the partial surrender amount. If the face amount reflects
increases in the policy's initial face amount, any partial surrender
will reduce first the most recent increase, and then the next most
recent increase, if any, in reverse order, and finally the policy's
initial face amount.
(b) If death benefit option B is in effect, the total death benefit is also
reduced by the partial surrender amount, but the policy's face amount
is not affected.
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Beneficiary
You designate the beneficiary (or beneficiaries) when you apply for the
policy. You may change the designated beneficiary (or beneficiaries) by
submitting a satisfactory written request to us. The change will take effect on
the date the request was signed, but it will not apply to payments we make
before we accept the written request. If no beneficiary is living at the
insured's death, we will pay the death benefit proceeds to you, if living, or
to your estate.
Tax Considerations
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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 relating to the policy. This summary is based upon our
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service ("IRS"). Because of the complexity
of such laws and the fact that tax results will vary according to the factual
status of the specific policy involved, tax advice from a qualified tax advisor
may be needed by a person contemplating the purchase of a policy or the
exercise of certain elections under the policy. These comments concerning
Federal income tax consequences are not an exhaustive discussion of all tax
questions that might arise under the policy. Further, these comments do not
take into account any Federal estate tax and gift, state, or local tax
considerations which may be involved in the purchase of a policy or the
exercise of certain elections under the policy. For complete information on
such Federal and state tax considerations, a qualified tax advisor should be
consulted. We do not make any guarantee regarding the tax status of any policy,
and the following summary is not intended as tax advice.
Tax Status of the Policy
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
policies should satisfy the applicable requirements. There is less guidance,
however, with respect to policies issued on a substandard basis and it is not
clear whether such policies will in all cases satisfy the applicable
requirements. If it is subsequently determined that a policy does not satisfy
the applicable requirements, we may take appropriate steps to bring the policy
into compliance with such requirements and we reserve the right to restrict
policy transactions in order to do so.
In certain circumstances, owners of variable life insurance 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. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the policies, such as the flexibility of a policy owner to allocate
premium payments and policy values, have not been explicitly addressed in
published rulings. While we believe that the policies do not give policy owners
investment control over Variable Account assets, we reserve the right to modify
the policies as necessary to prevent a policy owner from being treated as the
owner of the Variable Account assets supporting the policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through Target/United Funds, Inc. will satisfy these
diversification requirements.
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The following discussion assumes that the policy will qualify as a life
insurance contract for Federal income tax purposes.
Tax Treatment of Policy Benefits
In General. We believe that the death benefit under a policy should be
excludable from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of policy proceeds
depend on the circumstances of each policy owner or beneficiary. A tax advisor
should be consulted on these consequences.
Generally, the policy owner will not be deemed to be in constructive receipt
of the policy value until there is a distribution. When distributions from a
policy occur, or when loans are taken out from or secured by a policy, the tax
consequences depend on whether the policy is classified as a "Modified
Endowment Contract."
Modified Endowment Contracts. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such policy. The premium limitation rules for
determining whether such a policy is a modified endowment contract are
extremely complex. In general, however, a policy will be a modified endowment
contract if the accumulated premiums paid at any time during the first seven
policy years exceed the sum of the net level premiums which would have been
paid on or before such time if the policy provided for paid-up future benefits
after the payment of seven level annual premiums.
In addition, if a policy is "materially changed," it may cause such policy
to be treated as a modified endowment contract. The material change rules for
determining whether a policy is a modified endowment contract are also
extremely complex. In general, however, the determination whether a policy will
be a modified endowment contract after a material change depends upon the
relationship of the death benefit at the time of change to the policy or cash
value at the time of such change and the additional premiums paid in the seven
policy years starting with the date on which the material change occurs.
The manner in which the premium limitation and material change rules should
be applied to certain features of the policy and its riders is unclear.
Nonetheless, under our current procedures, the policy owner will be notified at
the time a policy is issued whether, according to our calculations, the policy
is or is not classified as a modified endowment contract based on the premium
then received.
Due to the policy's flexibility, classification of a policy as a modified
endowment contract will depend upon the circumstances of each policy.
Accordingly, a prospective policy owner should contact a qualified tax advisor
before purchasing a policy to determine the circumstances under which the
policy would be a modified endowment contract. In addition, a policy owner
should contact a competent tax advisor before making any change to, including
an exchange of or reduction in benefits of, a policy to determine whether such
change would cause the policy (or the new policy in the case of an exchange) to
be treated as a modified endowment contract.
If a policy becomes a modified endowment contract, distributions such as
partial surrenders and policy loans that occur during the policy year it
becomes a modified endowment contract and any subsequent policy year will be
taxed as distributions from a modified endowment contract. In addition,
distributions from a policy within two years before it becomes a modified
endowment contract will be taxed in this manner. This means that a distribution
made from a policy that is not a modified endowment contract could later become
taxable as a distribution from a modified endowment contract.
Whether a policy is or is not a modified endowment contract, upon a complete
surrender or a lapse or termination of a policy or when benefits are paid at
its maturity date, if the amount received plus the amount of any indebtedness
exceeds the total investment in the policy, the excess will generally be
treated as ordinary income subject to tax.
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Distributions Other than Death Benefits from Policies Classified as Modified
Endowment Contracts. Policies classified as modified endowment contracts will
be subject to the following tax rules:
(1) First, all distributions, including distributions upon surrender and
benefits paid at maturity, from such a policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of
the policy value immediately before the distribution over the
"investment in the policy" (described below) at such time.
(2) Second, loans taken from, or secured by, such a policy (including
unpaid loan interest that is added to the principal of a loan) are
treated as distributions from such a policy and taxed accordingly.
(3) Third, a 10 percent additional tax is imposed on the portion of any
distribution from, or loan taken from or secured by, such a policy that
is included in income except where the distribution or loan:
(a) is made on or after the policy owner reaches actual age 59 1/2,
(b) is attributable to the policy owner's becoming disabled, or
(c) is part of a series of substantially equal periodic payments for
the life (or life expectancy) of the policy owner or the joint
lives (or joint life expectancies) of the policy owner and the
policy owner's beneficiary.
Distributions Other than Death Benefits from Policies that Are Not Modified
Endowment Contracts. Distributions other than death benefits from a policy that
is not classified as a modified endowment contract are generally treated first
as a recovery of the policy owner's investment in the policy and only after the
recovery of all investment in the policy as taxable income. However, certain
distributions which must be made in order to enable the policy to continue to
qualify as a life insurance contract for Federal income tax purposes if policy
benefits are reduced during the first 15 policy years may be treated in whole
or in part as ordinary income subject to tax.
Loans from or secured by a policy that is not a modified endowment contract
are generally not treated as distributions. However, the tax consequences
associated with policy loans that are outstanding after the first 15 policy
years are less clear and a tax advisor should be consulted about such loans.
Finally, neither distributions from nor loans from or secured by a policy
that is not a modified endowment contract are subject to the 10 percent
additional income tax.
Policy Loan Interest. Interest paid on a policy loan generally is not tax-
deductible. The policy owner should consult a competent tax advisor if the
deductibility of interest paid on a policy loan is an important issue.
Investment in the Policy. "Investment in the policy" means:
(a) the aggregate amount of any premiums or other consideration paid for a
policy; minus
(b) the aggregate amount received under the policy which is excluded from
the gross income of the policy owner (except that the amount of any
loan from, or secured by, a policy that is a modified endowment
contract, to the extent such amount is excluded from gross income, will
be disregarded); plus
(c) the amount of any loan from, or secured by, a policy that is a modified
endowment contract to the extent that such amount is included in the
gross income of the policy owner.
