File Nos. 333-32887
811-08325
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. _3__ [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. _4__ [X]
(Check appropriate box or boxes.)
BMA Variable Annuity Account A
-------------------------------
(Exact Name of Registrant)
Business Men's Assurance Company of America
-------------------------------------------
(Name of Depositor)
700 Karnes Boulevard, Kansas City, Missouri 64108
------------------------------------------------------------ ----------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (816) 753-8000
Name and Address of Agent for Service
David A. Gates
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on September 6, 1998 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following:
_____ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Title of Securities Being Registered:
Individual Flexible Purchase Payment Deferred Variable Annuity Contracts
CROSS REFERENCE SHEET
(required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. Location
<S> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Index of Special Terms
Item 3. Synopsis Profile
Item 4. Condensed Financial Information Appendix
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies Other Information -
BMA; The Separate
Account; Investors Mark Series
Fund, Inc., Berger Institutional
Products Trust
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable
Annuity Contracts The Annuity Contract
Item 8. Annuity Period Annuity Payments
(The Income Phase)
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value Purchase
Item 11. Redemptions Access to Your Money
Item 12. Taxes Taxes
Item 13. Legal Proceedings None
Item 14. Table of Contents of the Statement
of Additional Information Table of Contents of the
Statement of Additional
Information
</TABLE>
CROSS REFERENCE SHEET
(required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. LOCATION
<S> <C>
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distribution
Item 21. Calculation of Performance Data Performance Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
SEPTEMBER ___, 1998
PROFILE OF THE FIXED AND VARIABLE ANNUITY CONTRACT
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU
SHOULD CONSIDER AND KNOW BEFORE PURCHASING THE CONTRACT. THE CONTRACT IS MORE
FULLY DESCRIBED IN THE FULL PROSPECTUS WHICH ACCOMPANIES THIS PROFILE. PLEASE
READ THE PROSPECTUS CAREFULLY.
1. THE ANNUITY CONTRACT: The fixed and variable annuity contract offered by
BMA is a contract between you, the owner, and Business Men's Assurance Company
of America (BMA), an insurance company. The Contract provides a means for
investing on a tax-deferred basis in 2 fixed account options of BMA and 10
investment portfolios. The Contract is intended for retirement savings or other
long-term investment purposes and provides for a death benefit and guaranteed
income options.
We offer 2 fixed accounts (Fixed Account I and Fixed Account II). The fixed
accounts offer interest rates that are guaranteed by the insurance company, BMA.
For Fixed Account I, an interest rate is set at the time of each purchase
payment or transfer to Fixed Account I. This initial interest rate is guaranteed
for 12 months. For Fixed Account II, currently there are 3 different guarantee
periods available, each with its own interest rate. If you make a withdrawal or
transfer from Fixed Account II before the end of the guarantee period, it may be
subject to an interest adjustment. While your money is in either fixed account,
the interest your money will earn as well as your principal is guaranteed by
BMA.
This Contract also offers 10 investment portfolios which are listed in
Section 4. The returns on these portfolios are NOT guaranteed. You can lose
money.
You can put money into any or all of the investment portfolios, Fixed
Account I and/or any currently available guarantee period of Fixed Account II.
You can transfer between accounts up to 12 times a year without charge or tax
implications during the accumulation phase and 4 times each year without charge
or tax implications during the income phase. There are certain limitations on
the amounts that can be transferred to or from the Fixed Accounts. After 12
transfers each year during the accumulation period and four transfers each year
during the income phase, the charge is $25 per transfer.
The Contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your Contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments during
the income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE): If you want to receive regular
income from your annuity, you can choose one of four options: (1) monthly
payments for your life (assuming you are the annuitant); (2) monthly payments
for your life, but with payments continuing to the beneficiary for 10 or 20
years (as you select) if you die before the end of the selected period; (3)
monthly payments for your life and for the life of another person (usually your
spouse) selected by you; and (4) monthly payments for your life and for the life
of another person (usually your spouse), but if you and the other person die
before payments have been made for the 10 or 20 year period, payments will
continue for the remainder of the period. Once you begin receiving regular
payments, you cannot change your payment plan.
During the income phase, you can choose from the same investment options
you had during the accumulation phase. You can choose to have payments come from
our general account, the investment portfolios or both. If you choose to have
any part of your payments come from the investment portfolios, the dollar amount
of your payments may go up or down.
3. PURCHASE: You can buy this Contract with $10,000 or more under most
circumstances.
You can add $1,000 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
4. INVESTMENT OPTIONS: You can put your money in any or all of these
investment portfolios which are described in the prospectuses for the funds:
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income Portfolio
Mid Cap Equity Portfolio
Money Market Portfolio
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income Portfolio
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity Portfolio
Large Cap Growth Portfolio
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value Portfolio
MANAGED BY LORD, ABBETT & CO.
Growth & Income Portfolio
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced Portfolio
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International Fund
Depending upon market conditions, you can make or lose money in any of
these portfolios.
5. EXPENSES: The Contract has insurance features and investment features,
and there are costs related to each.
Each year BMA deducts a $35 contract maintenance charge from your Contract.
During the accumulation phase, BMA currently waives this charge if the value of
your Contract is at least $100,000. BMA also deducts a coverage charge which is
equal to 1.40% annually of the average daily value of your Contract allocated to
the investment portfolios if your initial purchase payment (excluding amounts
you select to be allocated to Fixed Account II) is less than $75,000 and 1.25%
annually if your initial purchase payment (excluding amounts you select to be
allocated to Fixed Account II) is $75,000 or more.
If you take your money out, BMA may assess a withdrawal charge against each
purchase payment withdrawn. The withdrawal charge is equal to:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS FROM
DATE OF PURCHASE PAYMENT WITHDRAWAL CHARGE
- - ----------------------------- -----------------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
Under some circumstances BMA may waive the withdrawal charge.
When you begin receiving regular income payments from your annuity, BMA may
assess a state premium tax charge which ranges from 0% - 4%, depending upon the
state. In South Dakota, BMA will deduct the premium tax charge from each
purchase payment.
There are also investment charges which range from .50% to 1.20% of the
average daily value of the investment portfolio depending upon the investment
portfolio.
The following charts are designed to help you to understand the expenses in
the Contract. There are two charts below. Chart 1 assumes your initial purchase
payment is less than $75,000. Chart 2 assumes your initial purchase payment is
$75,000 or more (excluding amounts you select to be allocated to Fixed Account
II). The column "Total Annual Expenses" in Chart 1 shows the total of the $35
contract maintenance charge (which has been converted to a percentage and is
represented as .14% below), the 1.40% coverage charge and the investment
expenses for each investment portfolio. The column "Total Annual Expenses" in
Chart 2 shows the total $35 contract maintenance charge (which has been
converted to a percentage and is represented as .04% below), the 1.25% coverage
charge and the investment expenses for each investment portfolio. The next two
columns in each chart show you two examples of the expenses, in dollars, you
would pay under a Contract. The examples assume that you invested $1,000 in a
Contract which earns 5% annually and that you withdraw your money: (1) at the
end of year 1, and (2) at the end of year 10. For year 1, the Total Annual
Expenses are assessed as well as the withdrawal charge. For year 10, the example
shows the aggregate of all the annual expenses assessed for the 10 years, but
there is no withdrawal charge.
The premium tax is assumed to be 0% in the examples.
<TABLE>
<CAPTION>
CHART 1 (INITIAL PURCHASE PAYMENT IS LESS THAN $75,000)
EXAMPLES:
TOTAL TOTAL ANNUAL
TOTAL ANNUAL ANNUAL TOTAL EXPENSES AT END OF:
INSURANCE PORTFOLIO ANNUAL (1) (2)
CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income Portfolio........................ 1.54% .80% 2.34% $ 94.25 $ 272.59
Mid Cap Equity Portfolio................................... 1.54% .90% 2.44% $ 95.27 $ 282.79
Money Market Portfolio..................................... 1.54% .50% 2.04% $ 91.16 $ 241.30
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income Portfolio.............................. 1.54% 1.00% 2.54% $ 96.30 $ 292.89
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity Portfolio................................. 1.54% 1.05% 2.59% $ 96.81 $ 297.89
Large Cap Growth Portfolio................................. 1.54% .90% 2.44% $ 95.27 $ 282.79
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value Portfolio.................................. 1.54% .90% 2.44% $ 95.27 $ 282.79
MANAGED BY LORD, ABBETT & CO.
Growth & Income Portfolio.................................. 1.54% .90% 2.44% $ 95.27 $ 282.79
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced Portfolio......................................... 1.54% .90% 2.44% $ 95.27 $ 282.79
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International Fund........................ 1.54% 1.20% 2.74% $ 98.35 $ 312.75
</TABLE>
<TABLE>
<CAPTION>
CHART 2 (INITIAL PURCHASE PAYMENT IS $75,000+, EXCLUDING AMOUNTS YOU SELECT TO BE
ALLOCATED TO FIXED ACCOUNT II)
EXAMPLES:
TOTAL TOTAL ANNUAL
TOTAL ANNUAL ANNUAL TOTAL EXPENSES AT END OF:
INSURANCE PORTFOLIO ANNUAL (1) (2)
CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income Portfolio........................ 1.29% .80% 2.09% $91.71 $246.88
Mid Cap Equity Portfolio................................... 1.29% .90% 2.19% $92.73 $257.35
Money Market Portfolio..................................... 1.29% .50% 1.79% $88.61 $214.76
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income Portfolio.............................. 1.29% 1.00% 2.29% $93.76 $267.71
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity Portfolio................................. 1.29% 1.05% 2.34% $94.27 $272.85
Large Cap Growth Portfolio................................. 1.29% .90% 2.19% $92.73 $257.35
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value Portfolio.................................. 1.29% .90% 2.19% $92.73 $257.35
MANAGED BY LORD, ABBETT & CO.
Growth & Income Portfolio.................................. 1.29% .90% 2.19% $92.73 $257.35
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced Portfolio......................................... 1.29% .90% 2.19% $92.73 $257.35
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International Fund........................ 1.29% 1.20% 2.49% $95.81 $288.10
</TABLE>
The expenses in both charts above reflect the expense reimbursements or fee
waivers by the fund managers. For the newly formed Portfolios, the expenses have
been estimated. For more detailed information, see the Fee Table in the
prospectus for the Contract.
6. TAXES: Your earnings are not taxed until you take them out. If you take
money out during the accumulation phase, earnings come out first and are taxed
as income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on the earnings. Payments during the income
phase are considered partly a return of your original investment. That part of
each payment is not taxable as income.
7. ACCESS TO YOUR MONEY: You can take money out at any time during the
accumulation phase. Each purchase payment you add to your Contract has its own 7
year withdrawal charge period. After BMA has had a payment for 7 years, there is
no charge for withdrawals. So long as you have not made another withdrawal
during the same Contract year, a withdrawal of up to 10% of the Contract value
withdrawn is not subject to a withdrawal charge. Withdrawals in excess of that
will be charged a withdrawal charge which ranges from 7% in the first year and
declines to 0% after the seventh year. Of course, you may also have to pay
income tax and a tax penalty on any money you take out.
8. PERFORMANCE: The value of the Contract will vary up or down depending
upon the investment performance of the investment portfolios you choose. BMA may
provide total return figures for each investment portfolio. The total return
figures are based on historical data and are not intended to indicate future
performance. Performance is not shown here because the investment portfolios did
not have a complete calendar year of performance as of December 31, 1997.
9. DEATH BENEFIT: If you die before moving to the income phase, the
beneficiary will receive a death benefit. During the first Contract year, this
death benefit will be the greater of: 1) the payments you have made, less any
money you have taken out and related withdrawal charges; or 2) the value of your
Contract. During the second and subsequent years, the death benefit will be the
greater of: (1) the payments you have made, less any money you have taken out
and related withdrawal charges; or (2) the value of your Contract; or (3) the
highest value of your Contract on the last day of any Contract year prior to
your 81st birthday, plus payments you have made, less withdrawals (and related
withdrawal charges) since that day. If you are 80 or older on the day we issue
your Contract, different rules apply.
10. OTHER INFORMATION:
FREE-LOOK. If you cancel the Contract within 10 days after receiving it (or
whatever period is required in your state), we will send your money back without
assessing a withdrawal charge. You will receive whatever your Contract is worth
on the day we receive your request. This may be more or less than your original
payment. If we are required by law to return your original payment or if you
have purchased the Contract as an Individual Retirement Annuity (IRA), you will
receive back the greater of your purchase payment (less withdrawals), or the
Contract value and we will put your money in the Money Market Portfolio during
the free-look period.
NO PROBATE. In most cases, when you die, the beneficiary will receive the
death benefit without going through probate. However, the avoidance of probate
does not mean that the beneficiary will not have tax liability as a result of
receiving the death benefit.
WHO SHOULD PURCHASE THE CONTRACT? This Contract is designed for people
seeking long-term tax-deferred accumulation of assets, generally for retirement
or other long-term purposes. The tax-deferred feature is most attractive to
people in high federal and state tax brackets. You should not buy this Contract
if you are looking for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
ADDITIONAL FEATURES. The Contract has additional features you might be
interested in. These include:
- You can arrange to have money automatically sent to you (monthly,
quarterly, semi-annually or annually) while your Contract is still in the
accumulation phase. Of course, you'll have to pay taxes on money you receive.
You may also have to pay a penalty tax on money you receive. We call this
feature the Automatic Withdrawal Program.
- If you purchased the Contract under an Individual Retirement Annuity, you
can arrange to have money sent to you periodically to meet certain required
distribution requirements imposed by the Internal Revenue Code. We call this
feature the Minimum Distribution Program.
- You can arrange to have a regular amount of money automatically
transferred from the Money Market Portfolio or Fixed Account I to the investment
portfolios each month, theoretically giving you a lower average cost per unit
over time than a single one time purchase. We call this feature the Dollar Cost
Averaging Option.
- BMA will automatically readjust the money between investment portfolios
periodically to keep the blend you select. We call this feature the Asset
Rebalancing Option.
- Under certain circumstances, BMA will give you your money without a
withdrawal charge if you are in a nursing home, or become totally disabled,
terminally ill, involuntarily unemployed or divorced. Of course, you'll have to
pay taxes on money you receive. You may also have to pay a penalty tax on the
money you receive.
These features may not be available in your state and may not be suitable
for your particular situation.
11. INQUIRIES: If you need more information about buying a Contract, please
contact us at our service center:
BMA
PO Box 412879
Kansas City, Missouri 64141-2879
1-888-262-8131
THE FIXED AND VARIABLE ANNUITY
ISSUED BY
BMA VARIABLE ANNUITY ACCOUNT A
AND
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
This prospectus describes the Fixed and Variable Annuity Contract offered
by Business Men's Assurance Company of America (BMA).
The annuity contract has 12 investment choices--2 FIXED ACCOUNT options and
10 INVESTMENT PORTFOLIOS listed below. The 10 INVESTMENT PORTFOLIOS are part of
Investors Mark Series Fund, Inc. and Berger Institutional Products Trust. You
can put your money in Fixed Account I, any currently available GUARANTEE PERIOD
of Fixed Account II and/or any of these INVESTMENT PORTFOLIOS.
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income
Mid Cap Equity
Money Market
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity
Large Cap Growth
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value
MANAGED BY LORD, ABBETT & CO.
Growth & Income
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the BMA Fixed and Variable
Annuity Contract.
To learn more about the BMA Fixed and Variable Annuity Contract, you can
obtain a copy of the Statement of Additional Information (SAI) dated September
___, 1998. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of the prospectus. The SEC has a web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page 19 of this prospectus. For a free
copy of the SAI, call us at 1-800-423-9398 or write us at: 9735 Landmark Parkway
Drive, St. Louis, MO 63127-1690.