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Multiple Policies. All modified endowment contracts that are issued by us
(or our affiliates) to the same policy owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includable in gross income.
Accelerated Death Benefit Rider. We believe that payments received under the
accelerated death benefit rider should be fully excludable from the gross
income of the beneficiary if the beneficiary is the insured under the policy.
(See "Accelerated Death Benefit Rider" for more information regarding the
rider.) However, you should consult a qualified tax advisor about the
consequences of adding this rider to a policy or requesting payment under this
rider.
Other Policy Owner Tax Matters. The tax consequences of continuing the
policy beyond the insured's 100th year are unclear. You should consult a tax
advisor if you intend to keep the policy in force beyond the insured's 100th
year.
Businesses can use the policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare
benefit plans, retiree medical benefit plans and others. The tax consequences
of such plans may vary depending on the particular facts and circumstances. If
you are purchasing the policy for any arrangement the value of which depends in
part on its tax consequences, you should consult a qualified tax advisor. In
recent years, moreover, Congress has adopted new rules relating to life
insurance owned by businesses. Any business contemplating the purchase of a new
policy or a change in an existing policy should consult a tax advisor.
Possible Tax Law Changes. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the policy
could change by legislation or otherwise. Consult a tax advisor with respect to
legislative developments and their effect on the policy.
Taxation of United Investors
We incur state and local premium taxes, and Federal income taxes resulting
from the treatment of deferred acquisition costs. The amount of the charge we
deduct for such taxes is discussed above under "Charges and Deductions." At the
present time, we make no charge to the Variable Account for any other Federal,
state or local taxes that it incurs which may be attributable to the Variable
Account or to the policies. Nevertheless, we reserve the right in the future to
make a charge for any such tax or other economic burden resulting from the
application of the tax laws that we determine to be properly attributable to
the Variable Account or to the policies.
Employment-Related Benefit Plans
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. The policies described in this
prospectus contain guaranteed purchase rates for certain payment options that
generally distinguish between men and women. Accordingly, employers and
employee organizations should consider, in consultation with their legal
counsel, the impact of Norris, and Title VII generally, on any employment-
related insurance or benefit program for which a policy may be purchased.
Other Information
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United Investors Life Insurance Company
We were incorporated in the State of Missouri on August 17, 1981, as the
successor to a company of the same name established in Missouri on September
27, 1961. We are a stock life insurance company, indirectly
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owned by Torchmark Corporation. Our principal business is selling life
insurance and annuity contracts. We are admitted to do business in the District
of Columbia and all states except New York.
Preparing for Year 2000. Existing computer programs of many businesses were
developed with a two-digit identification of the year of a transaction without
consideration of the upcoming change in century or millennium in the year 2000.
This means that "00" is used to identify the year, and computers may interpret
this incorrectly as the year 1900 instead of 2000. If this fact were ignored,
many computer programs could fail or produce erroneous results, creating
considerable uncertainty and potentially adversely affecting operations or
business.
We have been in the process of modifying our computer system and
applications for the year 2000. We substantially completed this project during
1998, and will conduct final testing in 1999. We have primarily used internal
staff for this conversion but are also using outside consultants where
necessary. The cost of this project, which is immaterial to our financial
position, is expensed as incurred.
As a part of our activities, we rely on and communicate electronically with
other financial institutions and various other organizations which have
computer systems that may not be year 2000 compliant. Where possible, we are
verifying that these other business systems are now year 2000 compliant or are
in the process of becoming compliant. If these systems are not compliant, the
potential interruptions to our operations and cost to our business may be
significant.
Published Ratings. We may publish (in advertisements, sales literature, and
reports to policy owners) the ratings and other information assigned to us by
one or more independent insurance industry analysts or rating organizations
such as A. M. Best Company, Standard & Poor's Corporation, and Weiss Research,
Inc. These ratings reflect the organization's current opinion of an insurance
company's financial strength and operating performance in comparison to the
norms for the insurance industry; they do not reflect the strength,
performance, risk, or safety (or lack thereof) of the variable investment
divisions. The claims-paying ability rating as measured by Standard & Poor's is
an opinion of an operating insurance company's financial capacity to meet its
obligations under its outstanding insurance and annuity policies.
Sale of the Policies
Waddell & Reed, Inc. of 6300 Lamar, Overland Park, Kansas, is the principal
underwriter of the policies. Waddell & Reed, Inc. is a corporation organized
under the laws of the state of Delaware in 1981, 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 available in all states. Waddell & Reed, Inc. may enter into written
sales agreements with various broker-dealers to aid in the sale of the
policies. A commission plus bonus compensation may be paid to broker-dealers or
agents in connection with sales of the policies.
Changing the Variable Account
We have the right to make changes to, and to modify how we operate, the
Variable Account. Specifically, we have the right to:
(a) add investment divisions to, or remove investment divisions from, the
Variable Account;
(b) combine the Variable Account with other separate accounts;
(c) replace the shares of a portfolio by substituting shares of another
portfolio of Target/United Funds, Inc. or another investment company
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<PAGE>
(1) if shares of the portfolio are no longer available for investment,
or
(2) if, in our judgment, continued investment in the portfolio is
inappropriate in view of the purposes of the Variable Account;
(d) end the registration of the Variable Account under the 1940 Act;
(e) disregard instructions from policy owners (only if required by state
insurance regulatory authorities or otherwise pursuant to insurance law
or regulation) regarding a change in the investment objectives of a
portfolio or the approval or disapproval of an investment advisory
agreement; and
(f) operate the Variable Account or one or more of its investment divisions
in any other form allowed by law, including a form that permits direct
investments in individual securities (rather than solely investments in
a mutual fund shares).
Voting of Portfolio Shares
We are the legal owner of portfolio shares held in the investment divisions
of the Variable Account and therefore have the right to vote on all matters
submitted to shareholders of the portfolios. However, to the extent required by
law, we will vote shares held in the variable investment divisions at meetings
of the shareholders of the portfolios in accordance with instructions received
from policy owners. Target/United Funds, Inc. does not hold regular annual
shareholder meetings. To obtain voting instructions from policy owners before a
meeting of shareholders of a particular portfolio, we may send voting
instruction material, a voting instruction form and any other related material
to policy owners with policy value in the variable investment division
corresponding to that portfolio. We will vote shares held in a variable
investment division for which no timely instructions are received in the same
proportion as those shares for which voting instructions are received. If the
applicable Federal securities laws, regulations or interpretations thereof
change to permit us to vote shares of the portfolios in our own right, then we
may elect to do so. We may, if required by state insurance officials, disregard
policy owners' voting instructions if such instructions would require us to
vote the shares so as to cause a change in sub-classification or investment
objectives of one or more of the portfolios, or to approve or disapprove an
investment advisory agreement. In addition, we may under certain circumstances
disregard voting instructions that would require changes in the investment
policy or investment adviser of a portfolio, provided that we reasonably
disapprove of such changes in accordance with applicable Federal regulations.
If we ever disregard voting instructions, policy owners will be advised of that
action and of our reasons for doing so in our next report to policy owners.
Addition, Deletion, or Substitution of Investments
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares of Target/United
Funds, Inc. that are held by the Variable Account (or any of its investment
divisions) or that the Variable Account (or any of its investment divisions)
may purchase. We reserve the right to eliminate the shares of any of the
portfolios of Target/United Funds, Inc. and to substitute shares of another
portfolio of Target/United Funds, Inc. or any other investment vehicle or of
another open-end, registered investment company if:
(a) laws or regulations are changed;
(b) the shares of Target/United Funds, Inc. or one of its portfolios are no
longer available for investment, or;
(c) in our judgment, further investment in any portfolio becomes
inappropriate in view of the purposes of the Investment Division.
30
<PAGE>
We will not substitute any shares attributable to your interest in an
investment division of the Variable Account without notice and prior approval
of the U.S. Securities and Exchange Commission and the insurance regulator of
the state where the policy was delivered, if required. Nevertheless, the
representations in this prospectus will not prevent the Variable Account from
purchasing other securities for other series or classes of policies, or from
permitting a conversion between series or classes of policies on the basis of
requests made by policy owners.
We also reserve the right to establish additional investment divisions of
the Variable Account, each of which would invest in a new portfolio of
Target/United Funds, Inc., or in shares of another investment company or
suitable investment, with a specified investment objective. We may establish
new variable investment divisions when, in our sole discretion, marketing needs
or investment conditions warrant. We may make available any new variable
investment divisions to existing policy owners, and will do so on a basis that
we will determine. We may also eliminate one or more variable investment
divisions if, in our sole discretion, marketing, tax, or investment conditions
warrant.
In the event of any such substitution or change, we may, by appropriate
endorsement, make such changes in this and other policies as may be necessary
or appropriate to reflect such substitution or change. If we deem it to be in
the best interests of persons having voting rights under the policies, the
Variable Account may be:
(a) operated as a management company under the Investment Company Act of
1940;
(b) deregistered under that Act in the event such registration is no longer
required; or
(c) combined with other United Investors separate accounts.
Other Information
A registration statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. That information may be obtained at the SEC's principal office in
Washington, D.C. by paying the SEC's prescribed fees.
Litigation
No legal or administrative proceeding is pending that would have a material
effect upon the Variable Account.
Legal Matters
Legal advice regarding certain matters relating to Federal securities laws
applicable to the issuance of the policy described in this prospectus has been
provided by Sutherland Asbill & Brennan LLP of Washington, D.C.
Experts
Our balance sheets as of December 31, 1998 and 1997, and the related
statements of operations, shareholder's equity, and cash flows for each of the
years in the three-year period ended December 31, 1998 and the balance sheet of
United Investors Universal Life Variable Account as of December 31, 1998 and
the related statement of operations and changes in net assets for the period
then ended have been included herein in reliance upon the report of ,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by W.
Thomas Aycock, Vice President and Chief Actuary of United Investors, whose
opinion is filed as an exhibit to the registration statement.
31
<PAGE>
Financial Statements
Our financial statements which are included in Appendix E to this prospectus
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.
32
<PAGE>
Appendix A:
Surrender Charges Per $1,000 of Face Amount
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Issue Year Year Year Year Year Year Year Year Year Year Year Year
Age 1-6 7 8 9 10 11 12 13 14 15 16 17+
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-
25 $6.00 $5.45 $4.91 $4.35 $3.82 $3.27 $2.73 $2.18 $1.64 $1.09 $0.55 $0.00
- ---------------------------------------------------------------------------------
26-
30 6.50 5.91 5.32 4.73 4.14 3.55 2.95 2.38 1.77 1.18 0.59 0.00
- ---------------------------------------------------------------------------------
31-
35 7.00 6.36 5.73 5.09 4.45 3.82 3.18 2.55 1.91 1.27 0.64 0.00
- ---------------------------------------------------------------------------------
36-
40 7.75 7.05 6.34 5.84 4.93 4.23 3.52 2.82 2.11 1.41 0.70 0.00
- ---------------------------------------------------------------------------------
41-
45 8.75 7.95 7.16 6.36 5.57 4.77 3.98 3.18 2.39 1.59 0.80 0.00
- ---------------------------------------------------------------------------------
46-
50 10.00 9.09 8.18 7.27 6.36 5.45 4.55 3.64 2.73 1.82 0.91 0.00
- ---------------------------------------------------------------------------------
51-
55 11.50 10.45 9.41 8.36 7.32 6.27 5.23 4.18 3.14 2.09 1.06 0.00
- ---------------------------------------------------------------------------------
56-
60 13.75 12.50 11.25 10.00 8.75 7.50 6.25 5.00 3.75 2.50 1.25 0.00
- ---------------------------------------------------------------------------------
61-
65 16.75 15.23 13.70 12.18 10.66 9.14 7.61 6.09 4.57 3.05 1.52 0.00
- ---------------------------------------------------------------------------------
66-
70 20.75 18.86 16.98 15.09 13.20 11.32 9.43 7.55 5.66 3.77 1.89 0.00
- ---------------------------------------------------------------------------------
71-
75 26.00 23.64 21.27 18.91 16.55 14.18 11.62 9.45 7.09 4.73 2.36 0.00
</TABLE>
Note: These rates are interpolated during each year. The charge shown is for
the beginning of each year. For example, for a 35-year old at issue, during
year 6 the charge declines from $7.00 per $1,000 of Face Amount at the
beginning of the year to $6.36 per $1,000 of Face Amount at the end of the
year.
33
<PAGE>
Appendix B:
Hypothetical Illustrations
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following illustrations show how certain values under a sample policy
change with assumed investment performance over an extended period of time. In
particular, they illustrate how policy values, net cash surrender values and
death benefits under a policy, covering an insured of a given age on the
policy's effective date, would vary over time if planned premiums were paid
annually and the return on the assets in the variable investment divisions were
a uniform gross annual rate of 0%, 6% or 12%, before deduction of any fees and
charges, including portfolio expenses. The tables also show planned premiums
accumulated at 5% interest. The values under a policy would be different from
those shown if the returns averaged 0%, 6% or 12% but fluctuated over and under
those averages throughout the years shown. The hypothetical investment rates of
return are illustrative only and should not be deemed a representation of past
or future investment rates of return. Actual rates of return for a particular
policy may be more or less than the hypothetical investment rates of return
used in the illustrations.
The illustrations assume an average annual expense ratio of . % of the
average daily net assets of the portfolios available under the policies, based
on the expense ratios of each of the portfolios for the last fiscal year of
operations and the service fee ("12b-1 fee"), at an annual rate of 0.25%, under
the service plan beginning August 31, 1998. For information on portfolio
expenses, see the Target/United Funds, Inc. prospectus accompanying this
prospectus.
The current illustrations also reflect the 0.90% mortality and expense risk
charge to the Variable Account during the first ten policy years, and 0.70%
thereafter. The guaranteed illustrations reflect the 0.90% maximum mortality
and expense risk charge and the $7.50 maximum monthly administrative charge for
all policy years. After deduction of estimated portfolio expenses and the
current mortality and expense risk charge, the illustrated gross annual
investment rates of return of 0%, 6% and 12% would correspond to approximate
net annual rates of return for the variable investment divisions of - . %, . %,
and . %, respectively, in policy years 1 through 10 and - . %, . %, and . %,
respectively, thereafter.
The illustrations also reflect the deduction of the 3.5% premium expense
charge and the monthly deduction for the hypothetical insured. Our current
charges and the higher guaranteed charges we have the contractual right to
deduct from your policy value are reflected in separate illustrations on each
of the following pages. All the illustrations reflect the fact that no charges
for Federal or state income taxes are currently made against the Variable
Account and assume no loan balance or charges for supplemental benefits.
Upon request, we will furnish a comparable illustration based upon the
proposed insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in the following
tables.