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
September ___, 1998.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEX OF SPECIAL TERMS.................................................... 1
FEE TABLE................................................................. 2
EXAMPLES.................................................................. 3
1. THE ANNUITY CONTRACT.................................................. 5
2. ANNUITY PAYMENTS (THE INCOME PHASE)................................... 5
3. PURCHASE.............................................................. 7
Purchase Payments.................................................... 7
Allocation of Purchase Payments...................................... 7
Accumulation Units................................................... 7
4. INVESTMENT OPTIONS.................................................... 8
Transfers............................................................ 9
Dollar Cost Averaging Option......................................... 10
Asset Rebalancing Option............................................. 10
Asset Allocation Option.............................................. 11
Voting Rights........................................................ 11
Substitution......................................................... 11
5. EXPENSES.............................................................. 11
Coverage Charge...................................................... 11
Contract Maintenance Charge.......................................... 12
Withdrawal Charge.................................................... 12
Waiver of Withdrawal Charge Benefits................................. 12
Reduction or Elimination of the Withdrawal Charge.................... 13
Premium Taxes........................................................ 13
Transfer Fee......................................................... 13
Income Taxes......................................................... 13
Investment Portfolio Expenses........................................ 13
6. TAXES................................................................. 13
Annuity Contracts in General......................................... 14
Qualified and Non-Qualified Contracts................................ 14
Withdrawals--Non-Qualified Contracts................................. 14
Withdrawals--Qualified Contracts..................................... 14
Death Benefits....................................................... 14
Diversification...................................................... 15
7. ACCESS TO YOUR MONEY.................................................. 15
Automatic Withdrawal Program......................................... 15
Minimum Distribution Program......................................... 16
8. PERFORMANCE........................................................... 16
9. DEATH BENEFIT......................................................... 16
Upon Your Death...................................................... 16
Death of Annuitant................................................... 17
10. OTHER INFORMATION..................................................... 17
BMA.................................................................. 17
The Separate Account................................................. 17
Distributor.......................................................... 18
Administration....................................................... 18
Ownership............................................................ 18
Beneficiary.......................................................... 18
Assignment........................................................... 18
Suspension of Payments or Transfers.................................. 18
Financial Statements................................................. 19
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.............. 19
APPENDIX--CONDENSED FINANCIAL INFORMATION................................. 20
</TABLE>
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for
you as possible. By the very nature of the contract, however, certain technical
words or terms are unavoidable. We have identified the following as some of
these words or terms. They are identified in the text in italic and the page
that is indicated here is where we believe you will find the best explanation
for the word or term.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accumulation Phase........................................................ 5
Accumulation Unit......................................................... 7
Annuitant................................................................. 5
Annuity Date.............................................................. 5
Annuity Options........................................................... 5
Annuity Payments.......................................................... 6
Annuity Unit.............................................................. 7
Beneficiary............................................................... 18
Fixed Account............................................................. 5
Guarantee Period.......................................................... 5
Income Phase.............................................................. 5
Investment Portfolios..................................................... 8
Joint Owner............................................................... 18
Non-Qualified............................................................. 14
Owner..................................................................... 18
Purchase Payment.......................................................... 7
Qualified................................................................. 14
Tax Deferral.............................................................. 5
</TABLE>
FEE TABLE
OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of PURCHASE PAYMENT withdrawn) (See Note
2 below)
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS
FROM DATE OF PURCHASE PAYMENT WITHDRAWAL CHARGE
- - ----------------------------- ---------------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
Transfer Fee (see Note 3 below)
No charge for first 12 transfers in a contract year during
the ACCUMULATION PHASE and no charge for four transfers in a
contract year during the INCOME PHASE; thereafter, the fee is
$25 per transfer.
CONTRACT MAINTENANCE CHARGE (see Note 4 below)..................................
$35 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C> <C>
IF INITIAL IF INITIAL
PURCHASE PURCHASE
PAYMENT IS PAYMENT IS
LESS THAN $75,000 OR
$75,000 MORE
---------- ----------
Mortality and Expense Risk Fees and Account Fees
and Expenses (See Note 5 below).................. 1.40% 1.25%
--- ---
Total Separate Account Annual Expenses............ 1.40% 1.25%
</TABLE>
INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an INVESTMENT PORTFOLIO)
<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER EXPENSES PORTFOLIO EXPENSES
(AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENT-- REIMBURSEMENT--
SEE NOTES 6 SEE NOTES 6
MANAGEMENT FEES AND 7 BELOW) AND 7 BELOW)
--------------- ------------------- --------------------
<S> <C> <C> <C>
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income Portfolio... .60% .20% .80%
Mid Cap Equity Portfolio.............. .80% .10% .90%
Money Market Portfolio................ .40% .10% .50%
MANAGED BY STANDISH INTERNATIONAL
MANAGEMENT COMPANY, L.P.
Global Fixed Income Portfolio......... .75% .25% 1.00%
MANAGED BY STEIN ROE & FARNHAM,
INCORPORATED
Small Cap Equity Portfolio............ .95% .10% 1.05%
Large Cap Growth Portfolio............ .80% .10% .90%
</TABLE>
<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER EXPENSES PORTFOLIO EXPENSES
(AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENT-- REIMBURSEMENT--
SEE NOTES 6 SEE NOTES 6
MANAGEMENT FEES AND 7 BELOW) AND 7 BELOW)
--------------- ------------------- --------------------
MANAGED BY DAVID L. BABSON & CO., INC.
<S> <C> <C> <C>
Large Cap Value Portfolio............. .80% .10% .90%
MANAGED BY LORD, ABBETT & CO.
Growth & Income Portfolio............. .80% .10% .90%
MANAGED BY KORNITZER CAPITAL MANAGEMENT,
INC.
Balanced Portfolio.................... .80% .10% .90%
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International Fund... .00% 1.20% 1.20%
</TABLE>
EXAMPLES
There are two sets of examples below. The first set assumes your initial
PURCHASE PAYMENT is less than $75,000. The second set assumes your initial
PURCHASE PAYMENT (excluding amounts you select to be allocated to Fixed Account
II) is $75,000 or more.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets and assuming your initial PURCHASE PAYMENT is less than
$75,000:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized with a life
ANNUITY OPTION or another ANNUITY OPTION with an ANNUITY PAYMENT
period of more than 5 years.
<TABLE>
<CAPTION>
TIME PERIODS
-----------------
1 YEAR 3 YEARS
------- -------
<S> <C> <C>
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income............................................................ a) $94.25 a) $119.23
b) $24.25 b) $74.63
Mid Cap Equity....................................................................... a) $95.27 a) $122.33
b) $25.27 b) $77.71
Money Market......................................................................... a) $91.16 a) $109.89
b) $21.16 b) $65.33
MANAGED BY STANDISH INTERNATIONAL
MANAGEMENT COMPANY, L.P.
Global Fixed Income.................................................................. a) $96.30 a) $125.42
b) $26.30 b) $80.78
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity..................................................................... a) $96.81 a) $126.96
b) $26.81 b) $82.31
Large Cap Growth..................................................................... a) $95.27 a) $122.33
b) $25.27 b) $77.71
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value...................................................................... a) $95.27 a) $122.33
b) $25.27 b) $77.71
MANAGED BY LORD, ABBETT & CO.
Growth & Income...................................................................... a) $95.27 a) $122.33
b) $25.27 b) $77.71
</TABLE>
<TABLE>
<CAPTION>
TIME PERIODS
-----------------
1 YEAR 3 YEARS
------- -------
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
<S> <C> <C>
Balanced............................................................................. a) $95.27 a) $122.33
b) $25.27 b) $77.71
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT--International....................................................... a) $98.35 a) $131.56
b) $28.35 b) $86.90
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets and assuming your initial PURCHASE PAYMENT is $75,000 or
more:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized with a life annuity
option or another annuity option with an annuity payment period of more
than 5 years.
<TABLE>
<CAPTION>
TIME PERIODS
-----------------
1 YEAR 3 YEARS
------- -------
INVESTORS MARK SERIES FUND, INC.
<S> <C> <C>
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income........................................................... a) $91.71 a) $111.54
b) $21.71 b) $ 66.98
Mid Cap Equity...................................................................... a) $92.73 a) $114.66
b) $22.73 b) $ 70.08
Money Market........................................................................ a) $88.61 a) $102.13
b) $18.61 b) $ 57.62
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income................................................................ a) $93.76 a) $117.76
b) $23.76 b) $ 73.17
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity................................................................... a) $94.27 a) $119.31
b) $24.27 b) $ 74.71
Large Cap Growth................................................................... a) $92.73 a) $114.66
b) $22.73 b) $ 70.08
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value.................................................................... a) $92.73 a) $114.66
b) $22.73 b) $ 70.08
MANAGED BY LORD, ABBETT & CO.
Growth & Income.................................................................... a) $92.73 a) $114.66
b) $22.73 b) $ 70.88
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced........................................................................... a) $92.73 a) $114.66
b) $22.73 b) $ 70.08
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International.................................................... a) $95.81 a) $123.95
b) $25.81 b) $ 79.32
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract. The Fee Table reflects
expenses of the Separate Account as well as the INVESTMENT PORTFOLIOS.
2. After BMA has had a PURCHASE PAYMENT for 7 years, there is no charge by BMA
for a withdrawal of that PURCHASE PAYMENT. You may also have to pay income
tax and a tax penalty on any money you take out. After the first contract
year, the first 10% of contract value withdrawn is not subject to a
withdrawal charge, unless you have already made another withdrawal during
that same contract year.
3. BMA will not charge you the transfer fee even if there are more than 12
transfers in a year during the ACCUMULATION PHASE if the transfer is for
the Dollar Cost Averaging Option, the Asset Allocation Option or Asset
Rebalancing Option.
4. During the ACCUMULATION PHASE, BMA will not charge the contract maintenance
charge if the value of your contract is $100,000 or more. If you make a
complete withdrawal and the contract value is less than $100,000, BMA will
charge the contract maintenance charge. If you own more than one BMA
contract, we will determine the total value of all the contracts. If the
total value of all the contracts is more than $100,000, we will not assess
the contract maintenance charge. During the INCOME PHASE, BMA will deduct
the contract maintenance charge from each ANNUITY PAYMENT on a pro rata
basis.
5. The coverage charge is an aggregate charge which consists of mortality and
expense risk fees and account fees and expenses which is referred to as a
coverage charge throughout this prospectus and in your contract. The amount
of the coverage charge for your contract depends upon the amount of your
initial PURCHASE PAYMENT (excluding amounts you select to be allocated to
Fixed Account II).
6. Investors Mark Advisors, LLC has voluntarily agreed to reimburse expenses
of each Portfolio of Investors Mark Series Fund, Inc. through April 30,
1999 so that the annual expenses do not exceed the amounts set forth above
under "Total Annual Portfolio Expenses" for each Portfolio. Absent such
expense reimbursement, the Total Annual Portfolio Expenses are estimated to
be: 2.04% for the Intermediate Fixed Income Portfolio; 1.10% for the Mid
Cap Equity Portfolio; 1.15% for the Money Market Portfolio; 2.04% for the
Global Fixed Income Portfolio; 1.25% for the Small Cap Equity Portfolio;
1.02% for the Large Cap Growth and Large Cap Value Portfolios; and 1.10%
for the Growth & Income and Balanced Portfolios.
7. BBOI Worldwide LLC has voluntarily agreed to waive its advisory fee and
expects to voluntarily reimburse the Berger/BIAM IPT--International Fund
for additional expenses to the extent that normal operating expenses in any
fiscal year, including the management fee but excluding brokerage
commissions, interest, taxes and extraordinary expenses, of the Fund exceed
1.20% of the Fund's average daily net assets. Absent the voluntary waiver
and reimbursement, the management fee for the Fund would be .90% and its
"Total Annual Portfolio Expenses" are estimated to be 3.83%.
8. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
9. The assumed average contract size in Chart 1 is $25,000 and $100,000 in
Chart 2.
10. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
There is an Accumulation Unit Value history contained in the Appendix -
Condensed Financial Information.
1. THE ANNUITY CONTRACT
This prospectus describes the Fixed and Variable Annuity Contract offered
by BMA.
An annuity is a contract between you, the owner, and an insurance company
(in this case BMA), where the insurance company promises to pay you an income,
in the form of ANNUITY PAYMENTS, beginning on a designated date that's at least
one year after we issue your contract. Until you decide to begin receiving
ANNUITY PAYMENTS, your annuity is in the ACCUMULATION PHASE. Once you begin
receiving ANNUITY PAYMENTS, your contract switches to the INCOME PHASE. The
contract benefits from TAX DEFERRAL.
TAX DEFERRAL means that you are not taxed on earnings or appreciation on
the assets in your contract until you take money out of your contract.
The contract is called a variable annuity because you can choose among 10
INVESTMENT PORTFOLIOS and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the ACCUMULATION PHASE depends upon the investment performance
of the INVESTMENT PORTFOLIO(S) you select. The amount of the ANNUITY PAYMENTS
you receive during the INCOME PHASE from the variable annuity portion of the
contract also depends upon the investment performance of the INVESTMENT
PORTFOLIOS you select for the INCOME PHASE.
The contract also contains two FIXED ACCOUNT options (Fixed Account I and
Fixed Account II). The FIXED ACCOUNTS offer interest rates that are guaranteed
by BMA. For Fixed Account I, an interest rate is set at the time of each
PURCHASE PAYMENT or transfer to the account. This initial interest rate is
guaranteed for 12 months. Fixed Account II offers different GUARANTEE PERIODS. A
GUARANTEE PERIOD is the time period for which an interest rate is credited in
Fixed Account II. Currently, the following GUARANTEE PERIODS are available:
three years, five years, and seven years. Each PURCHASE PAYMENT or transfer to a
GUARANTEE PERIOD has its own interest rate. BMA guarantees that the interest
credited to the FIXED ACCOUNT options will not be less than 3% per year. If you
make a withdrawal, transfer or if your contract switches to the INCOME PHASE
before the end of the GUARANTEE PERIOD you have selected, an interest adjustment
will be made to the value of your contract. If you select either FIXED ACCOUNT
option, your money will be placed with the other general assets of BMA. If you
select either FIXED ACCOUNT, the amount of money you are able to accumulate in
your contract during the ACCUMULATION PHASE depends upon the total interest
credited to your contract. The amount of the ANNUITY PAYMENTS you receive during
the INCOME PHASE from the general account will remain level for the entire
INCOME PHASE.
As OWNER of the contract, you exercise all rights under the contract. You
can change the OWNER at any time by notifying BMA in writing. You and your
spouse can be named JOINT OWNERS. We have described more information on this in
Section 10-Other Information.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Under the contract you can receive regular income payments. You can choose
the date on which those payments begin. We call that date the ANNUITY DATE. Your
first ANNUITY PAYMENT will be made one month (or one modal period if you do not
choose monthly payments) after the ANNUITY DATE. Currently, the amount of each
payment is determined ten business days prior to the payment date. You can also
choose among income plans. We call those ANNUITY OPTIONS.
We ask you to choose your ANNUITY DATE when you purchase the contract. You
can change it at any time before the ANNUITY DATE with 30 days notice to us.
Your ANNUITY DATE cannot be any earlier than one year after we issue the
contract. ANNUITY PAYMENTS must begin by the later of the first day of the first
calendar month after the ANNUITANT'S 95th birthday or 10 years after we issue
your contract (or the maximum date allowed under state law). The ANNUITANT is
the person whose life we look to when we make ANNUITY PAYMENTS.