[Updated tables to be filed by amendment.]
34
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
CURRENT CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ------------------------ ------------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,050 $100,000 $100,000 $100,000 $ 706 $ 756 $ 806 $ 6 $ 56 $ 106
2 2,153 100,000 100,000 100,000 1,391 1,535 1,686 691 835 986
3 3,310 100,000 100,000 100,000 2,052 2,336 2,644 1,352 1,636 1,944
4 4,526 100,000 100,000 100,000 2,690 3,158 3,687 1,990 2,458 2,987
5 5,802 100,000 100,000 100,000 3,304 4,003 4,825 2,604 3,303 4,125
6 7,142 100,000 100,000 100,000 3,891 4,867 6,064 3,255 4,231 5,428
7 8,549 100,000 100,000 100,000 4,457 5,757 7,418 3,684 5,184 6,845
8 10,027 100,000 100,000 100,000 5,003 6,674 8,901 4,494 6,165 8,392
9 11,578 100,000 100,000 100,000 5,535 7,627 10,534 5,090 7,182 10,089
10 13,207 100,000 100,000 100,000 6,053 8,617 12,332 5,671 8,235 11,950
11 14,917 100,000 100,000 100,000 6,564 9,656 14,329 6,246 9,338 14,011
12 16,713 100,000 100,000 100,000 7,054 10,729 16,525 6,799 10,474 16,270
13 18,599 100,000 100,000 100,000 7,521 11,836 18,940 7,330 11,645 18,749
14 20,579 100,000 100,000 100,000 7,970 12,982 21,601 7,843 12,655 21,474
15 22,657 100,000 100,000 100,000 8,408 14,176 24,539 8,344 14,112 24,475
16 24,840 100,000 100,000 100,000 8,824 15,411 27,778 8,824 15,411 27,776
17 27,132 100,000 100,000 100,000 9,201 16,672 31,335 9,201 16,672 31,335
18 29,539 100,000 100,000 100,000 9,542 17,963 35,249 9,542 17,963 35,249
19 32,066 100,000 100,000 100,000 9,840 19,278 39,554 9,840 19,278 39,554
20 34,719 100,000 100,000 100,000 10,092 20,617 44,296 10,092 20,617 44,296
21 37,505 100,000 100,000 100,000 10,296 21,980 49,523 10,296 21,980 49,523
22 40,430 100,000 100,000 100,000 10,445 23,364 55,292 10,445 23,364 55,292
23 43,502 100,000 100,000 100,000 10,530 24,760 61,662 10,530 24,760 61,662
24 46,727 100,000 100,000 100,000 10,550 26,171 68,710 10,550 26,171 68,710
25 50,113 100,000 100,000 102,530 10,489 27,586 76,515 10,489 27,586 76,515
26 53,669 100,000 100,000 110,666 10,347 29,008 85,128 10,347 29,008 85,128
27 57,403 100,000 100,000 121,073 10,105 30,422 94,588 10,105 30,422 94,588
28 61,323 100,000 100,000 132,277 9,765 31,834 104,982 9,765 31,834 104,982
29 65,439 100,000 100,000 144,336 9,304 33,231 116,400 9,304 33,231 116,400
30 69,761 100,000 100,000 157,312 8,710 34,605 128,944 8,710 34,605 128,944
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
35
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
CURRENT CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ------------------------ ------------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,625 $100,000 $100,000 $100,000 $ 1,838 $ 1,966 $ 2,094 $ 838 $ 966 $ 1,094
2 5,381 100,000 100,000 100,000 3,605 3,976 4,363 2,605 2,976 3,363
3 8,275 100,000 100,000 100,000 5,328 6,060 6,854 4,328 5,060 5,854
4 11,314 100,000 100,000 100,000 6,994 8,206 9,575 5,994 7,206 8,575
5 14,505 100,000 100,000 100,000 8,583 10,397 12,533 7,583 9,397 11,533
6 17,855 100,000 100,000 100,000 10,113 12,654 15,771 9,204 11,745 14,862
7 21,373 100,000 100,000 100,000 11,569 14,964 19,305 10,751 14,146 18,487
8 25,066 100,000 100,000 100,000 12,940 17,319 23,161 12,213 16,592 22,434
9 28,945 100,000 100,000 100,000 14,227 19,724 27,377 13,591 19,088 26,741
10 33,017 100,000 100,000 100,000 15,424 22,176 31,992 14,879 21,631 31,447
11 37,293 100,000 100,000 100,000 16,542 24,706 37,107 16,087 24,251 36,652
12 41,782 100,000 100,000 100,000 17,565 27,293 42,743 17,201 26,929 42,379
13 46,497 100,000 100,000 100,000 18,539 29,985 49,005 18,266 29,712 48,732
14 51,446 100,000 100,000 100,000 19,491 32,812 55,989 19,309 32,630 55,807
15 56,644 100,000 100,000 100,000 20,405 35,771 63,775 20,314 35,680 63,684
16 62,101 100,000 100,000 100,000 21,121 38,742 72,403 21,121 38,742 72,403
17 67,831 100,000 100,000 100,000 21,695 41,781 82,031 21,695 41,781 82,031
18 73,848 100,000 100,000 109,428 22,130 44,904 92,735 22,130 44,904 92,735
19 80,165 100,000 100,000 122,248 22,412 48,117 104,465 22,412 48,117 104,485
20 86,798 100,000 100,000 136,156 22,507 51,417 117,376 22,507 51,417 117,376
21 93,763 100,000 100,000 151,252 22,418 54,828 131,523 22,418 54,828 131,523
22 101,076 100,000 100,000 165,205 22,089 58,345 147,084 22,089 58,345 147,084
23 108,755 100,000 100,000 182,289 21,519 62,002 164,224 21,519 62,002 164,224
24 116,818 100,000 100,000 199,608 20,679 65,822 183,127 20,679 65,822 183,127
25 125,284 100,000 100,000 218,278 19,492 69,819 203,999 19,492 69,819 203,999
26 134,173 100,000 100,000 238,448 17,940 74,042 227,093 17,940 74,042 227,093
27 143,506 100,000 100,000 265,069 15,916 78,526 252,447 15,916 78,526 252,447
28 153,307 100,000 100,000 294,288 13,382 83,343 280,274 13,382 83,343 280,274
29 163,597 100,000 100,000 326,330 10,188 88,566 310,790 10,188 88,566 310,790
30 174,402 100,000 100,000 361,458 6,268 94,310 344,245 6,268 94,310 344,245
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
36
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
GUARANTEED CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ----------------------- -----------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------ ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,050 $100,000 $100,000 $100,000 $ 676 $ 725 $ 775 $ 0 $ 25 $ 75
2 2,153 100,000 100,000 100,000 1,332 1,472 1,619 632 772 919
3 3,310 100,000 100,000 100,000 1,964 2,239 2,539 1,264 1,539 1,839
4 4,526 100,000 100,000 100,000 2,573 3,027 3,539 1,873 2,327 2,839
5 5,802 100,000 100,000 100,000 3,159 3,834 4,629 2,459 3,134 3,929
6 7,142 100,000 100,000 100,000 3,718 4,659 5,814 3,082 4,023 5,178
7 8,549 100,000 100,000 100,000 4,251 5,503 7,105 3,678 4,930 6,532
8 10,027 100,000 100,000 100,000 4,756 6,365 8,511 4,247 5,856 8,002
9 11,578 100,000 100,000 100,000 5,234 7,245 10,042 4,789 6,800 9,597
10 13,207 100,000 100,000 100,000 5,683 8,142 11,712 5,301 7,760 11,330
11 14,917 100,000 100,000 100,000 6,101 9,054 13,532 5,783 8,736 13,214
12 16,713 100,000 100,000 100,000 6,486 9,981 15,517 6,231 9,726 15,262
13 18,599 100,000 100,000 100,000 6,837 10,923 17,684 6,646 10,732 17,493
14 20,579 100,000 100,000 100,000 7,153 11,876 20,051 7,026 11,749 19,924
15 22,657 100,000 100,000 100,000 7,431 12,841 22,638 7,367 12,777 22,574
16 24,840 100,000 100,000 100,000 7,667 13,814 25,467 7,667 13,814 25,467
17 27,132 100,000 100,000 100,000 7,858 14,791 28,562 7,858 14,791 28,562
18 29,539 100,000 100,000 100,000 7,997 15,766 31,947 7,997 15,766 31,947
19 32,066 100,000 100,000 100,000 8,077 16,735 35,654 8,077 16,735 35,654
20 34,719 100,000 100,000 100,000 8,094 17,691 39,716 8,094 17,691 39,716
21 37,505 100,000 100,000 100,000 8,040 18,630 44,175 8,040 18,630 44,175
22 40,430 100,000 100,000 100,000 7,911 19,545 49,076 7,911 19,545 49,076
23 43,502 100,000 100,000 100,000 7,701 20,434 54,476 7,701 20,434 54,476
24 46,727 100,000 100,000 100,000 7,402 21,287 60,434 7,402 21,287 60,434
25 50,113 100,000 100,000 100,000 7,003 22,096 67,024 7,003 22,096 67,024
26 53,669 100,000 100,000 100,000 6,491 22,850 74,327 6,491 22,850 74,327
27 57,403 100,000 100,000 105,502 5,853 23,535 82,423 5,853 23,535 82,423
28 61,323 100,000 100,000 115,041 5,068 24,134 91,302 5,068 24,134 91,302
29 65,439 100,000 100,000 125,271 4,113 24,627 101,025 4,113 24,627 101,025
30 69,761 100,000 100,000 136,242 2,964 24,993 111,673 2,964 24,993 111,673
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
37
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
GUARANTEED CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ------------------------ ------------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,625 $100,000 $100,000 $100,000 $ 1,769 $ 1,894 $ 2,020 $ 769 $ 894 $ 1,020
2 5,381 100,000 100,000 100,000 3,468 3,830 4,208 2,468 2,830 3,208
3 8,275 100,000 100,000 100,000 5,093 5,804 6,576 4,093 4,804 5,576
4 11,314 100,000 100,000 100,000 6,639 7,812 9,140 5,639 6,812 8,140
5 14,505 100,000 100,000 100,000 8,103 9,853 11,916 7,103 8,853 10,916
6 17,855 100,000 100,000 100,000 9,481 11,923 14,926 8,572 11,014 14,017
7 21,373 100,000 100,000 100,000 10,769 14,021 18,193 9,951 13,203 17,375
8 25,066 100,000 100,000 100,000 11,966 16,148 21,747 11,239 15,421 21,020
9 28,945 100,000 100,000 100,000 13,067 18,301 25,620 12,431 17,665 24,984
10 33,017 100,000 100,000 100,000 14,064 20,475 29,846 13,519 19,930 29,301
11 37,293 100,000 100,000 100,000 14,949 22,666 34,466 14,494 22,211 34,011
12 41,782 100,000 100,000 100,000 15,713 24,870 39,529 15,349 24,506 39,165
13 46,497 100,000 100,000 100,000 16,341 27,078 45,089 16,068 26,805 44,816
14 51,446 100,000 100,000 100,000 16,818 29,281 51,212 16,636 29,099 51,030
15 56,644 100,000 100,000 100,000 17,129 31,474 57,981 17,038 31,383 57,890
16 62,101 100,000 100,000 100,000 17,270 33,662 65,507 17,270 33,662 65,507
17 67,831 100,000 100,000 100,000 17,216 35,833 73,907 17,216 35,833 73,907
18 73,848 100,000 100,000 100,000 16,951 37,984 83,330 16,951 37,984 83,330
19 80,165 100,000 100,000 109,765 16,451 40,110 93,816 16,451 40,110 93,816
20 86,798 100,000 100,000 122,126 15,686 42,205 105,281 15,686 42,205 105,281
21 93,763 100,000 100,000 135,486 14,611 44,254 117,814 14,611 44,254 117,814
22 101,076 100,000 100,000 148,667 13,169 46,240 131,564 13,169 46,240 131,564
23 108,755 100,000 100,000 162,802 11,284 48,141 146,668 11,284 48,141 146,668
24 116,818 100,000 100,000 177,983 8,867 49,934 163,287 8,867 49,934 163,287
25 125,284 100,000 100,000 194,327 5,824 51,601 181,614 5,824 51,601 181,614
26 134,173 100,000 100,000 211,976 2,050 53,128 201,822 2,050 53,128 201,882
27 143,506 *** 100,000 235,258 *** 54,503 224,056 *** 54,503 224,056
28 153,307 *** 100,000 260,717 *** 55,710 248,302 *** 55,710 248,302
29 163,597 *** 100,000 288,538 *** 56,729 274,798 *** 56,729 274,798
30 174,402 *** 100,000 318,921 *** 57,524 303,734 *** 57,524 303,734
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
38
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
CURRENT CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ----------------------- -----------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------ ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,050 $100,705 $100,755 $100,805 $ 705 $ 755 $ 805 $ 5 $ 55 $ 105
2 2,153 101,387 101,531 101,681 1,387 1,531 1,681 687 831 981
3 3,310 102,044 102,326 102,633 2,044 2,326 2,633 1,344 1,626 1,933
4 4,526 102,676 103,141 103,667 2,676 3,141 3,667 1,976 2,441 2,967
5 5,802 103,283 103,976 104,793 3,283 3,976 4,793 2,583 3,276 4,093
6 7,142 103,861 104,827 106,013 3,861 4,827 6,013 3,225 4,191 5,377
7 8,549 104,416 105,701 107,343 4,416 5,701 7,343 3,843 5,128 6,770
8 10,027 104,949 106,598 108,795 4,949 6,598 6,795 4,440 6,089 8,286
9 11,578 105,467 107,527 110,389 5,467 7,527 10,389 5,022 7,082 9,944
10 13,207 105,970 108,489 112,138 5,970 8,489 12,138 5,588 8,107 11,756
11 14,917 106,463 109,495 114,075 6,463 9,495 14,075 6,145 9,177 13,757
12 16,713 106,932 110,528 116,194 6,932 10,528 16,194 6,677 10,273 15,939
13 18,599 107,378 111,589 118,515 7,378 11,589 18,515 7,187 11,398 18,324
14 20,579 107,803 112,682 121,060 7,803 12,682 21,060 7,676 12,555 20,933
15 22,657 108,214 113,815 123,861 8,214 13,815 23,861 8,150 13,751 23,797
16 24,840 108,602 114,979 126,932 8,602 14,979 26,932 8,602 14,979 26,932
17 27,132 108,947 116,156 130,279 8,947 16,156 30,279 8,947 16,156 30,279
18 29,539 109,251 117,347 133,934 9,251 17,347 33,934 9,251 17,347 33,934
19 32,066 109,506 118,545 137,919 9,506 18,545 37,919 9,506 18,545 37,919
20 34,719 109,711 119,746 142,264 9,711 19,746 42,264 9,711 19,746 42,264
21 37,505 109,861 120,946 147,001 9,861 20,946 47,001 9,861 20,946 47,001
22 40,430 109,951 122,137 152,165 9,951 22,137 52,165 9,951 22,137 52,165
23 43,502 109,968 123,307 157,783 9,968 23,307 57,783 9,968 23,307 57,783
24 46,727 109,914 124,452 163,904 9,914 24,452 63,904 9,914 24,452 63,904
25 50,113 109,770 125,553 170,557 9,770 25,553 70,557 9,770 25,553 70,557
26 53,669 109,537 126,608 177,798 9,537 26,608 77,798 9,537 26,608 77,798
27 57,403 109,195 127,591 185,663 9,195 27,591 85,663 9,195 27,591 85,663
28 61,323 108,760 128,513 194,232 8,760 28,513 94,232 8,780 28,513 94,232
29 65,439 108,198 129,336 203,540 8,196 29,336 103,540 8,198 29,336 103,540
30 69,761 107,496 130,041 213,646 7,496 30,041 113,646 7,496 30,041 113,646
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
39
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
CURRENT CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ------------------------ ------------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,625 $101,828 $101,955 $102,083 $ 1,828 $ 1,955 $ 2,083 $ 828 $ 955 $ 1,083