You can select and/or change an ANNUITY OPTION at any time prior to the
ANNUITY DATE (with 30 days notice to us). If you do not choose an ANNUITY
OPTION, we will assume that you selected Option 2 which will provide a life
annuity with 120 monthly payments guaranteed.
At the ANNUITY DATE, you can choose whether payments will come from a FIXED
ACCOUNT, referred to as a fixed annuity, or from the INVESTMENT PORTFOLIO(s)
available, referred to as a variable annuity, or a combination of both. If you
choose to have any portion of your ANNUITY PAYMENTS come from the FIXED
ACCOUNTS, Fixed Accounts I and II will be terminated, and the fixed annuity
payments will be made from BMA's general account. The general account of BMA
contains all of our assets except the assets of the Separate Account and other
separate accounts we may have. The dollar amount of each fixed annuity payment
will be determined in accordance with the annuity tables in the contract. If, on
the ANNUITY DATE, we are using annuity payment tables for similar fixed annuity
contracts which would provide a larger ANNUITY PAYMENT, we will use those
tables. Once determined, the amount of the fixed annuity payment will not
change, unless you transfer a portion of your variable annuity payment into the
fixed annuity. Up to four times each contract year you may increase the amount
of your fixed annuity payment by a transfer of all or portion of your variable
annuity payment to the fixed annuity payment. After the ANNUITY DATE, you may
not transfer any portion of the fixed annuity into the variable annuity payment.
If you choose to have any portion of your ANNUITY PAYMENTS come from the
INVESTMENT PORTFOLIO(s), the dollar amount of the initial variable annuity
payment will depend upon the value of your contract in the INVESTMENT
PORTFOLIO(s) and the annuity tables in the contract. The dollar amount of this
variable annuity payment is not guaranteed to remain level. Each variable
annuity payment will vary depending on the investment performance of the
INVESTMENT PORTFOLIO(s) you have selected. A 3.5% annual investment rate is used
in the annuity tables in the contract. If the actual performance of the
INVESTMENT PORTFOLIO(s) you have selected equals 3.5%, then the variable annuity
payments will remain level. If the actual performance of the INVESTMENT
PORTFOLIO(s) you have selected exceeds the 3.5% assumption, the variable annuity
payments will increase, and conversely, if the performance is less than the
3.5%, the payments will decrease.
ANNUITY PAYMENTS are made monthly unless you have less than $10,000 to
apply toward a payment. In that case, BMA may provide your ANNUITY PAYMENT in a
single lump sum. Likewise, if your ANNUITY PAYMENTS would be or become less than
$250 a month, BMA has the right to change the frequency of payments so that your
ANNUITY PAYMENTS are at least $250.
You can choose one of the following ANNUITY OPTIONS. Any other ANNUITY
OPTION acceptable to us may also be selected. After ANNUITY PAYMENTS begin, you
cannot change the ANNUITY OPTION.
OPTION 1. LIFE ANNUITY. Under this option, we will make an ANNUITY PAYMENT
each month so long as the ANNUITANT is alive. After the ANNUITANT dies, we stop
making ANNUITY PAYMENTS.
OPTION 2. LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED. Under this option,
we will make an ANNUITY PAYMENT each month so long as the ANNUITANT is alive.
However, if, when the ANNUITANT dies, we have made ANNUITY PAYMENTS for less
than the selected guaranteed period, we will then continue to make ANNUITY
PAYMENTS for the rest of the guaranteed period to the BENEFICIARY. If the
BENEFICIARY does not want to receive ANNUITY PAYMENTS, he or she can ask us for
a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
ANNUITY PAYMENTS each month so long as the ANNUITANT and a second person are
both alive. When either of these people dies, we will continue to make ANNUITY
PAYMENTS, so long as the survivor continues to live. The amount of the ANNUITY
PAYMENTS we will make to the survivor can be equal to 100%, 75% or 50% of the
amount that we would have paid if both were alive.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 10 OR 20 YEARS GUARANTEED.
Under this option, we will make ANNUITY PAYMENTS each month so long as the
ANNUITANT and a second person (joint ANNUITANT) are both alive. However, if when
the last ANNUITANT dies, we have made ANNUITY PAYMENTS for less than the
selected guaranteed period, we will then continue to make ANNUITY PAYMENTS for
the rest of the guaranteed period to the BENEFICIARY. If the BENEFICIARY does
not want to receive ANNUITY PAYMENTS, he or she can ask us for a single lump
sum.
3. PURCHASE
PURCHASE PAYMENTS
A PURCHASE PAYMENT is the money you give us to buy the contract. The
minimum we will accept for a NON-QUALIFIED contract is $10,000. If you buy the
contract as part of an Individual Retirement Annuity (IRA), the minimum PURCHASE
PAYMENT we will accept is $2,000. The maximum we accept is $1 million without
our prior approval. You can make additional PURCHASE PAYMENTS of $1,000 or more.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your PURCHASE PAYMENT to
Fixed Account I, any currently available GUARANTEE PERIOD of Fixed Account II
and/or one or more of the INVESTMENT PORTFOLIOS you have selected. If you make
additional PURCHASE PAYMENTS, we will allocate them in the same way as your
first PURCHASE PAYMENT unless you tell us otherwise. Any allocation to Fixed
Account I or to any GUARANTEE PERIOD of Fixed Account II must be at least
$5,000. Any allocation to an INVESTMENT PORTFOLIO must be at least $1,000.
Allocation percentages need to be in whole numbers. Each allocation must be at
least 1%. BMA reserves the right to decline any PURCHASE PAYMENT.
At its discretion, BMA may refuse PURCHASE PAYMENTS into Fixed Account I or
Fixed Account II if the total value of Fixed Accounts I and II is greater than
or equal to 30% of the value of your contract at the time of the PURCHASE
PAYMENT.
If you change your mind about owning the contract, you can cancel it within
10 days after receiving it, or the period required in your state (free-look
period). When you cancel the contract within this time period, BMA will not
assess a withdrawal charge. You will receive back whatever your contract is
worth on the day we receive your request. In certain states, or if you have
purchased the contract as an IRA, we will refund the greater of your PURCHASE
PAYMENT (less withdrawals) or the value of your contract if you decide to cancel
your contract within 10 days after receiving it (or whatever period is required
in your state). If that is the case, we will put your PURCHASE PAYMENT in the
Money Market Portfolio for 15 days beginning when we allocate your first
PURCHASE PAYMENT. (In some states, the period may be longer.) At the end of that
period, we will re-allocate those funds as you selected.
Once we receive your PURCHASE PAYMENT and the necessary information, we
will issue your contract and allocate your first PURCHASE PAYMENT within 2
business days. If you do not give us all of the information we need, we will
contact you to get it. If for some reason we are unable to complete this process
within 5 business days, we will either send back your money or get your
permission to keep it until we get all of the necessary information. If you add
more money to your contract by making additional PURCHASE PAYMENTS, we will
credit these amounts to your contract within one business day. Our business day
closes when the New York Stock Exchange closes, usually 4:00 P.M. Eastern time.
ACCUMULATION UNITS
The value of the variable annuity portion of your contract will go up or
down depending upon the investment performance of the INVESTMENT PORTFOLIO(s)
you choose. In order to keep track of the value of your contract, we use a unit
of measure we call an ACCUMULATION UNIT. (An ACCUMULATION UNIT works like a
share of a mutual fund.) During the INCOME PHASE of the contract we call the
unit an ANNUITY UNIT.
Every business day we determine the value of an ACCUMULATION UNIT for each
of the INVESTMENT PORTFOLIOS by multiplying the ACCUMULATION UNIT value for the
previous business day by a factor for the current business day. The factor is
determined by:
1. dividing the value of an INVESTMENT PORTFOLIO share at the end of the
current business day by the value of an INVESTMENT PORTFOLIO share for
the previous business day; and
2. multiplying it by one minus the daily amount of the coverage charge
and any charges for taxes.
The value of an ACCUMULATION UNIT may go up or down from day to day.
When you make a PURCHASE PAYMENT, we credit your contract with ACCUMULATION
UNITS. The number of ACCUMULATION UNITS credited is determined by dividing the
amount of the PURCHASE PAYMENT allocated to an INVESTMENT PORTFOLIO by the value
of the ACCUMULATION UNIT for that INVESTMENT PORTFOLIO.
We calculate the value of an ACCUMULATION UNIT for each INVESTMENT
PORTFOLIO after the New York Stock Exchange closes each day and then credit your
contract.
EXAMPLE:
On Monday we receive an additional PURCHASE PAYMENT of $4,000 from you. You
have told us you want this to go to the Balanced Portfolio. When the New York
Stock Exchange closes on that Monday, we determine that the value of an
ACCUMULATION UNIT for the Balanced Portfolio is $12.70. We then divide $4,000 by
$12.70 and credit your contract on Monday night with 314.960630 ACCUMULATION
UNITS for the Balanced Portfolio.
4. INVESTMENT OPTIONS
The contract offers 10 INVESTMENT PORTFOLIOS which are listed below.
Additional INVESTMENT PORTFOLIOS may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE
INVESTING. COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
INVESTORS MARK SERIES FUND, INC.
Investors Mark Series Fund, Inc. is managed by Investors Mark Advisors, LLC
(Adviser), which is an affiliate of BMA. Investors Mark Series Fund, Inc. is a
mutual fund with multiple portfolios. Each INVESTMENT PORTFOLIO has a different
investment objective. The Adviser has engaged sub-advisers to provide investment
advice for the individual INVESTMENT PORTFOLIOS. The following INVESTMENT
PORTFOLIOS are available under the contract.
STANDISH, AYER & WOOD, INC. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Intermediate Fixed Income Portfolio
Mid Cap Equity Portfolio
Money Market Portfolio
STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P. IS THE SUB-ADVISER TO THE
FOLLOWING PORTFOLIO:
Global Fixed Income Portfolio
STEIN ROE & FARNHAM, INCORPORATED IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Small Cap Equity Portfolio
Large Cap Growth Portfolio
DAVID L. BABSON & CO., INC. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIO:
Large Cap Value Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIO:
Growth & Income Portfolio
KORNITZER CAPITAL MANAGEMENT, INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIO:
Balanced Portfolio
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple
portfolios, one of which, the Berger/ BIAM IPT--International Fund, is managed
by BBOI Worldwide LLC. BBOI Worldwide LLC has retained Bank of Ireland Asset
Management (U.S.) Limited ("BIAM") as subadviser.
The following INVESTMENT PORTFOLIO is available under the contract:
Berger/BIAM IPT--International Fund
Shares of the portfolios may be offered in connection with certain variable
annuity contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with BMA. Certain portfolios may
also be sold directly to qualified plans. The funds do not believe that offering
their shares in this manner will be disadvantageous to you.
TRANSFERS
You can transfer money among the FIXED ACCOUNTS and the 10 INVESTMENT
PORTFOLIOS.
You can make transfers by telephone. If you own the contract with a JOINT
OWNER, unless BMA is instructed otherwise, BMA will accept instructions from
either you or the other OWNER. BMA will use reasonable procedures to confirm
that instructions given us by telephone are genuine. If BMA fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. BMA tape records all telephone instructions.
TRANSFERS DURING THE ACCUMULATION PHASE
You can make 12 transfers every year during the ACCUMULATION PHASE without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the FIXED ACCOUNTS and to or from
any INVESTMENT PORTFOLIO. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The fee is $25 per transfer. The transfer fee is
deducted from the amount which is transferred. The following apply to any
transfer during the ACCUMULATION PHASE:
1. The minimum amount which you can transfer from the INVESTMENT PORTFOLIO,
Fixed Account I or any GUARANTEE PERIOD of Fixed Account II is $250 or your
entire interest in the INVESTMENT PORTFOLIO, Fixed Account I or GUARANTEE PERIOD
of Fixed Account II, if less.
2. We reserve the right to restrict the maximum amount which you can
transfer from any FIXED ACCOUNT option (unless the transfer is from a GUARANTEE
PERIOD of Fixed Account II just expiring) to 25% of the amount in Fixed Account
I or any GUARANTEE PERIOD of Fixed Account II. Currently, BMA is waiving this
restriction. This requirement is waived if the transfer is part of the Dollar
Cost Averaging, Asset Allocation or Asset Rebalancing options. This requirement
is also waived if the transfer is to switch your contract to the INCOME PHASE.
3. At its discretion, BMA may refuse transfers to Fixed Account I or Fixed
Account II if the total value of Fixed Accounts I and II is greater than or
equal to 30% of the value of your contract at the time of the transfer.
4. The minimum amount which must remain in any INVESTMENT PORTFOLIO after a
transfer is $1,000. The minimum amount which must remain in Fixed Account I or
any GUARANTEE PERIOD of Fixed Account II after a transfer is $5,000.
5. You may not make a transfer until after the end of the free-look period.
6. We reserve the right to restrict the number of transfers per year and to
restrict transfers made on consecutive business days.
Your right to make transfers may be modified if we determine, in our sole
opinion, that the exercise of the transfer right by one or more OWNERS is, or
would be, harmful to other OWNERS.
TRANSFERS DURING THE INCOME PHASE
Each year, during the INCOME PHASE, you can make 4 transfers between the
INVESTMENT PORTFOLIO(s). We measure a year from the anniversary of the day we
issued your contract. You can also make 4 transfers each contract year from the
INVESTMENT PORTFOLIOS to the general account. You may not make a transfer from
the general account to the INVESTMENT PORTFOLIOS. These four transfers each
contract year during the INCOME PHASE are free. If you make more than 4
transfers in a year during the INCOME PHASE, a transfer fee of $25 per transfer
(after the 4 free) will be charged.
DOLLAR COST AVERAGING OPTION
The Dollar Cost Averaging Option allows you to systematically transfer a
set amount each month from the Money Market Portfolio or Fixed Account I to any
of the other INVESTMENT PORTFOLIO(s). By allocating amounts on a regular
schedule as opposed to allocating the total amount at one particular time, you
may be less susceptible to the impact of market fluctuations.
The minimum amount which can be transferred each month is $250. The value
of your contract must be at least $10,000 in order to participate in Dollar Cost
Averaging.
All Dollar Cost Averaging transfers will be made on the 15th day of the
month unless that day is not a business day. If it is not, then the transfer
will be made the next business day. You must participate in Dollar Cost
Averaging for at least 6 months.
If you participate in Dollar Cost Averaging, the transfers made under this
option are not taken into account in determining any transfer fee.
No Automatic Withdrawals and Minimum Distributions will be allowed if you
are participating in Dollar Cost Averaging.
ASSET REBALANCING OPTION
Once your money has been allocated among the INVESTMENT PORTFOLIOS, the
performance of each portfolio may cause your allocation to shift. If the value
of your contract is at least $10,000, you can direct us to automatically
rebalance your contract each quarter to return to your original percentage
allocations by selecting our Asset Rebalancing Option. The program will ignore
any new PURCHASE PAYMENTS or transfers allocated to portfolios other than the
original (or most current) rebalancing portfolio allocations. You may change
your allocations to incorporate new PURCHASE PAYMENTS or transfers by contacting
the BMA Service Center. The minimum period to participate in this program is 6
months. The transfer date will be the 15th of the month unless that day is not a
business day. If it is not, then the transfer will be made the next business
day. The FIXED ACCOUNT options are not part of asset rebalancing. If you
participate in the Asset Rebalancing Option, the transfers made under the
program are not taken into account in determining any transfer fee.
EXAMPLE:
Assume that you want your initial PURCHASE PAYMENT split between 2
INVESTMENT PORTFOLIOS. You want 40% to be in the Intermediate Fixed Income
Portfolio and 60% to be in the Mid Cap Equity Portfolio. Over the next 2 1/2
months the bond market does very well while the stock market performs poorly. At
the end of the first quarter, the Intermediate Fixed Income Portfolio now
represents 50% of your holdings because of its increase in value. If you had
chosen to have your holdings rebalanced quarterly, on the first day of the next
quarter, BMA would sell some of your units in the Intermediate Fixed Income
Portfolio to bring its value back to 40% and use the money to buy more units in
the Mid Cap Equity Portfolio to increase those holdings to 60%.
ASSET ALLOCATION OPTION
BMA recognizes the value to certain OWNERS of having available, on a
continuous basis, advice for the allocation of your money among the investment
options available under the contracts.
Even though BMA may allow the use of approved Asset Allocation Programs,
the contract was not designed for professional market timing organizations.
Repeated patterns of frequent transfers are disruptive to the operations of the
INVESTMENT PORTFOLIOS, and should BMA become aware of such disruptive practices,
we may modify the transfer provisions of the contract.
If you participate in an approved Asset Allocation Program, the transfers
made under the program will not be taken into account in determining any
transfer fee.
VOTING RIGHTS
BMA is the legal owner of the INVESTMENT PORTFOLIO shares. However, BMA
believes that when an INVESTMENT PORTFOLIO solicits proxies in conjunction with
a vote of shareholders, it is required to obtain from you and other OWNERS
instructions as to how to vote those shares. When we receive those instructions,
we will vote all of the shares we own in proportion to those instructions.
This will also include any shares that BMA owns on its own behalf. Should
BMA determine that it is no longer required to comply with the above, we will
vote the shares in our own right.
SUBSTITUTION
BMA may be required to substitute one of the INVESTMENT PORTFOLIOS you have
selected with another portfolio. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give you notice of our intent
to do this.
5. EXPENSES
There are charges and other expenses associated with the contracts that
reduce the return on your investment in the contract. These charges and expenses
are:
COVERAGE CHARGE
Each day, BMA makes a deduction for its coverage charge. BMA does this as
part of its calculation of the value of the ACCUMULATION UNITS and the ANNUITY
UNITS. The amount of the charge depends upon the amount of your initial PURCHASE
PAYMENT (excluding amounts you select to be allocated to Fixed Account II). If
you make additional PURCHASE PAYMENTS to your contract, these amounts are not
used to determine the amount of the coverage charge for your contract. If your
initial PURCHASE PAYMENT is less than $75,000, the coverage charge is equal, on
an annual basis, to 1.40% of the average daily value of the contract invested in
an INVESTMENT PORTFOLIO, after expenses have been deducted. If your initial
PURCHASE PAYMENT is $75,000 or more (excluding amounts you select to be
allocated to Fixed Account II), the coverage charge is equal, on an annual
basis, to 1.25% of the average daily value of the contract invested in an
INVESTMENT PORTFOLIO, after expenses have been deducted. We reserve the right to
increase this charge but it will never be more than 1.75% of the average daily
value of the contract invested in an INVESTMENT PORTFOLIO, after expenses have
been deducted.
This charge is for all the insurance benefits E.G., guarantee of annuity
rates, the death benefit, and for assuming the risk that the current charges
will be insufficient in the future to cover the cost of administering the
contract. This charge is also for administrative expenses, including preparation
of the contract, confirmations, annual reports and statements, maintenance of
contract records, personnel costs, legal and accounting fees, filing fees and
computer and system costs and certain distribution expenses.
CONTRACT MAINTENANCE CHARGE
During the ACCUMULATION PHASE, every year on the anniversary of the date
when your contract was issued, BMA deducts $35 from your contract as a contract
maintenance charge. If you make a complete withdrawal from your contract, the
charge will also be deducted. A pro rata portion of the charge will be deducted
if the ANNUITY DATE is other than an anniversary. We reserve the right to
increase this charge but it will never be more than $60 each year. This charge
is for administrative expenses.
BMA will not deduct this charge, if when the deduction is to be made, the
value of your contract is $100,000 or more. If you own more than one BMA
contract, we will determine the total value of all your contracts. If the OWNER
is a non-natural person (E.G., a corporation), we will look to the ANNUITANT to
determine this information. BMA may some time in the future discontinue this
practice and deduct the charge.
After the ANNUITY DATE, the charge will be collected monthly out of each
ANNUITY PAYMENT regardless of the size of the contract.
WITHDRAWAL CHARGE
During the ACCUMULATION PHASE, you can make withdrawals from your contract.
BMA keeps track of each PURCHASE PAYMENT. The first 10% of the contract value
withdrawn (free withdrawal amount) is not subject to the withdrawal charge
(unless you have already made another withdrawal during that same contract
year), if on the day you make your withdrawal, the value of your contract is
$10,000 or more. A withdrawal charge will be assessed against each PURCHASE
PAYMENT withdrawn in excess of the free withdrawal amount and will result in a
reduction in remaining contract value. The withdrawal charge and the free
withdrawal amount are calculated at the time of each withdrawal. The withdrawal
charge compensates us for expenses associated with selling the contract.
The withdrawal charge is:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS
FROM DATE OF PURCHASE PAYMENT WITHDRAWAL CHARGE
- - ----------------------------- ---------------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
After BMA has had a PURCHASE PAYMENT for 7 years, there is no charge when
you withdraw that PURCHASE PAYMENT. When the withdrawal is for only part of the
value of your contract, the withdrawal charge is deducted from the remaining
value in your contract.
NOTE: For tax purposes, withdrawals are considered to have come from the
last money into the contract. Thus, for tax purposes, earnings are considered to
come out first.
BMA does not assess the withdrawal charge on any amounts paid out as death
benefits or as ANNUITY PAYMENTS if a life ANNUITY OPTION or another option with
an ANNUITY PAYMENT period of more than 5 years is selected.
WAIVER OF WITHDRAWAL CHARGE BENEFITS
Under certain circumstances, after the first year, BMA will allow you to
take your money out of the contract without deducting the withdrawal charge: 1)
if you become confined to a long term care facility, nursing facility or
hospital for at least 90 consecutive days; 2) if you become totally disabled; 3)
if you become terminally ill (which means that you are not expected to live more
than 12 months); (4) if you are involuntarily unemployed for at least 90
consecutive days; or (5) if you get divorced. These benefits may not be
available in your state.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
BMA will reduce or eliminate the amount of the withdrawal charge when the
contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the contract or a prospective purchaser already had a relationship with BMA. BMA
will not deduct a withdrawal charge under a contract issued to an officer,
director or employee of BMA or any of its affiliates.
PREMIUM TAXES
Some states and other governmental entities (E.G., municipalities) charge
premium taxes or similar taxes. BMA is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when ANNUITY
PAYMENTS begin. It is BMA's current practice, for all states except South
Dakota, to not charge anyone for these taxes until ANNUITY PAYMENTS begin. In
South Dakota, BMA will assess a charge equal to the amount of the premium tax at
the time each PURCHASE PAYMENT is made.
BMA may some time in the future discontinue this practice and assess the
charge when the tax is due. Premium taxes generally range from 0% to 4%,
depending on the state.
TRANSFER FEE
You can make 12 free transfers every year during the ACCUMULATION PHASE and
4 free transfers every year during the INCOME PHASE. We measure a year from the
day we issue your contract. If you make more than 12 transfers a year during the
ACCUMULATION PHASE or more than 4 transfers a year during the INCOME PHASE, we
will deduct a transfer fee of $25. The transfer fee is for expenses in
connection with transfers.
If the transfer is part of the Dollar Cost Averaging Option, the Asset
Rebalancing Option or an approved Asset Allocation Program, it will not count in
determining the transfer fee.
INCOME TAXES
BMA will deduct from the contract for any income taxes which it incurs
because of the contract. At the present time, we are not making any such
deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the
various INVESTMENT PORTFOLIOS, which are described in the attached fund
prospectuses.
6. TAXES
NOTE: BMA HAS PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE TO ANY INDIVIDUAL.
YOU SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN CIRCUMSTANCES. BMA HAS
INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION AN ADDITIONAL DISCUSSION
REGARDING TAXES.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs
usually retirement. Congress recognized how important saving for retirement was
and provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the
earnings on the money held in your annuity contract until you take the money
out. This is referred to as TAX DEFERRAL. There are different rules as to how
you will be taxed depending on how you take the money out and the type of
contract (QUALIFIED or NON-QUALIFIED, see the following sections).
You, as the OWNER, will not be taxed on increases in the value of your
contract until a distribution occurs--either as a withdrawal or as ANNUITY
PAYMENTS. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. For ANNUITY PAYMENTS, different rules apply. A
portion of each ANNUITY PAYMENT is treated as a partial return of your PURCHASE
PAYMENTS and will not be taxed. The remaining portion of the ANNUITY PAYMENT
will be treated as ordinary income. How the ANNUITY PAYMENT is divided between
taxable and non-taxable portions depends upon the period over which the ANNUITY
PAYMENTS are expected to be made. ANNUITY PAYMENTS received after you have
received all of your PURCHASE PAYMENTS are fully includible in income.
When a NON-QUALIFIED contract is owned by a non-natural person (E.G.,
corporation or certain other entities other than tax-qualified trusts), the
contract will generally not be treated as an annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not an Individual
Retirement Annuity (IRA), your contract is referred to as a NON-QUALIFIED
contract.
If you purchase the contract under an IRA, your contract is referred to as
a QUALIFIED contract.
WITHDRAWALS--NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a
withdrawal as first coming from earnings and then from your PURCHASE PAYMENTS.
Such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts: (1) paid
on or after the taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if
the taxpayer becomes totally disabled (as that term is defined in the Code); (4)
paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity, (5) paid under an immediate annuity; or
(6) which come from PURCHASE PAYMENTS made prior to August 14, 1982.
WITHDRAWALS--QUALIFIED CONTRACTS
The above information describing the taxation of NON-QUALIFIED contracts
does not apply to QUALIFIED contracts. There are special rules that govern with
respect to QUALIFIED contracts. We have provided a more complete discussion in
the Statement of Additional Information.
DEATH BENEFITS
Any death benefits paid under the contract are taxable to the BENEFICIARY.
The rules governing the taxation of payments from an annuity contract, as
discussed above, generally apply to the payment of death benefits and depend on
whether the death benefits are paid as a lump sum or as ANNUITY PAYMENTS.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity
must satisfy certain diversification requirements in order to be treated as an
annuity contract. BMA believes that the INVESTMENT PORTFOLIOS are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to
date provide guidance as to the circumstances under which you, because of the
degree of control you exercise over the underlying investments, and not BMA,
would be considered the owner of the shares of the INVESTMENT PORTFOLIOS. If
this occurs, it will result in the loss of the favorable tax treatment for the
contract. It is unknown to what extent under federal tax law OWNERS are
permitted to select INVESTMENT PORTFOLIOS, to make transfers among the
INVESTMENT PORTFOLIOS or the number and type of INVESTMENT PORTFOLIOS OWNERS may
select from. If any guidance is provided which is considered a new position,
then the guidance would generally be applied prospectively. However, if such
guidance is considered not to be a new position, it may be applied
retroactively. This would mean that you, as the OWNER of the contract, could be
treated as the OWNER of the INVESTMENT PORTFOLIOS.
Due to the uncertainty in this area, BMA reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making a
withdrawal (either a partial or a complete withdrawal); (2) by electing to
receive ANNUITY PAYMENTS; or (3) when a death benefit is paid to your
BENEFICIARY. Withdrawals can only be made during the ACCUMULATION PHASE.
When you make a complete withdrawal you will receive the value of the
contract on the day you made the withdrawal less any applicable withdrawal
charge, less any premium tax, less any contract maintenance charge and less an
interest adjustment, if applicable. (See Section 5. Expenses for a discussion of
the charges.)
Unless you instruct BMA otherwise, any partial withdrawal will be made pro
rata from all the INVESTMENT PORTFOLIO(S) and the FIXED ACCOUNT option(s) you
selected. Under most circumstances the amount of any partial withdrawal must be
for at least $1,000 (withdrawals made pursuant to the automatic withdrawal
program and the minimum distribution option are not subject to this minimum).
BMA requires that after a partial withdrawal is made you keep at least $1,000 in
any INVESTMENT PORTFOLIO and $5,000 in Fixed Account I or any GUARANTEE PERIOD
of Fixed Account II. BMA also requires that after a partial withdrawal is made
you keep at least $10,000 in your contract.
We will pay the amount of any withdrawal from the INVESTMENT PORTFOLIOS
within 7 days of a receipt in good order of your request unless the suspension
or deferral of payments or transfers provision is in effect (see Section
10--Other Information--Suspension of Payments or Transfers). Use of a certified
check to purchase the contract may expedite the payment of your withdrawal
request if the withdrawal request is soon after your payment by certified check.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
AUTOMATIC WITHDRAWAL PROGRAM
This program provides periodic payments to you. Each payment must be for at
least $250. You may select to have payments made monthly, quarterly,
semi-annually or annually. The first 10% of the contract value withdrawn is not
subject to the withdrawal charge. A withdrawal charge will be applied to any
withdrawals in excess of the first 10% withdrawn and will result in a reduction
in remaining contract value. If you use this program, you may not make any other
withdrawals (including a partial withdrawal). For a discussion of the withdrawal
charge and the 10% free withdrawal, see Section 5. Expenses.
All Automatic Withdrawals will be made on the 15th day of the month unless
that day is not a business day. If it is not, then the payment will be the next
business day.
No Minimum Distribution payments and/or Dollar Cost Averaging transfers
will be allowed if you are participating in the Automatic Withdrawal Program.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO AUTOMATIC WITHDRAWALS.
MINIMUM DISTRIBUTION PROGRAM
If you own an IRA contract, you may select the Minimum Distribution
Program. Under this program, BMA will make payments to you from your contract
that are designed to meet the applicable Minimum Distribution requirements
imposed by the Internal Revenue Code for QUALIFIED plans. BMA will make payments
to you periodically (currently, monthly, quarterly, semi-annually or annually).
The payments will not be subject to the withdrawal charge and will be instead of
the 10% single free withdrawal amount each year.
No Dollar Cost Averaging transfers or Automatic Withdrawals will be allowed
if you are participating in the Minimum Distribution Program.
8. PERFORMANCE
BMA may periodically advertise performance of the various INVESTMENT
PORTFOLIOS. BMA will calculate performance by determining the percentage change
in the value of an ACCUMULATION UNIT by dividing the increase (decrease) for
that unit by the value of the ACCUMULATION UNIT at the beginning of the period.
This performance number reflects the deduction of the coverage charge and the
fees and expenses of the INVESTMENT PORTFOLIO. It does not reflect the deduction
of any applicable contract maintenance charge and withdrawal charge. The
deduction of any applicable contract maintenance charge and withdrawal charge
would reduce the percentage increase or make greater any percentage decrease.
Any advertisement will also include average annual total return figures which
will reflect the deduction of the coverage charge, contract maintenance charges,
withdrawal charges as well as the fees and expenses of the INVESTMENT PORTFOLIO.
BMA may also advertise yield information. If it does, it will provide you
with information regarding how yield is calculated.
BMA may, from time to time, include in its advertising and sales materials,
tax deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
More detailed information regarding how performance is calculated is found
in the SAI.
9. DEATH BENEFIT
UPON YOUR DEATH
If you die during the ACCUMULATION PHASE, BMA will pay a death benefit to
your BENEFICIARY (see below). If you have a JOINT OWNER, the death benefit will
be paid when the first of you dies. The surviving JOINT OWNER will be treated as
the BENEFICIARY.