2 5,381 103,575 103,943 104,326 3,575 3,943 4,326 2,575 2,943 3,326
3 8,275 105,268 105,990 106,775 5,268 5,990 6,775 4,268 4,990 5,775
4 11,314 106,893 108,085 109,431 6,893 8,085 9,431 5,893 7,085 8,431
5 14,505 108,427 110,203 112,293 8,427 10,203 12,293 7,427 9,203 11,293
6 17,855 109,889 112,363 115,397 9,889 12,363 15,397 8,980 11,454 14,488
7 21,373 111,261 114,548 118,748 11,261 14,548 18,748 10,443 13,730 17,930
8 25,066 112,528 116,741 122,353 12,528 16,741 22,353 11,801 16,014 21,626
9 28,945 113,691 118,941 126,238 13,691 18,941 26,238 13,055 18,305 25,602
10 33,017 114,740 121,136 130,416 14,740 21,136 30,416 14,195 20,591 29,871
11 37,293 115,679 123,339 134,949 15,679 23,339 34,949 15,224 22,884 34,494
12 41,782 116,494 125,526 139,833 16,494 25,526 39,833 16,130 25,162 39,469
13 46,497 117,253 127,763 145,175 17,253 27,763 45,175 16,980 27,490 44,902
14 51,446 117,976 130,072 151,042 17,976 30,072 51,042 17,794 29,890 50,860
15 56,644 118,646 132,438 157,469 18,646 32,438 57,469 18,555 32,347 57,378
16 62,101 119,041 134,663 164,277 19,041 34,633 64,277 19,041 34,633 64,277
17 67,831 117,247 136,735 171,593 19,247 36,735 71,593 19,247 36,735 71,593
18 73,848 119,269 138,741 179,468 19,269 38,741 79,468 19,269 38,741 79,468
19 80,165 119,092 140,627 187,942 19,092 40,627 87,942 19,092 40,627 87,942
20 86,798 118,673 142,341 197,028 18,673 42,341 97,028 18,673 42,341 97,028
21 93,763 118,021 143,881 206,794 18,021 43,881 106,794 18,021 43,881 106,794
22 101,076 117,070 145,168 217,236 17,070 45,168 117,236 17,070 45,168 117,236
23 108,755 115,833 146,197 228,431 15,833 46,197 128,431 15,833 46,197 128,431
24 116,818 114,284 146,927 240,425 14,284 46,927 140,425 14,284 46,927 140,425
25 125,284 112,348 147,262 253,215 12,348 47,262 153,215 12,348 47,262 153,215
26 134,173 110,031 147,183 266,883 10,031 47,183 116,883 10,031 47,183 166,883
27 143,506 107,238 146,570 281,412 7,238 46,570 181,412 7,238 46,570 181,412
28 153,307 103,976 145,398 296,891 3,976 45,398 196,891 3,976 45,398 196,891
29 163,597 100,136 143,522 313,295 136 43,522 213,295 136 43,522 213,295
30 174,402 *** 140,921 330,726 *** 40,921 230,726 *** 40,921 230,726
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
40
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
GUARANTEED CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ---------------------- ----------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------ ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,050 $100,675 $100,724 $100,723 $ 675 $ 724 $ 773 $ 0 $ 24 $ 73
2 2,153 101,328 101,468 101,614 1,328 1,468 1,614 628 768 914
3 3,310 101,956 102,230 102,528 1,956 2,230 2,528 1,256 1,530 1,828
4 4,526 102,560 103,010 103,520 2,560 3,010 3,520 1,860 2,310 2,820
5 5,802 103,138 103,080 104,597 3,138 3,808 4,597 2,438 3,108 3,897
6 7,142 103,688 104,621 105,765 3,688 4,621 5,765 3,052 3,985 5,129
7 8,549 104,210 105,448 107,032 4,210 5,448 7,032 3,637 4,875 6,459
8 10,027 104,703 106,290 108,406 4,703 6,290 8,406 4,194 5,781 7,897
9 11,578 105,166 107,145 109,897 5,166 7,145 9,897 4,721 6,700 9,452
10 13,207 105,598 108,012 111,514 5,598 8,012 11,514 5,216 7,630 11,132
11 14,917 105,995 108,887 113,267 5,995 8,887 13,267 5,677 8,569 12,949
12 16,713 106,357 109,769 115,167 6,357 9,769 15,167 6,102 9,514 14,912
13 18,599 106,682 110,657 117,226 6,682 10,657 17,226 6,491 10,466 17,035
14 20,579 106,969 111,547 119,459 6,969 11,547 19,459 6,842 11,420 19,332
15 22,657 107,214 112,436 121,879 7,214 12,436 21,879 7,150 12,372 21,815
16 24,840 107,214 113,320 124,499 7,414 13,320 24,499 7,414 13,320 24,499
17 27,132 107,563 114,192 127,334 7,563 14,192 27,334 7,563 14,192 27,334
18 29,539 107,657 115,045 130,398 7,657 15,045 30,398 7,657 15,045 30,398
19 32,066 107,686 115,868 133,706 7,686 15,868 33,706 7,686 15,868 33,706
20 34,719 107,647 116,655 137,274 7,647 16,655 37,274 7,647 16,655 37,274
21 37,505 107,532 117,394 141,120 7,532 17,394 41,120 7,532 17,394 41,120
22 40,430 107,336 118,078 145,266 7,336 18,078 45,266 7,336 18,078 45,266
23 43,502 107,055 118,698 149,735 7,055 18,698 49,735 7,055 18,698 49,735
24 46,727 106,681 119,242 154,550 6,681 19,242 54,550 6,681 19,242 54,550
25 50,113 106,203 119,693 159,733 6,203 19,693 59,733 6,203 19,693 59,733
26 53,669 105,611 120,036 165,307 5,611 20,036 65,307 5,611 20,036 65,307
27 57,403 105,892 120,250 171,297 4,692 20,250 71,297 4,892 20,250 71,297
28 61,323 104,039 120,320 177,734 4,039 20,320 77,734 4,039 20,320 77,734
29 65,439 103,023 120,208 184,629 3,023 20,208 84,629 3,023 20,208 84,629
30 69,761 101,826 119,884 192,006 1,826 19,884 92,006 1,826 19,884 92,006
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
41
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
GUARANTEED CHARGES
<TABLE>
<CAPTION>
NET CASH
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
-------------------------- ------------------------ ------------------------
Assuming Hypothetical Gross Annual Rate of Return of:
End of PREMIUMS
Policy + Interest at
Year 5% Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ------------- -------- -------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,625 $101,758 $101,883 $102,008 $ 1,758 $ 1,883 $ 2,008 $ 758 $ 883 $ 1,008
2 5,381 103,436 103,795 104,169 3,436 3,795 4,169 2,436 2,795 3,169
3 8,275 105,028 105,729 106,491 5,028 5,729 5,491 4,028 4,729 5,491
4 11,314 106,528 107,679 108,981 6,528 7,679 8,981 5,528 6,679 7,981
5 14,505 107,931 109,638 111,650 7,931 9,638 11,650 6,931 8,638 10,650
6 17,855 109,230 111,597 114,506 9,230 11,597 14,506 8,321 10,688 13,597
7 21,373 110,421 113,551 117,562 10,421 13,551 17,562 9,603 12,733 16,744
8 25,066 111,501 115,493 120,831 11,501 15,493 20,831 10,774 14,766 20,104
9 28,945 112,461 117,412 124,325 12,461 17,412 24,325 11,825 16,776 23,689
10 33,017 113,293 119,296 128,053 13,293 19,296 28,053 12,748 18,751 27,508
11 37,293 113,984 121,129 132,026 13,984 21,129 32,026 13,529 20,674 31,571
12 41,782 114,525 122,894 136,253 14,525 22,894 36,253 14,161 22,530 35,889
13 46,497 114,907 124,579 140,748 14,097 24,579 40,748 14,634 24,306 40,475
14 51,446 115,103 126,147 145,507 15,103 26,147 45,507 14,921 25,965 45,325
15 56,644 115,094 127,573 150,531 15,094 27,573 50,531 15,003 27,482 50,440
16 62,101 114,865 128,829 155,829 14,865 28,829 55,829 14,865 28,829 55,829