The amount of the death benefit depends on how old you are on the day we
issue your contract. If BMA issues your contract prior to your 80th birthday,
the death benefit will be:
During the first contract year, the greater of: (1) the payments you have
made, less any money you have taken out and related withdrawal charges; or
(2) the value of your contract.
During the second and subsequent contract years, the greater of: (1) the
payments you have made, less any money you have taken out and related
withdrawal charges; or (2) the value of your contract; or (3) the highest
value of your contract on the last day of any contract year prior to your
81st birthday, plus payments you have made, less withdrawals (and related
withdrawal charges) since that day.
If BMA issues your contract on or after your 80th birthday, the death benefit
will be the greater of: (1) the payments you have made, less any money you have
taken out and related withdrawal charges; or (2) the value of your contract.
The above death benefit may not be available in your state in which case,
the death benefit will be the greater of:
1. Total PURCHASE PAYMENTS, less withdrawals (and any withdrawal charges
paid on the withdrawals);
or
2. The value of your contract at the time the death benefit is to be paid.
The entire death benefit must be paid within 5 years of the date of death
unless the BENEFICIARY elects to have the death benefit payable under an ANNUITY
OPTION. The death benefit payable under an ANNUITY OPTION must be paid over the
BENEFICIARY'S lifetime or for a period not extending beyond the BENEFICIARY'S
life expectancy. Payment must begin within one year of the date of death. If the
BENEFICIARY is the spouse of the OWNER, he/she can continue the contract in
his/her own name and the contract value will become the currently payable death
benefit. Payment to the BENEFICIARY (other than a lump sum) may only be elected
during the 60 day period beginning with the date we receive proof of death. If a
lump sum payment is elected and all the necessary requirements are met, the
payment will be made within 7 days.
If you or any JOINT OWNER dies during the INCOME PHASE (and you are not the
ANNUITANT) any remaining payments under the ANNUITY OPTION chosen will continue
at least as rapidly as under the method of distribution in effect at the time of
death. If you die during the INCOME PHASE, the BENEFICIARY becomes the OWNER.
See Section 6. Taxes-Death Benefits regarding the tax treatment of death
proceeds.
DEATH OF ANNUITANT
If the ANNUITANT, who is not an OWNER or JOINT OWNER, dies during the
ACCUMULATION PHASE, you can name a new ANNUITANT. If no ANNUITANT is named
within 30 days of the death of the ANNUITANT, you will become the ANNUITANT.
However, if the OWNER is a non-natural person (for example, a corporation), then
the death of the ANNUITANT will be treated as the death of the OWNER, and a new
ANNUITANT may not be named.
Upon the death of the ANNUITANT during the INCOME PHASE, the death benefit,
if any, will be as provided for in the ANNUITY OPTION selected. The death
benefits will be paid at least as rapidly as under the method of distribution in
effect at the ANNUITANT'S death.
10. OTHER INFORMATION
BMA
Business Men's Assurance Company of America (BMA), BMA Tower, 700 Karnes
Blvd., Kansas City, Missouri 64108 was incorporated in 1909 under the laws of
the state of Missouri. BMA is licensed in the District of Columbia, Puerto Rico
and all states except New York. BMA is a wholly owned subsidiary of
Assicurazioni Generali S.p.A., which is the largest insurance organization in
Italy.
BMA's obligations arising under the contracts are general obligations of
BMA.
Some of BMA's computer systems were written using two digits rather than
four to define the applicable year. As a result, those computer systems will not
recognize the year 2000 which, if not corrected, could cause disruptions of
operations, including, among other things, an inability to process transactions
or engage in similar normal business activities.
BMA has developed a plan to modify its information technology to be ready
for the year 2000 and has begun converting critical data processing systems. BMA
currently expects the project to be substantially complete by late 1998 which is
prior to any anticipated impact on its operating systems. Based on this plan,
BMA does not believe that the costs to complete such system modifications or
replacement will be material to BMA.
THE SEPARATE ACCOUNT
BMA has established a separate account, BMA Variable Annuity Account A
(Separate Account), to hold the assets that underlie the contracts. The Board of
Directors of BMA adopted a resolution to establish the Separate Account under
Missouri insurance law on September 9, 1996. We have registered the Separate
Account with the Securities and Exchange Commission as a unit investment trust
under the Investment Company Act of 1940.
The assets of the Separate Account are held in BMA's name on behalf of the
Separate Account and legally belong to BMA. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business BMA may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts BMA may issue.
DISTRIBUTOR
Jones & Babson, Inc., acts as the distributor of the contracts. Jones &
Babson, Inc. is a wholly owned subsidiary of BMA.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions of up to 6% of PURCHASE PAYMENTS.
Sometimes, BMA may enter into an agreement with the broker-dealer to pay the
broker-dealer commissions as a combination of a certain amount of the commission
at the time of sale and a trail commission (which when totaled will not exceed
6% of PURCHASE PAYMENTS).
ADMINISTRATION
BMA has hired GENELCO, Incorporated, 9735 Landmark Parkway Drive, St.
Louis, Missouri to perform certain administrative services regarding the
contracts. The administrative services include issuance of the contracts and
maintenance of contract owners' records.
OWNERSHIP
OWNER. You, as the OWNER of the contract, have all the rights under the
contract. The OWNER is as designated at the time the contract is issued, unless
changed. The BENEFICIARY becomes the OWNER upon the death of the OWNER.
JOINT OWNER. The contract can be owned by JOINT OWNERS. Any JOINT OWNER
must be the spouse of the other OWNER. Upon the death of either JOINT OWNER, the
surviving OWNER will be the primary BENEFICIARY. Any other BENEFICIARY
designation will be treated as a contingent BENEFICIARY unless otherwise
indicated.
BENEFICIARY
The BENEFICIARY is the person(s) or entity you name to receive any death
benefit. The BENEFICIARY is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable BENEFICIARY has been named, you
can change the BENEFICIARY at any time before you die.
ASSIGNMENT
You can assign the contract at any time during your lifetime. BMA will not
be bound by the assignment until it receives the written notice of the
assignment. BMA will not be liable for any payment or other action we take in
accordance with the contract before we receive notice of the assignment. AN
ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a QUALIFIED plan, there may be
limitations on your ability to assign the contract.
SUSPENSION OF PAYMENTS OR TRANSFERS
BMA may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
INVESTMENT PORTFOLIOS is not reasonably practicable or BMA cannot
reasonably value the shares of the INVESTMENT PORTFOLIOS;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of OWNERS.
BMA has reserved the right to defer payment for a withdrawal or transfer
from the FIXED ACCOUNTS for the period permitted by law but not for more than
six months.
FINANCIAL STATEMENTS
The financial statements of BMA have been included in the Statement of
Additional Information.
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Company................................................................... 1
Experts................................................................... 1
Legal Opinions............................................................ 1
Distributor............................................................... 1
Calculation of Performance Data........................................... 1
Federal Tax Status........................................................ 5
Annuity Provisions........................................................ 11
Mortality and Expense Guarantee........................................... 12
Financial Statements...................................................... 12
</TABLE>
APPENDIX--CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT Value History--The following schedule includes
ACCUMULATION UNIT values for the period from November 24, 1997 [commencement of
operations] to December 31, 1997 and the six months ended June 30, 1998. This
data has been extracted from the unaudited June 30, 1998 and audited December
31, 1997 Separate Account's financial statements. This information should be
read in conjunction with the Separate Account's financial statements and related
notes which are included in the Statement of Additional Information.
<TABLE>
<CAPTION>
SIX MONTHS PERIOD ENDED
ENDED 6/30/98 12/31/97
------------- ------------
<S> <C> <C>
INVESTORS MARK SERIES FUND, INC.:
MONEY MARKET SUB-ACCOUNT
Unit value at beginning of period $10.3660 $10.00
Unit value at end of period $10.2271 $10.3660
No. of Accumulation Units Outstanding at
end of period 1,720 100
INTERMEDIATE FIXED INCOME SUB-ACCOUNT
Unit value at beginning of period $10.1029 $10.00
Unit value at end of period $10.4020 $10.1029
No. of Accumulation Units Outstanding at
end of period 16,772 100
GLOBAL FIXED INCOME SUB-ACCOUNT
Unit value at beginning of period $10.2068 $10.00
Unit value at end of period $10.4778 $10.2068
No. of Accumulation Units Outstanding at
end of period 1,441 100
MID CAP EQUITY SUB-ACCOUNT
Unit value at beginning of period $10.1186 $10.00
Unit value at end of period $11.0640 $10.1186
No. of Accumulation Units Outstanding at
end of period 7,788 543
SMALL CAP EQUITY SUB-ACCOUNT
Unit value at beginning of period $ 9.7057 $10.00
Unit value at end of period $ 9.0219 $ 9.7057
No. of Accumulation Units Outstanding at
end of period 7,019 507
LARGE CAP GROWTH SUB-ACCOUNT
Unit value at beginning of period $10.4344 $10.00
Unit value at end of period $12.2392 $10.4344
No. of Accumulation Units Outstanding at
end of period 4,459 345
LARGE CAP VALUE SUB-ACCOUNT
Unit value at beginning of period $ 9.6830 $10.00
Unit value at end of period $10.8962 $ 9.6830
No. of Accumulation Units Outstanding at
end of period 24,830 364
GROWTH & INCOME SUB-ACCOUNT
Unit value at beginning of period $10.0687 $10.00
Unit value at end of period $10.9500 $10.0687
No. of Accumulation Units Outstanding at
end of period 31,585 353
BALANCED SUB-ACCOUNT
Unit value at beginning of period $10.0854 $10.00
Unit value at end of period $10.3776 $10.0854
No. of Accumulation Units Outstanding at
end of period 12,371 100
BERGER INSTITUTIONAL PRODUCTS TRUST:
BERGER/BIAM IPT - INTERNATIONAL SUB-ACCOUNT
Unit value at beginning of period $10.4116 $10.00
Unit value at end of period $12.0872 $10.4116
No. of Accumulation Units Outstanding at
end of period 17,928 482
</TABLE>
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BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
9735 LANDMARK PARKWAY DRIVE
ST. LOUIS, MO 63127-1690
Please send me, at no charge, the Statement of Additional Information dated
September ___, 1998 for the Annuity Contract issued by BMA.
(Please print or type and fill in all information)
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
City State Zip Code
BMA-Registered Trademark-
------------------------------
A MEMBER OF THE GENERALI GROUP
Business Men's Assurance Company of America
P.O. Box 412879 / Kansas City, MO 64141
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
ISSUED BY
BMA VARIABLE ANNUITY ACCOUNT A
AND
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
September, ___ 1998
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
COMPANY AT: 1-888-262-8131, 9735 Landmark Parkway Drive, St. Louis, MO
63127-1690.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED SEPTEMBER
___, 1998.
TABLE OF CONTENTS
PAGE
COMPANY ...........................................................3
EXPERTS ...........................................................3
LEGAL OPINIONS ......................................................3
DISTRIBUTOR .........................................................3
CALCULATION OF PERFORMANCE DATA .....................................3
FEDERAL TAX STATUS ..................................................6
ANNUITY PROVISIONS ..................................................14
MORTALITY AND EXPENSE GUARANTEE .....................................15
FINANCIAL STATEMENTS ................................................15
COMPANY
Business Men's Assurance Company of America ("BMA" or the "Company"), BMA Tower,
700 Karnes Blvd., Kansas City, Missouri, 64108 was incorporated in 1909 under
the laws of the state of Missouri. BMA is licensed in the District of Columbia,
Puerto Rico and all states except New York. BMA is a wholly owned subsidiary of
Assicurazioni Generali S.p.A., which is the largest insurance organization in
Italy.
EXPERTS
The financial statements of BMA Variable Annuity Account A at December 31, 1997,
and for the period from November 24, 1997 (inception) to December 31, 1997, and
the consolidated financial statements of Business Men's Assurance Company of
America at December 31, 1997 and 1996, and for each of the three years in the
period ended December 31, 1997, appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, 1200 Main Street, Kansas
City, Missouri 64105, independent auditors, as set forth in their reports
thereon appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the contracts.
DISTRIBUTOR
Jones & Babson, Inc., acts as the distributor. The offering is on a continuous
basis.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an accumulation unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the accumulation unit value at the beginning of the period.
Any such advertisement will include average annual total return figures for the
time periods indicated in the advertisement. Such total return figures will
reflect the deduction of the coverage charge, the expenses for the underlying
investment portfolio being advertised and any applicable contract maintenance
charges and withdrawal charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual accumulation unit
values for an initial $1,000 purchase payment, and deducting any applicable
contract maintenance charges and any applicable withdrawal charges to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described.
The formula used in these calculations is:
n
P ( 1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used
(or fractional portion thereof) of a hypothetical $1,000 payment
made at the beginning of the time periods used.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
withdrawal charge and contract maintenance charge. The deduction of any
withdrawal charge and contract maintenance charge would reduce any percentage
increase or make greater any percentage decrease.
Owners should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return may be in any future period.
YIELD
THE MONEY MARKET PORTFOLIO. The Company may advertise yield and effective
information for the Money Market Portfolio. Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the subaccount refers to the income generated by an investment in the
subaccount over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the subaccount is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Money Market Portfolio's current yield is computed on a base period return
of a hypothetical Contract having a beginning balance of one accumulation unit
for a particular period of time (generally seven days). The return is determined
by dividing the net change (exclusive of any capital changes) in such
accumulation unit by its beginning value, and then multiplying it by 365/7 to
get the annualized current yield. The calculation of net change reflects the
value of additional shares purchased with the dividends paid by the Portfolio,
and the deduction of the coverage charge and contract maintenance charge. The
effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested.
(Effective yield = [(Base Period Return + 1)365/7]-1.)
The Company does not currently advertise any yield information for the Money
Market Portfolio.
OTHER PORTFOLIOS. The Company may also quote current yield in sales literature,
advertisements and Owner communications for the other Portfolios. Each Portfolio
(other than the Money Market Portfolio) will publish standardized total return
information with any quotation of current yield.
The yield computation is determined by dividing the net investment income per
accumulation unit earned during the period (minus the deduction for the coverage
charge and the contract maintenance charge) by the accumulation unit value on
the last day of the period, according to the following formula:
6
Yield = 2 [[(a-b) + 1] - 1]
-----
cd
Where:
a = net investment income earned during the period by the Portfolio
attributable to shares owned by the subaccount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in the advertisement or communication. Yield
calculations assume no withdrawal charge. The Company does not currently
advertise any yield information for any Portfolio.
HISTORICAL UNIT VALUES
The Company may also show historical accumulation unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual accumulation unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in accumulation unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
REPORTING AGENCIES
The Company may also distribute sales literature which compares the performance
of the accumulation unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
FEDERAL TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment or as annuity payments under the Annuity
Option selected. For a lump sum payment received as a total withdrawal (total
surrender), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions. The Company is taxed as a life insurance company under the Code.
For federal income tax purposes, the Separate Account is not a separate entity
from the Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions). Participants should consult their own tax counsel
or other tax adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered herein may also be used as Qualified Contracts. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified
Contract may be subject to the terms and conditions of the plan regardless of
the terms and conditions of the Contracts issued pursuant to the plan. The
following discussion of Qualified Contracts is not exhaustive and is for general
informational purposes only. The tax rules regarding Qualified Contracts are
very complex and will have differing applications depending on individual facts
and circumstances. Each purchaser should obtain competent tax advice prior to
purchasing Qualified Contracts.
Qualified Contracts include special provisions restricting Contract provisions
that may otherwise be available as described herein. Generally, Qualified
Contracts are not transferable except upon surrender or annuitization.
On July 6, 1983, the Supreme Court decided 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. Qualified Contracts will utilize annuity tables
which do not differentiate on the basis of sex. Such annuity tables will also be
available for use in connection with certain non-qualified deferred compensation
plans.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Under applicable limitations, certain amounts may be contributed to an IRA which
will be deductible from the individual's gross income. These IRAs are subject to
limitations on eligibility, contributions, transferability and distributions.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
Roth IRAs
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Purchase payments for a Roth IRA are limited to a maximum
of $2,000 per year. Lower maximum limitations apply to individuals with adjusted
gross incomes between $95,000 and $110,000 in the case of single taxpayers,
between $150,000 and $160,000 in the case of married taxpayers filing joint
returns, and between $0 and $10,000 in the case of married taxpayers filing
separately. An overall $2,000 annual limitation continues to apply to all of a
taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including Contracts issued and
qualified under Code Section 408 and 408A (Individual Retirement Annuities). To
the extent amounts are not includible in gross income because they have been
rolled over to an IRA or to another eligible Qualified Plan, no tax penalty will
be imposed. The tax penalty will not apply to the following distributions: (a)
if distribution is made on or after the date on which the Annuitant reaches age
59 1/2; (b) distributions following the death or disability of the Annuitant
(for this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Annuitant
or the joint lives (or joint life expectancies) of the Annuitant and his or her
designated Beneficiary; (d) distributions made to the Annuitant to the extent
such distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Annuitant for amounts paid during the taxable year for
medical care; (e) distributions from an Individual Retirement Annuity for the
purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code)
for the Annuitant and his or her spouse and dependents if the Annuitant has
received unemployment compensation for at least 12 weeks (this exception will no
longer apply after the Annuitant has been re-employed for at least 60 days); (f)
distributions from an Individual Retirement Annuity made to the Annuitant to the
extent such distributions do not exceed the qualified higher education expenses
(as defined in Section 72(t)(7) of the Code) of the Annuitant for the taxable
year; and (g) distributions from an Individual Retirement Annuity made to the
Annuitant which are qualified first-time home buyer distributions (as defined in
Section 72(t)(8) of the Code).
Generally, distributions from a qualified plan must commence no later than April
1 of the calendar year following the year in which the employee attains age 70
1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
FIXED ANNUITY
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Company and do not vary with the investment experience of the
Separate Account. The dollar amount of each fixed annuity will be determined in
accordance with annuity tables contained in the contract.
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account.
ANNUITY UNIT VALUE
On the Annuity Date a fixed number of Annuity Units will be purchased as
follows:
For each Subaccount the fixed number of Annuity Units is equal to the Adjusted
Contract Value for all Subaccounts, divided first by $1000, then multiplied by
the appropriate Annuity Payment amount from the Annuity Table contained in the
Contract for each $1000 of value for the Annuity Option selected, and then
divided by the Annuity Unit value for that Subaccount on the Annuity Date. After
that, the number of Annuity Units in each Subaccount remains unchanged unless
you elect to transfer between Subaccounts. All calculations will appropriately
reflect the Annuity Payment frequency selected.
On each Annuity Payment date, the total Variable Annuity Payment is the sum of
the Annuity Payments for each Subaccount. The Variable Annuity Payment in each
Subaccount is determined by multiplying the number of Annuity Units then
allocated to such Subaccount by the Annuity Unit value for that Subaccount.
On each subsequent business day, the value of an Annuity Unit is determined in
the following way:
First: The net Investment Factor is determined as described in the Prospectus
under "Accumulation Units".
Second: The value of an Annuity Unit for a business day is equal to:
a. the value of the Annuity Unit for the immediately preceding business
day;
b. multiplied by the Net Investment Factor for current business day;
c. divided by the Assumed Net Investment Factor (see below) for the
business day.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular business day. The Assumed Investment Return
that we will use is 3 1/2%. However, we may agree with you to use a different
value.
BMA may elect to determine the amount of each annuity payment up to 10 business
days prior to the elected payment date. The value of your contract less any
applicable premium tax is applied to the applicable annuity table to determine
the initial annuity payment.
MORTALITY AND EXPENSE GUARANTEE
We guarantee that the dollar amount of each Annuity Payment after the first will
not be affected by variations in mortality or expense experience.
FINANCIAL STATEMENTS
The unaudited balance sheet of BMA Variable Annuity Account A as of June 30,
1998, and the related statement of operations and changes in net assets for the
period from December 31, 1997 to June 30, 1998, follow.
The audited balance sheet of BMA Variable Annuity Account A as of December 31,
1997 and the related statement of operations and changes in net assets for the
period from November 24, 1997 (inception) to December 31, 1997, and the report
of Ernst & Young LLP, independent auditors with respect thereto, follow.
The audited consolidated financial statements of the Company as of December 31,
1997 and 1996, and for each of the years in the three year period ended December
31, 1997, which are also included herein should be considered only as bearing
upon the ability of the Company to meet its obligations under the Contracts.
<TABLE>
<CAPTION>
BMA VARIABLE ANNUITY ACCOUNT A
Statement of Assets and Liabilities
ASSETS
JUNE 30, 1998
(UNAUDITED)
-----------
INVESTMENTS:
Investors Mark Series Fund, Inc. (IMSF):
<S> <C>
Balanced - 12,841 shares at net asset value of $10.32 per share (cost,
$127,806) $132,519
Growth and Income - 30,441 shares at net asset value of $11.40 per
share (cost, $323,129) 347,027
Large Cap Value - 24,730 shares at net asset value of $10.98 per
share (cost, $250,040) 271,535
Small Cap Equity - 7,004 shares at net asset value of $9.07 per share
(cost, $67,527) 63,526
Large Cap Growth - 4,329 shares at net asset value of $12.65 per share
(cost, $46,881) 54,762
Intermediate Fixed Income - 16,780 shares at net asset value of $10.43
per share (cost, $171,003) 175,015
Mid Cap Equity - 7,483 shares at net asset value of $11.55 per share
(cost, $79,829) 86,429
Money Market - 17,607 shares at net asset value of $1.00 per share
(cost, $17,150) 17,607
Global Fixed Income - 1,453 shares at net asset value of $10.41 per
share (cost, $14,824) 15,154
Berger Institutional Products Trust (Berger IBT):
Berger IPT International Fund - 18,998 shares at net asset value of
$11.37 per share (cost, $196,475) 216,007
-------
TOTAL ASSETS $1,379,581
----------
</TABLE>
See accompanying notes to unaudited financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
JUNE 30, 1998
Net assets are represented: (UNAUDITED)
-------------------------------------------------
NUMBER UNIT VALUE
OF UNITS AMOUNT
-------------------------------------------------
IMSF Balanced:
<S> <C> <C> <C>
Accumulation units 12,731 $10.3776 $132,119
IMSF Growth and Income
Accumulation units 31,585 10.9500 345,857
IMSF Large Cap Value
Accumulation units 24,830 10.8962 270,649
IMSF Small Cap Equity
Accumulation units 7,019 9.0219 63,308
IMSF Large Cap Growth
Accumulation units 4,459 12.2392 54,580
IMSF Intermediate Fixed Income
Accumulation units 16,772 10.4020 174,429
IMSF Mid Cap Equity
Accumulation units 7,788 11.0640 86,135
IMSF Money Market
Accumulation units 1,720 10.2271 17,592
IMSF Global Fixed Income
Accumulation units 1,441 10.4778 15,104
Berger IPT International
Accumulation units 17,925 12.0872 215,284
Net assets -----------------
1,375,057
Mortality and expense risks payable 4,524
------------------
Total liabilities and net assets $1,379,581
==================
</TABLE>
See accompanying notes to unaudited financial statements.
<TABLE>
<CAPTION>
BMA VARIABLE ANNUITY ACCOUNT A
Statement of Operations and Changes in Net Assets
Six Months Ended June 30, 1998 (Unaudited)
GROWTH LARGE CAP SMALL CAP LARGE CAP
BALANCED & INCOME VALUE EQUITY GROWTH
------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Investment Income $0 0 0 0 0
Mortality, expense and
administrative charges 724 1,883 1,402 362 294
------------- -------------- -------------- --------------- --------------
Net investment income (loss) (724) (1,883) (1,402) (362) (294)
Capital gain distributions 0 0 0 0 0
Realized gain (loss) on investments 72 164 590 10 144
Unrealized appreciation
(depreciation) on investments 4,626 23,688 20,880 (3,738) 7,639
------------- -------------- -------------- --------------- --------------
Net realized and unrealized gain
(loss) on investments 4,698 23,852 21,470 (3,728) 7,783
------------- -------------- -------------- --------------- --------------
Net increase (decrease) in net assets resulting
from operations 3,974 21,969 20,068 (4,090) 7,489
Net assets at beginning of period 1,009 3,550 3,521 4,923 3,600
Variable annuity deposits 118,346 309,254 235,958 51,897 41,800
Terminations and Withdrawals (43) (80) (89) (5) 0
Net transfers* 8,833 11,164 11,191 10,583 1,691
============= ============== ============== =============== ==============
Net assets at end of period $132,119 345,857 270,649 63,308 54,580
============= ============== ============== =============== ==============
</TABLE>
* Includes transfer activity from (to) other subaccounts and transfers (from) to
the fixed accounts.
See accompanying notes to unaudited financial statements.
<TABLE>
<CAPTION>
BMA VARIABLE ANNUITY ACCOUNT A
Statement of Operations and Changes in Net Assets
Six Months Ended June 30, 1998 (Unaudited)
INTERMEDIATE MID CAP MONEY GLOBAL FIXED BERGER IPT
FIXED INCOME EQUITY MARKET INCOME INTERNATIONAL TOTAL
------------------ ------------- ----------- ----------------- ------------------ --------
<S> <C> <C> <C> <C> <C> <C>
Investment Income 0 0 453 0 0 $453
Mortality, expense and
administrative charges 929 490 122 79 1,168 7,453
--------- ------------- --------------- ------------ ------------------- -------------
Net investment income (loss) (929) (490) 331 (79) (1,168) (7,000)
Capital gain distributions 0 0 0 1 0 1
Realized gain (loss) on investments 8 133 0 0 137 1,258
Unrealized appreciation
(depreciation) on investments 3,993 6,476 0 308 19,379 83,251
--------- ------------- --------------- ------------ ------------------- -------------
Net realized and unrealized gain
(loss) on investments 4,001 6,609 0 309 19,516 84,510
--------- ------------- --------------- ------------ ------------------- -------------
Net increase in net assets resulting
from operations 3,072 6,119 331 230 18,348 77,510
Net assets at beginning of period 1,011 5,494 1,003 1,021 5,017 30,149
Variable annuity deposits 164,279 71,510 94,901 11,779 185,185 1,284,909
Terminations and Withdrawals 0 0 0 0 0 (217)
Net transfers* 6,067 3,012 (78,643) 2,074 6,734 (17,294)
========= ============= =============== ============ =================== =============
Net assets at end of period 174,429 86,135 17,592 15,104 215,284 1,375,057
========= ============= =============== ============ =================== =============
</TABLE>
* Includes transfer activity from (to) other subaccounts and transfers (from) to
the fixed accounts.
See accompanying notes to unaudited financial statements.
BMA VARIABLE ANNUITY ACCOUNT A
Notes to Unaudited Financial Statements
June 30, 1998
These financial statements are unaudited but, in management's opinion, include
all adjustments necessary for a fair presentation of results.
The Variable Annuity Account A commenced operations on November 24, 1997.
Therefore, a statement of operations and changes in net assets has not been
presented for the six months ended June 30, 1997.
These interim financial statements should be read in conjunction with the BMA
Variable Annuity Account A financial statements for the period from
November 24, 1997 (inception) to December 31, 1997.
Financial Statements
BMA Variable Annuity Account A
Period from November 24, 1997 (inception)
to December 31, 1997
With Report of Independent Auditors
BMA Variable Annuity Account A
Financial Statements
Period from November 24, 1997 (inception) to December 31, 1997
Contents
Report of Independent Auditors...............................................1
Audited Financial Statements
Statement of Assets and Liabilities..........................................2
Statement of Operations and Changes in Net Assets............................4
Notes to Financial Statements................................................5
Report of Independent Auditors
The Contract Owners of BMA Variable Annuity
Account A and The Board of Directors of
Business Men's Assurance Company of America
We have audited the accompanying statement of assets and liabilities of the
various portfolios of BMA Variable Annuity Account A (the Company) as of
December 31, 1997, and the related statement of operations and changes in net
assets for the period from November 24, 1997 (inception) to December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BMA Variable Annuity Account A
at December 31, 1997, and the results of its operations and changes in net
assets for the period from November 24, 1997 (inception) to December 31, 1997,
in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Kansas City, Missouri
February 6, 1998
<TABLE>
<CAPTION>
BMA Variable Annuity Account A
Statement of Assets and Liabilities
December 31, 1997
Assets
<S> <C>
Investments (Notes 1 and 3):
Investors Mark Series Fund, Inc. (IMSF):
Balanced - 101 shares at net asset value of
$9.96 per share (cost, $1,006) $ 1,010
Growth and Income - 341 shares at net asset
value of $10.41 per share (cost, $3,501) 3,552
Large Cap Value - 364 shares at net asset value of $9.69
per share (cost, $3,503) 3,523
Small Cap Equity - 509 shares at net asset value of $9.69
per share (cost, $5,000) 4,927
Large Cap Growth - 336 shares at net asset value of $10.71
per share (cost, $3,500) 3,602
Intermediate Fixed Income - 101 shares at net asset value
of $10.06 per share (cost, $1,007) 1,012
Mid Cap Equity - 524 shares at net asset
value of $10.49 per share (cost, $5,506) 5,498
Money Market - 1,004 shares at net asset value
of $1.00 per share (cost, $1,004) 1,004
Global Fixed Income - 101 shares at net asset
value of $10.09 per share (cost, $1,008) 1,023
Berger Institutional Products Trust (Berger IPT):
Berger IPT International Fund - 513 shares at net asset
value of $9.79 per share (cost, $5,000) 5,022
===================
Total assets $30,173
===================
</TABLE>
<TABLE>
<CAPTION>
Liabilities and net assets
Mortality and expense risks payable $ 24
Net assets are represented by (Note 3):
Number Unit
of Units Value Amount
-----------------------------------------------------
IMSF Balanced:
<S> <C> <C> <C>
Accumulation units 100 $10.09 1,009
IMSF Growth and Income:
Accumulation units 353 10.06 3,550
IMSF Large Cap Value:
Accumulation units 364 9.68 3,521
IMSF Small Cap Equity:
Accumulation units 507 9.71 4,923
IMSF Large Cap Growth:
Accumulation units 345 10.43 3,600
IMSF Intermediate Fixed Income:
Accumulation units 100 10.11 1,011
IMSF Mid Cap Equity:
Accumulation units 543 10.12 5,494
IMSF Money Market:
Accumulation units 100 10.03 1,003
IMSF Global Fixed Income:
Accumulation units 100 10.21 1,021
Berger IPT International:
Accumulation units 482 10.41 5,017
-------------------
Net assets 30,149
-------------------
Total liabilities and net assets $30,173
===================
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
BMA Variable Annuity Account A
Statement of Operations and Changes in Net Assets
Period from November 24, 1997 (inception) to December 31, 1997
GROWTH LARGE SMALL LARGE INTERMEDIATE
AND CAP CAP CAP FIXED
BALANCED INCOME VALUE EQUITY GROWTH INCOME
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income $ 6 $ 1 $ 3 $ - $ - $ 7
Expenses (Note 2):
Mortality, expense and
administrative charges 1 2 2 4 2 1
----------------------------------------------------------------------------------
Net investment income 5 (1) 1 (4) (2) 6
Capital gain distributions - - - - - -
Unrealized appreciation (depreciation)
on investments 4 51 20 (73) 102 5
----------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 4 51 20 (73) 102 5
----------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 9 50 21 (77) 100 11
Net assets at beginning of period - - - - - -
Variable annuity deposits
(Notes 2 and 3) 1,000 3,500 3,500 5,000 3,500 1,000
==================================================================================
Net assets at end of period $1,009 $3,550 $3,521 $4,923 $3,600 $1,011
==================================================================================
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
BMA Variable Annuity Account A
Statement of Operations and Changes in Net Assets
Period from November 24, 1997 (inception) to December 31, 1997
GLOBAL FIXED
MID CAP MONEY INCOME BERGER IPT
EQUITY MARKET INTERNATIONAL TOTAL
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income $ 6 $ 4 $ 8 $ - $ 35
Expenses (Note 2):
Mortality, expense and
administrative charges 4 1 2 5 24
----------------------------------------------------------------------
Net investment income 2 3 6 (5) 11
Capital gain distributions - - - - -
Unrealized appreciation (depreciation)
on investments (8) - 15 22 138
----------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (8) - 15 22 138
----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (6) 3 21 17 149
Net assets at beginning of period - - - - -
Variable annuity deposits
(Notes 2 and 3) 5,500 1,000 1,000 5,000 30,000
======================================================================
Net assets at end of period $5,494 $1,003 $1,021 $5,017 $30,149
======================================================================
</TABLE>
See accompanying notes.