17 67,831 114,402 129,890 161,406 14,402 29,890 61,406 14,402 29,890 61,406
18 73,848 113,691 130,730 167,274 13,691 30,730 67,274 13,691 30,730 67,274
19 80,165 112,714 131,315 173,437 12,714 31,315 73,437 12,714 31,315 73,437
20 86,798 111,446 131,604 179,892 11,446 31,604 79,892 11,446 31,604 79,892
21 93,763 109,849 131,541 186,624 9,849 31,541 86,624 9,849 31,541 86,624
22 101,076 107,879 131,059 193,606 7,879 31,059 93,606 7,879 31,059 93,606
23 108,755 105,478 130,074 200,796 5,478 30,074 100,796 5,478 30,074 100,796
24 116,818 102,591 128,500 208,148 2,591 28,500 108,148 2,591 28,500 108,148
25 125,284 *** 126,255 215,618 *** 26,255 115,618 *** 26,255 115,618
26 134,173 *** 123,265 223,172 *** 23,265 123,172 *** 23,265 123,172
27 143,506 *** 119,460 230,778 *** 19,460 130,778 *** 19,460 130,778
28 153,307 *** 114,770 238,403 *** 14,770 138,403 *** 14,770 138,403
29 163,597 *** 109,117 246,007 *** 9,117 146,007 *** 9,117 146,007
30 174,402 *** 102,394 253,552 *** 2,394 153,522 *** 2,394 153,522
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate of return may be more or less than those shown and
will depend on a number of factors, including the allocations made by a policy
owner to one or more variable investment divisions and the investment
experience of the portfolios underlying those variable investment divisions.
The death benefit, policy value and net cash surrender value for a policy would
be different from those shown if the actual gross annual rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above or below
those averages for individual policy years. They would also be different if any
policy loans or partial surrenders were made. No representations can be made by
us, the Variable Account or the portfolios that these hypothetical rates of
return can be achieved for any one year or sustained over a period of time.
42
<PAGE>
Appendix C:
Directors and Officers of United Investors
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We are managed by a board of directors. The following table sets forth the
name and principal occupations during the past five years of each of our
directors and senior officers. Unless otherwise noted, the address for each
person is United Investors Life Insurance Company, 2001 Third Avenue South,
Birmingham, Alabama 35233.
<TABLE>
<CAPTION>
Name and Position with Principal Occupation
United Investors During the Past Five Years
- -----------------------------------------------------------------------------------------------
<S> <C>
W. Thomas Aycock Vice President and Chief Actuary of United Investors since November
Director, Vice President 1992.
and Chief Actuary
- -----------------------------------------------------------------------------------------------
Tony G. Brill* Executive Vice President--Administration of United Investors since
Director and Executive September 1998. Senior Vice President of United Investors, March
Vice President-- 1998--September 1998. Senior Vice President of Torchmark
Administration Corporation since January 1997. Managing Partner of KPMG Peat
Marwick LLP, Birmingham, Alabama Office, 1984--January 1997.
- -----------------------------------------------------------------------------------------------
Terry W. Davis Vice President--Administration of Liberty National Life Insurance
Director Company and United Investors since December 1996. Second Vice
President--Administration of Liberty National Life Insurance
Company since March 1988.
- -----------------------------------------------------------------------------------------------
C.B. Hudson* Chairman of United Investors and Torchmark Corporation since March
Chairman of the Board 1998. Chairman of Insurance Operations of Torchmark Corporation,
and Chief Executive January 1993--March 1998. Chairman of Liberty National Life
Officer Insurance Company, United American Insurance Company, and Globe
Life Insurance Company since 1991.
- -----------------------------------------------------------------------------------------------
Larry M. Hutchison* Vice President and General Counsel of Torchmark since February
Director 1997. Vice President and General Counsel of United American
Insurance Company since 1992.
- -----------------------------------------------------------------------------------------------
Michael J. Klyce Vice President of Torchmark Corporation since January 1984.
Vice President and
Treasurer
- -----------------------------------------------------------------------------------------------
John H. Livingston Secretary and Counsel of United Investors since May 1995. Secretary
Director, Secretary and Associate Counsel of United Investors, December 1994--May 1995.
and Counsel Associate Counsel of United Investors, July 1990--December 1994.
- -----------------------------------------------------------------------------------------------
James L. Mayton, Jr. Vice President & Controller of Liberty National Life Insurance
Vice President and Company since January 1985.
Controller
- -----------------------------------------------------------------------------------------------
Mark S. McAndrew Senior Vice President--Marketing of United Investors since March
Senior Vice President-- 1998. Director of Torchmark Corporation since April 1998. President
Marketing of United American Insurance Company and Globe Life and Accident
Insurance Company since 1991.
- -----------------------------------------------------------------------------------------------
Carol A. McCoy Secretary of Torchmark Corporation since February 1994. Associate
Director and Assistant Counsel of Torchmark Corporation since January 1985.
Secretary
- -----------------------------------------------------------------------------------------------
Anthony L. McWhorter President of United Investors since September 1998. President of
Director and President Liberty National Life Insurance Company since December 1994.
Executive Vice President and Chief Actuary of Liberty National,
November 1993--December 1994. Senior Vice President & Chief Actuary
of Liberty National, September 1991--November 1993.
- -----------------------------------------------------------------------------------------------
Ross W. Stagner Vice President of United Investors since January 1992.
Director and Vice
President
</TABLE>
*Principal business address: Torchmark Corporation, 3700 South Stonebridge,
McKinney, Texas 75070.
43
<PAGE>
Appendix D:
Glossary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Administrative Office 5525 LBJ Freeway, Suite 500, P.O. Box 219065, Dallas, Texas 75221-
9065, (800) 451-6923.
- -----------------------------------------------------------------------------------------------
Attained Age The age of the insured on his or her last birthday at the beginning
of each policy year.
- -----------------------------------------------------------------------------------------------
Business Day Each day that the New York Stock Exchange is open for trading.
- -----------------------------------------------------------------------------------------------
Cash Surrender Value Policy value less any applicable surrender charges.
- -----------------------------------------------------------------------------------------------
Death Benefit The amount of insurance payable to the beneficiary on the death of
the insured.
- -----------------------------------------------------------------------------------------------
Death Benefit Option One of two options under the policy that is used to determine the
amount of the death benefit.
- -----------------------------------------------------------------------------------------------
Fixed Account A part of our general account. The general account consists of all
of our assets other than those in any separate account.
- -----------------------------------------------------------------------------------------------
Fixed Account Value The policy value in the fixed account.
- -----------------------------------------------------------------------------------------------
Loan Balance The sum of all outstanding loans including principal and interest.
- -----------------------------------------------------------------------------------------------
Maturity Date Policy anniversary on or next following the insured's 100th
birthday.
- -----------------------------------------------------------------------------------------------
Minimum Monthly Premium For any policy month during the death benefit guarantee period, the
minimum amount of premium required to keep the death benefit
guarantee in effect.
- -----------------------------------------------------------------------------------------------
Monthly Anniversary The same day each month as the policy's effective date. If the
monthly anniversary falls on a date other than a business day, the
next following business day will be deemed the monthly anniversary.
- -----------------------------------------------------------------------------------------------
Net Cash Surrender Value Cash surrender value less any loan balance.
- -----------------------------------------------------------------------------------------------
Net Premium The premium received less the premium expense charge.
- -----------------------------------------------------------------------------------------------
Partial Surrender A request to withdraw a portion of the net cash surrender value. A
partial surrender will be subject to a surrender charge.
- -----------------------------------------------------------------------------------------------
Policy Anniversary The same day and month as the policy's effective date each year
that the policy remains in force. If the policy anniversary falls
on a date other than a business day, the next following business
day will be deemed the policy anniversary.
- -----------------------------------------------------------------------------------------------
Policy's Effective Date The date from which policy anniversaries and policy years are
determined. Your policy's effective date is shown in your policy.
- -----------------------------------------------------------------------------------------------
Policy Loan A request to borrow a portion of the net cash surrender value.
- -----------------------------------------------------------------------------------------------
Policy Month The first policy month starts on the policy's effective date.
Subsequent policy months start on each monthly anniversary.
- -----------------------------------------------------------------------------------------------
Policy Value The sum of the variable account value and the fixed account value.
- -----------------------------------------------------------------------------------------------
Variable Account Value The sum of the values of the variable investment divisions under
your policy.
- -----------------------------------------------------------------------------------------------
We, Us, or United United Investors Life Insurance Company.
Investors
- -----------------------------------------------------------------------------------------------
You and Your The policy owner.
</TABLE>
44
<PAGE>
Appendix E:
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[To be provided by amendment]
45
<PAGE>
PART II
-------
UNDERTAKING TO FILE REPORTS
---------------------------
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
--------------------
In-so-far as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
----------------------------------------------
United Investors Life Insurance Company hereby represents that the fees and
charges deducted under the Policy, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the risks
assumed by United Investors Life Insurance Company.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of ___ pages.
Undertaking to file reports.
Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons: W. Thomas Aycock;
Independent Auditors; and Sutherland Asbill & Brennan LLP
The following exhibits, corresponding to those required by paragraph A
of the instructions as to exhibits in Form N-8B-2:
1. A.
(1) Resolution of the Board of Directors of United Investors
Life Insurance Company establishing United Investors
Universal Life Variable Account./1/
(2) Not Applicable
(3) (a) Underwriting Agreement/3/
(4) Not applicable
(5) (a) Specimen Flexible Premium Variable Life Insurance
Policy/1/
(b) Accelerated Death Benefit Rider/1/
(c) Disability Waiver of Monthly Deduction Rider/1/
(d) Additional Insured Term Insurance Rider/1/
(e) Children's Term Insurance Rider/1/
(f) Accidental Death Benefit Rider/1/
(6) (a) Articles of Incorporation of United Investors Life
Insurance Company./2/
(b) By-laws of United Investors Life Insurance
Company./2/
(7) Not applicable
(8) Form of Participation Agreement/3/
(9) Not applicable
(10) Application form/3/
(11) Description of issuance, transfer and redemption
procedures./3/
-2-
<PAGE>
2. Opinion and consent of counsel as to the legality of the securities
being registered./4/
3. Not applicable
4. Not applicable
5. Not applicable
6. Opinion and consent of W. Thomas Aycock as to actuarial matters
pertaining to the securities being registered./4/
7. (a) Consent of Independent Auditors/4/
(b) Consent of Sutherland Asbill & Brennan LLP/4/
- ------------------------------
/1/ Incorporated herein by reference to the initial Registration Statement on
Form S-6, File No. 333-26505, filed on May 5, 1997.
/2/ Incorporated herein by reference to the Exhibit filed electronically with
Post-Effective Amendment No. 12 to Form S-6 Registration Statement, File
No. 33-11465, filed on April 29, 1998 (previously filed on January 22,
1987, as an Exhibit to the Form S-6 Registration, File No. 33-11465)
/3/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to Form
S-6 Registration Statement, File No. 333-26505, filed on August 8, 1997.
/4/ To be filed by amendment.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, United Investors Universal Life Variable Account, has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in Birmingham, Alabama on the 23rd day of February, 1999.
United Investors Universal Life Variable Account
(Registrant)
(Seal) United Investors Life Insurance Company
(Depositor)
Attest: /s/ John H. Livingston By: /s/ Anthony L. McWhorter
-------------------------- -------------------------------
John H. Livingston Anthony L. McWhorter
Secretary and Counsel President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following Directors and Officers of
United Investors Life Insurance Company in the capacities and on the Dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ C. B. Hudson Chairman of the Board of Directors 2-23-99
- -------------------------------- and Chief Executive Officer ----------
C. B. Hudson
/s/ Anthony L. McWhorter Director and President 2-23-99
- -------------------------------- ----------
Anthony L. McWhorter
/s/ W. Thomas Aycock Director, Vice President and 2-23-99
- -------------------------------- Chief Actuary ----------
W. Thomas Aycock
/s/ Tony G. Brill Director and Executive Vice 2-23-99
- -------------------------------- President - Administration ----------
Tony G. Brill
Senior Vice President - Marketing
- -------------------------------- ----------
Mark S. McAndrew
Director
- -------------------------------- ----------
Larry M. Hutchison
/s/ Michael J. Klyce Vice President and Treasurer 2-23-99
- -------------------------------- ----------
Michael J. Klyce
/s/ James L. Mayton, Jr. Vice President and Controller 2-23-99
- -------------------------------- ----------
James L. Mayton, Jr.
/s/ John H. Livingston Director, Secretary and Counsel 2-23-99
- -------------------------------- ----------
John H. Livingston
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Carol A. McCoy Director and Assistant Secretary 2-23-99
- -------------------------------- ----------
Carol A. McCoy
/s/ Ross W. Stagner Director and Vice President 2-23-99
- -------------------------------- ----------
Ross W. Stagner
/s/ Terry W. Davis Director 2-23-99
- -------------------------------- ----------
Terry W. Davis