BMA Variable Annuity Account A
Notes to Financial Statements
December 31, 1997
1. Summary of Significant Accounting Policies
Organization
BMA Variable Annuity Account A (the Account) is a separate account of Business
Men's Assurance Company of America (BMA). The Account is registered as a unit
investment trust under the Investment Company Act of 1940, as amended.
Deposits received by the Account are invested in the Investors Mark Series
Funds, Inc. (IMSF) funds or the Berger Institutional Products Trust (IPT) fund
(mutual funds not otherwise available to the public). As directed by the owners,
amounts may be invested in shares of the following portfolios:
IMSF Balanced (emphasis on long-term growth and high current income) IMSF
Growth and Income (emphasis on long-term growth and income without a lot of
fluctuation in market value) IMSF Large Cap Value (emphasis on long-term
capital growth) IMSF Small Cap Equity (emphasis on long-term growth by
investing in small and medium sized companies) IMSF Large Cap Growth
(emphasis on long-term capital appreciation) IMSF Intermediate Fixed Income
(emphasis on current income with stability of principal and liquidity) IMSF
Mid Cap Equity (emphasis on long-term growth by investing in common stock
of mid-sized companies) IMSF Money Market (emphasis on current income while
preserving capital and maintaining liquidity) IMSF Global Fixed Income
(emphasis on maximizing total return and generating a market level return
while preserving both liquidity and principal)
Berger IPT International (emphasis on long-term capital appreciation
through investments in non-U.S. equity securities of well-established
companies)
Under the terms of the investment advisory contracts, portfolio investments of
the underlying mutual funds of IMSF are made by Investors Mark Series Fund, LLC
(IMSF, LLC), which is owned by Jones & Babson, Inc., a wholly-owned subsidiary
of BMA. IMSF, LLC has engaged Standish, Ayer & Wood, Inc. to provide subadvisory
services for the Intermediate Fixed Income Portfolio, the Mid Cap Equity
Portfolio and the Money Market Portfolio. IMSF, LLC has engaged Standish
International Management Company, L.P. to provide subadvisory services for the
Global Fixed Income Portfolio. IMSF, LLC has engaged Stein Roe & Farnam,
Incorporated to provide subadvisory services for the
1. Summary of Significant Accounting Policies (continued)
Small Cap Equity Portfolio and the Large Cap Growth Portfolio. IMSF, LLC has
engaged David L. Babson & Co., Inc. to provide subadvisory services for the
Large Cap Value Portfolio. IMSF, LLC has engaged Lord, Abbett & Co. to provide
subadvisory services for the Growth and Income Portfolio. IMSF, LLC has engaged
Kornitzer Capital Management, Inc. to provide subadvisory services for the
Balanced Portfolio.
Berger Institutional Products Trust is a mutual fund with multiple portfolios,
one of which, the Berger/BIAM IPT - International Fund, is managed by BBOI
Worldwide LLC. BBOI Worldwide LLC has retained Bank of Ireland Asset Management
(U.S.) Limited (BIAM) as subadvisor.
Investment Valuation
Investments in mutual fund shares are carried in the statement of assets and
liabilities at fair value (net asset value of the underlying mutual fund). The
first-in, first-out method is used to determine realized gains and losses.
Security transactions are accounted for on the trade date and dividend income
from the funds to the Account is recorded on the ex-dividend date and reinvested
upon receipt. Capital gain distributions from the mutual funds to the Account
are also reinvested upon receipt.
The cost of investments purchased was as follows:
Period from
November 24, 1997
(inception) to
December 31, 1997
---------------------------
IMSF Balanced $1,006
IMSF Growth and Income 3,501
IMSF Large Cap Value 3,503
IMSF Small Cap Equity 5,000
IMSF Large Cap Growth 3,500
IMSF Intermediate Fixed Income 1,007
IMSF Mid Cap Equity 5,506
IMSF Money Market 1,004
IMSF Global Fixed Income 1,008
Berger IPT International 5,000
1. Summary of Significant Accounting Policies (continued)
Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the operations
of BMA, which is taxed as a life insurance company under the Internal Revenue
Code. As a result, the net asset values of the subaccounts are not affected by
federal income taxes on income distributions received by the subaccounts.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. Variable Annuity Contract Charges
BMA deducts an administrative fee of $35 per year for each contract, except for
certain contracts based on a minimum account value. Mortality and expense risks
assumed by BMA are compensated for by a fee equivalent to an annual rate of
1.40% annually of the average daily value of each contract.
When applicable, an amount for state premium taxes is deducted as provided by
pertinent state law, either from purchase payments or from the amount applied to
effect an annuity at the time annuity payments commence.
A contingent deferred sales charge is assessed by BMA against certain
withdrawals during the first seven years of the contract, declining from 7% in
the first year to 1% in the seventh year.
Contract charges retained by BMA from the proceeds of sales of annuity contracts
were not significant during 1997.
3. Summary of Unit Transactions
Number
of Units
Period from
November 24, 1997
(inception) to
December 31, 1997
--------------------------
Balanced:
Variable annuity deposits 100
Growth and Income:
Variable annuity deposits 353
Large Cap Value:
Variable annuity deposits 364
Small Cap Equity:
Variable annuity deposits 507
Large Cap Growth:
Variable annuity deposits 345
Intermediate Fixed Income:
Variable annuity deposits 100
Mid Cap Equity:
Variable annuity deposits 543
Money Market:
Variable annuity deposits 100
Global Fixed Income:
Variable annuity deposits 100
Berger IPT International:
Variable annuity deposits 482
CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A MEMBER OF THE GENERALI GROUP OF COMPANIES)
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Financial Statements
Years ended December 31, 1997 and 1996
CONTENTS
Report of Independent Auditors................................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheets...................................................2
Consolidated Statements of Operations.........................................4
Consolidated Statements of Stockholder's Equity...............................5
Consolidated Statements of Cash Flows.........................................6
Notes to Consolidated Financial Statements....................................8
Report of Independent Auditors
The Board of Directors
Business Men's Assurance Company of America
We have audited the accompanying consolidated balance sheets of Business Men's
Assurance Company of America (an ultimate subsidiary of Assicurazioni Generali,
S.p.A.) (the Company) as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Business Men's Assurance Company of America at December 31, 1997 and 1996, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Kansas City, Missouri
February 6, 1998
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
(In Thousands)
ASSETS
Investments (Notes 1 and 3): Securities available-for-sale, at fair value:
Fixed maturities (amortized cost - $1,308,458 in 1997
<S> <C> <C> <C> <C>
and $1,286,888 in 1996) $1,326,018 $1,288,934
Equity securities (cost - $46,807 in 1997 and $28,644 in
1996) 57,806 32,350
Mortgage loans on real estate, net of allowance for losses
of $8,435 in 1997 and $6,879 in 1996 842,149 704,356
Real estate (Note 1) - 5,498
Policy loans 62,207 65,225
Short-term investments 47,507 39,991
Other 3,424 3,830
------------------------------------
Total investments 2,339,111 2,140,184
Accrued investment income 18,520 18,539
Premium and other receivables 10,606 11,817
Deferred policy acquisition costs 125,065 131,025
Property, equipment and software (Note 6) 16,753 18,890
Reinsurance recoverables:
Paid benefits 6,588 3,948
Benefits and claim reserves ceded 72,000 58,177
Other assets (Note 1) 16,216 16,923
Assets held in separate accounts (Note 1) 76,964 -
------------------------------------
Total assets $2,681,823 $2,399,503
====================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
(In Thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C> <C>
Future policy benefits:
Life and annuity (Note 10) $1,259,319 $1,192,497
Health 87,883 75,914
Contract account balances 699,244 636,656
Policy and contract claims 58,381 58,617
Unearned revenues 11,284 13,813
Other policyholder funds 14,286 15,429
Outstanding checks in excess of bank balances 2,669 4,673
Current income taxes payable (Note 7) 2,158 4,345
Deferred income taxes (Note 7) 12,244 14,912
Payable to affiliate (Note 10) 799 972
Other liabilities 72,858 44,808
Liabilities related to separate accounts (Note 1) 76,964 -
------------------------------------
Total liabilities 2,298,089 2,062,636
Commitments and contingencies (Note 5)
Stockholder's equity (Notes 2 and 11):
Preferred stock of $1 par value; authorized 3,000,000
shares, none issued and outstanding - -
Common stock of $1 par value; authorized 24,000,000
shares, 12,000,000 shares issued and outstanding
12,000 12,000
Paid-in capital 40,106 40,106
Net unrealized gains (losses) on securities 14,364 3,686
Retained earnings 317,264 281,075
------------------------------------
Total stockholder's equity 383,734 336,867
------------------------------------
Total liabilities and stockholder's equity $2,681,823 $2,399,503
====================================
See accompanying notes.
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
Revenues:
Premiums:
<S> <C> <C> <C>
Life and annuity $154,602 $142,461 $130,360
Health 43,518 60,491 47,294
Other insurance considerations 37,928 38,780 37,183
Net investment income (Note 3) 167,346 145,629 124,605
Realized gains, net (Note 3) 5,121 5,906 4,290
Other income 35,941 26,802 23,394
---------------------------------------------------
Total revenues 444,456 420,069 367,126
Benefits and expenses:
Life and annuity benefits 126,345 122,915 111,734
Health benefits 27,812 42,224 40,132
Increase in policy liabilities including
interest credited to account balances 104,581 94,530 65,017
Real estate expense, net 932 551 649
Commissions 53,622 55,180 54,176
Increase in deferred policy acquisition costs (1,229) (5,459) (16,366)
Taxes, licenses and fees 4,654 5,229 5,251
Other operating costs and expenses 89,018 76,647 82,604
---------------------------------------------------
Total benefits and expenses 405,735 391,817 343,197
---------------------------------------------------
Earnings from continuing operations before income
tax expense 38,721 28,252 23,929
Income tax expense (Note 7) 2,532 10,168 8,503
---------------------------------------------------
Earnings from continuing operations 36,189 18,084 15,426
Discontinued operations (Note 12):
Gain on sale of discontinued operations, net of
income tax expense of $735 in 1996 and $3,352
in 1995 - 1,416 6,355
---------------------------------------------------
Earnings from discontinued operations - 1,416 6,355
---------------------------------------------------
Net earnings $ 36,189 $ 19,500 $ 21,781
===================================================
</TABLE>
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Stockholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
Common stock:
<S> <C> <C> <C>
Balance at beginning and end of year $ 12,000 $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning of year 40,106 25,106 25,106
Additional paid-in capital - 15,000 -
----------------------------------------------------
Balance at end of year 40,106 40,106 25,106
Net unrealized gains (losses) on securities:
Balance at beginning of year 3,686 15,297 (28,865)
Change in net unrealized gains (losses) 10,678 (11,611) 44,162
----------------------------------------------------
Balance at end of year 14,364 3,686 15,297
Retained earnings:
Balance at beginning of year 281,075 266,575 252,794
Net earnings 36,189 19,500 21,781
Dividends declared (Note 2) - (5,000) (8,000)
----------------------------------------------------
Balance at end of year 317,264 281,075 266,575
----------------------------------------------------
Total stockholder's equity $383,734 $336,867 $318,978
====================================================
</TABLE>
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(In Thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings $ 36,189 $ 19,500 $ 21,781
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Deferred income tax (benefit) (8,416) 4,146 7,025
Realized gains, net (5,121) (5,906) (4,290)
Gain on disposal of discontinued segment - (2,151) (7,417)
Discount accretion, net (975) (1,246) (1,090)
Policy loans lapsed in lieu of surrender benefits 1,021 2,996 3,201
Depreciation 3,778 4,153 4,817
Amortization 782 782 782
Changes in assets and liabilities:
(Increase) decrease in accrued investment income 19 (1,392) (1,719)
(Increase) decrease in receivables and reinsurance
recoverables (15,425) 2,761 (19,425)
Policy acquisition costs deferred (28,449) (31,745) (40,510)
Policy acquisition costs amortized 27,220 26,286 24,144
(Increase) decrease in income taxes recoverable (2,187) 5,518 (4,546)
Increase in accrued policy benefits, claim
reserves, unearned revenues and policyholder funds 30,777 32,331 4,574
Interest credited to policyholder accounts 79,312 69,494 56,358
Increase (decrease) in outstanding checks in excess of
bank balances (2,004) 805 3,868
Decrease in other assets and other liabilities, net 7,269 412 1,133
Decrease in net asset of discontinued operations - - 1,335
Other, net (433) (1,208) (179)
-----------------------------------------
Net cash provided by operating activities 123,357 125,536 49,842
INVESTING ACTIVITIES
Purchases of investments:
Securities available-for-sale:
Fixed maturities (464,419) (527,172) (592,373)
Equity securities (31,625) (17,586) (12,537)
Mortgage and policy loans (237,990) (259,438) (159,521)
Other - - (269)
Sales, calls or maturities of investments:
Maturities and calls of securities
available-for-sale:
Fixed maturities 167,000 117,057 108,472
Equity securities - - 2,031
Sales of securities available-for-sale:
Fixed maturities 284,124 238,051 263,650
Equity securities 14,379 12,444 6,223
Mortgage and policy loans 98,554 66,934 41,753
Real estate 5,854 2,194 502
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(In Thousands)
INVESTING ACTIVITIES (CONTINUED)
<S> <C> <C> <C>
Purchase of property, equipment and software $ (1,949) $ (290) $ (2,659)
Net (increase) decrease in short-term investments (7,516) 36,272 13,264
Proceeds from sale of discontinued operations - 632 5,426
Distributions from unconsolidated related parties 1,514 718 2
-----------------------------------------
Net cash used in investing activities (172,074) (330,184) (326,036)
FINANCING ACTIVITIES
Dividends paid - (5,000) (8,000)
Additional paid-in capital - 15,000 -
Deposits from interest sensitive and investment type contracts 323,487 381,865 401,681
Withdrawals from interest sensitive and investment type contracts (295,633) (187,217) (120,956)
Net proceeds from reverse repurchase borrowing 40,925 35,173 -
Retirement of reverse repurchase borrowing (20,062) (35,173) -
-----------------------------------------
Net cash provided by financing activities 48,717 204,648 272,725
-----------------------------------------
Net decrease in cash - - (3,469)
Cash at beginning of year - - 3,469
=========================================
Cash at end of year $ - $ -$ -
=========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For purposes of the statements
of cash flows, Business Men's
Assurance Company of America considers only cash on hand
and demand deposits to be cash
Cash paid during the year for:
Income taxes $ 13,135 $ 1,239 $ 9,376
=========================================
Interest paid on reverse repurchase borrowing $ 369 $ 620 $ -
=========================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Real estate acquired through foreclosure $ 1,236 $ 3,033 $ 5,156
=========================================
</TABLE>
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements
December 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Business Men's Assurance Company of America (the Company) is a
Missouri-domiciled life insurance company licensed to sell insurance products in
49 states and the District of Columbia. The Company offers a diversified
portfolio of individual and group insurance and investment products both
directly, primarily distributed through general agencies, and through
reinsurance assumptions. Assicurazioni Generali S.p.A. (Generali), an Italian
insurer, is the ultimate parent company.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
INVESTMENTS
The Company's entire investment portfolio is designated as available-for-sale.
Changes in fair values of available-for-sale securities, after adjustment of
deferred policy acquisition costs (DPAC) and deferred income taxes, are reported
as unrealized gains or losses directly in stockholder's equity and, accordingly,
have no effect on net income. The DPAC offset to the unrealized gains or losses
represents valuation adjustments or reinstatements of DPAC that would have been
required as a charge or credit to operations had such unrealized amounts been
realized.
The amortized cost of fixed maturity investments classified as
available-for-sale is adjusted for amortization of premiums and accretion of
discounts. That amortization or accretion is included in net investment income.
Mortgage loans and mortgage-backed securities are carried at unpaid balances
adjusted for accrual of discount and allowances for other than temporary decline
in value. Policy loans are carried at unpaid balances.
Real estate is stated at the lower of cost or fair value. At December 31, 1997,
no real estate was owned; at December 31, 1996, real estate was carried net of a
valuation allowance of $2,344,000. Profit is recognized on real estate sales
when down payment,
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
continuing investment and transfer of risk criteria have been satisfied.
Property, equipment and software, and the home office building are generally
valued at cost, including development costs, less allowances for depreciation
and other than temporary decline in value.
Property, equipment and software are being depreciated over the estimated useful
lives of the assets, principally on a straight-line basis. Depreciation rates on
these assets are set forth in Note 6.
Realized gains and losses on sales of investments and declines in value
considered to be other than temporary are recognized in net earnings on the
specific identification basis.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
DEFERRED POLICY ACQUISITION COSTS
Certain commissions, expenses of the policy issue and underwriting departments
and other variable expenses have been deferred. For limited payment and other
traditional life insurance policies, these deferred acquisition costs are being
amortized over a period of not more than 25 years in proportion to the ratio of
the expected annual premium revenue to the expected total premium revenue.
Expected premium revenue was estimated with the same assumptions used for
computing liabilities for future policy benefits for these policies.
For universal life-type insurance and investment-type products, the deferred
policy acquisition costs are amortized over a period of not more than 25 years
in relation to the present value of estimated gross profits arising from
estimates of mortality, interest, expense and surrender experience. The
estimates of expected gross profits are evaluated regularly and are revised if
actual experience or other evidence indicates that revision is appropriate. Upon
revision, total amortization recorded to date is adjusted by a charge or credit
to current earnings.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred policy acquisition costs are evaluated to determine that the
unamortized portion of such costs does not exceed recoverable amounts after
considering anticipated investment income.
RECOGNITION OF INSURANCE REVENUE AND RELATED EXPENSES
For limited payment and other traditional life insurance policies, premium
income is reported as earned when due with past-due premiums being reserved.
Profits are recognized over the life of these contracts by associating benefits
and expenses with insurance in force for limited payment policies and with
earned premiums for other traditional life policies. This association is
accomplished by a provision for liability for future policy benefits and the
amortization of policy acquisition costs. Accident and health premium revenue is
recognized on a pro rata basis over the terms of the policies.
For universal life and investment-type policies, contract charges for mortality,
surrender and expense, other than front-end expense charges, are reported as
other insurance considerations revenue when charged to policyholders' accounts.
Expenses consist primarily of benefit payments in excess of policyholder account
values and interest credited to policyholder accounts. Profits are recognized
over the life of universal life-type contracts through the amortization of
policy acquisition costs and deferred front-end expense charges with estimated
gross profits from mortality, interest, surrender and expense.
POLICY LIABILITIES AND CONTRACT VALUES
The liability for future policy benefits for limited payment and other
traditional life insurance contracts has been computed primarily by a net level
premium reserve method based on estimates of future investment yield, mortality
and withdrawals made at the time gross premiums were calculated. Assumptions
used in computing future policy benefits are as follows: interest rates range
from 3.25% to 8.50%, depending on the year of issue; withdrawal rates for
individual life policies issued in 1966 and after are based on Company
experience, and policies issued prior to 1966 are based on industry tables; and
mortality rates are based on mortality tables that consider Company experience.
The liability for future policy benefits is graded to reserves stipulated by the
policy over a period of 20 to 25 years or the end of the premium paying period,
if less.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For universal life and investment-type contracts, the account value before
deduction of any surrender charges is held as the policy liability. An
additional liability is established for deferred front-end expense charges on
universal life-type policies. These expense charges are recognized in income as
insurance considerations using the same assumptions as are used to amortize
deferred policy acquisition costs.
Claims and benefits payable for reported disability income claims have been
computed as the present value of expected future benefit payments based on
estimates of future investment yields and claim termination rates. The amount of
benefits payable included in the future policy benefit reserves and policy and
contract claims for December 31, 1997 and 1996 was $47,211,000 and $38,694,000,
respectively. Interest rates used in the calculation of future investment yields
vary based on the year the claim was incurred and range from 3% to 8.75%. Claim
termination rates are based on industry tables.
Other accident and health claims and benefits payable for reported claims and
incurred but not reported claims are estimated using prior experience. The
methods of calculating such estimates and establishing the related liabilities
are periodically reviewed and updated. Any adjustments needed as a result of
periodic reviews are reflected in current operations.
FEDERAL INCOME TAXES
Deferred federal income taxes have been provided in the consolidated financial
statements to recognize temporary differences between the financial reporting
and tax bases of assets and liabilities measured using enacted tax rates and
laws (Note 7). Temporary differences are principally related to deferred policy
acquisition costs, the provision for future policy benefits, accrual of
discounts on investments, accelerated depreciation and unrealized investment
gains and losses.
SEPARATE ACCOUNTS
These accounts arise from two lines of business, variable annuities and MBIA
insured guaranteed investment contracts (GIC). The separate account assets are
legally segregated and are not subject to the claims which may arise from any
other business of the Company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The assets and liabilities of the variable line of business are reported at fair
value since the underlying investment risks are assumed by the policyowners.
Investment income and gains or losses arising from the variable line of business
accrue directly to the policy owners and are, therefore, not included in
investment earnings in the accompanying consolidated statement of operations.
Revenues to the Company from variable products consist primarily of contract
maintenance charges and administration fees. Separate account assets and
liabilities for the variable line of business totaled $30,000 on December 31,
1997.
The assets of the MBIA GIC line of business are maintained at an amount equal to
the related liabilities. These assets related to the MBIA GIC line of business
include securities available-for-sale reported at fair value and mortgage loans
carried at unpaid balances. Changes in fair values of available-for-sale
securities, net of deferred income taxes, are reported as unrealized gains or
losses directly in stockholders equity.
The liabilities are reported at the original deposit amount plus accrued
interest guaranteed to the contractholders. Investment income and gains or
losses arising from MBIA GIC investments are included in investment earnings in
the accompanying consolidated statement of operations. The guaranteed interest
payable is included in the increase in policy liabilities in the accompanying
consolidated statement of operations. Separate account assets and liabilities
for the MBIA GIC line of business totaled $76,934,000 on December 31, 1997.
INTANGIBLE ASSETS
Goodwill of $12,323,000, net of accumulated amortization of $3,325,000 resulting
from the acquisition of a subsidiary, is included in other assets. Goodwill is
being amortized over a period of 20 years on a straight-line basis, and
amortization amounted to $782,000 for each of the years ended December 31, 1997,
1996 and 1995.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognized in the balance sheet, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of the
instruments. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------- ---------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------------------------- ---------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Fixed maturities (Note 3) $1,326,018 $1,326,018 $1,288,934 $1,288,934
Equity securities (Note 3) 57,806 57,806 32,350 32,350
Mortgage loans 842,149 867,552 704,356 707,915
Policy loans 62,207 57,491 65,225 60,735
Short-term investments 47,507 47,507 39,991 39,991
Reinsurance recoverables:
Paid benefits 6,588 6,588 3,948 3,948
Benefits and claim reserves 72,000 72,000 58,177 58,177
Assets held in separate accounts 76,964 77,061 - -
Mortgage loan commitments (Note 5) - 74,469 - 46,735
Investment-type insurance
contracts (Note 4) 1,277,362 1,256,129 1,097,821 1,078,326
</TABLE>
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment securities: Fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the investments.
The fair value for equity securities is based on quoted market prices.
Off-balance-sheet instruments: The fair value for outstanding loan
commitments approximates the amount committed, as all loan commitments were
made within the last 60 days of the year.
Mortgage loans and policy loans: The fair value for mortgage loans and
policy loans is estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Loans with similar characteristics are
aggregated for purposes of the calculations. The carrying amount of accrued
interest approximates its fair value.
Flexible and single premium deferred annuities: The cash surrender value of
flexible and single premium deferred annuities approximates their fair
value.
Guaranteed investment contracts: The fair value for the Company's
liabilities under guaranteed investment contracts is estimated using
discounted cash flow analyses, using interest rates currently being offered
for similar contracts with maturities consistent with those remaining for
the contracts being valued.
Supplemental contracts without life contingencies: The carrying amounts of
supplemental contracts without life contingencies approximate their fair
values.
Reinsurance recoverables: The carrying values of reinsurance recoverables
approximate their fair values.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company becomes a party to various
financial transactions to reduce its exposure to fluctuations in interest rates.
In 1997, the Company entered into interest rate swap contracts for the purpose
of converting the variable interest
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
rate characteristics of certain investments to fixed rates to match those of the
related insurance liabilities (guaranteed investment contracts) that the
investments are supporting. The net interest effect of such swap transactions is
reported as an adjustment of interest income as incurred. The notional amount of
these contracts were $25,000,000 at December 31, 1997.
POSTRETIREMENT BENEFITS
The projected future cost of providing postretirement benefits, such as health
care and life insurance, is recognized as an expense as employees render
service. See Note 8 for further disclosures with respect to postretirement
benefits other than pensions.
IMPAIRMENT OF LOANS
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," require that an impaired mortgage loan's fair value be measured
based on the present value of future cash flows discounted at the loan's
effective interest rate, at the loan's observable market price or at the fair
value of the collateral if the loan is collateral dependent. If the fair value
of a mortgage loan is less than the recorded investment in the loan, the
difference is recorded as an allowance for mortgage loan losses. The change in
the allowance for mortgage loan losses is reported with realized gains or losses
on investments. Interest income on impaired loans is recognized on a cash basis.
PENDING ACCOUNTING STANDARD
SFAS No. 130, "Reporting Comprehensive Income," will be adopted in 1998 and will
require disclosure of comprehensive income which includes the change in
unrealized investment gains and losses. The comprehensive income amount is
expected to be more volatile than net income.
RECLASSIFICATION
Certain amounts for 1996 and 1995 have been reclassified to conform to the
current year presentation.
2. DIVIDEND LIMITATIONS
Missouri has legislation that requires prior reporting of all dividends to the
Director of Insurance. The Company, as a regulated life insurance company, may
pay a dividend from unassigned surplus without the approval of the Missouri
Department of Insurance if the aggregate of all dividends paid during the
preceding 12-month period does not exceed the greater of 10% of statutory
stockholder's equity at the end of the preceding calendar year or the statutory
net gain from operations for the preceding calendar year. A portion of the
statutory equity of the Company that is available for dividends would be subject
to additional federal income taxes should distribution be made from
"policyholders' surplus" (see Note 7).
As of December 31, 1997 and 1996, the Company's statutory stockholder's equity
was $188,193,000 and $171,240,000, respectively. Statutory net gain from
operations and net income for each of the three years in the period ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net gain from operations $18,545 $10,898 $8,309
Net income 14,540 10,381 9,418
</TABLE>
3. INVESTMENT OPERATIONS
The Company's investments in securities are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
<S> <C> <C> <C> <C>
agencies $ 67,406 $ 1,233 $ (46) $ 68,593
Obligations of states and political
subdivisions 36,053 1,472 (9) 37,516
Debt securities issued by foreign
governments 3,975 121 (126) 3,970
Corporate securities 427,242 8,955 (2,004) 434,193
Mortgage-backed securities 755,467 10,153 (2,330) 763,290
Redeemable preferred stocks 18,315 206 (65) 18,456
---------------------------------------------------------------
Total 1,308,458 22,140 (4,580) 1,326,018
Equity securities 46,807 12,419 (1,420) 57,806
---------------------------------------------------------------
$1,355,265 $34,559 $(6,000) $1,383,824
===============================================================
</TABLE>
3. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
<S> <C> <C> <C> <C>
agencies $ 119,125 $ 1,571 $ (802) $ 119,894
Obligations of states and political
subdivisions 40,052 773 (93) 40,732
Debt securities issued by foreign
governments 4,471 166 (267) 4,370
Corporate securities 426,286 6,472 (3,786) 428,972
Mortgage-backed securities 687,455 6,031 (8,147) 685,339
Redeemable preferred stocks 9,499 157 (29) 9,627
---------------------------------------------------------------
Total 1,286,888 15,170 (13,124) 1,288,934
Equity securities 28,644 4,875 (1,169) 32,350
---------------------------------------------------------------
$1,315,532 $20,045 $(14,293) $1,321,284
===============================================================
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997, by contractual maturity, are as follows. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Maturities of mortgage-backed securities have not been set forth in the
following table, as such securities are not due at a single maturity date:
<TABLE>
<CAPTION>
AMORTIZED COST FAIR VALUE
------------------------------------
(In Thousands)
<S> <C> <C>
Due in one year or less $ 59,899 $ 59,517
Due after one year through five years 140,594 142,573
Due after five years through 10 years 266,145 271,715
Due after 10 years 86,353 88,923
------------------------------------
552,991 562,728
Mortgage-backed securities 755,467 763,290
------------------------------------
Total fixed maturity securities $1,308,458 $1,326,018
====================================
</TABLE>
3. INVESTMENT OPERATIONS (CONTINUED)
The majority of the Company's mortgage loan portfolio is secured by real estate.
The following table presents information about the location of the real estate
that secures mortgage loans in the Company's portfolio:
<TABLE>
<CAPTION>
CARRYING AMOUNT AS OF DECEMBER 31,
1997 1996
------------------------------------
(In Thousands)
State:
<S> <C> <C>
California $ 71,675 $ 68,399
Arizona 65,030 51,515
Texas 60,821 59,404
Missouri 51,839 34,400
Oklahoma 47,569 32,809
Florida 42,549 30,790
Washington 39,824 34,614
Utah 37,821 25,383
Kansas 34,267 34,069
Other 390,754 332,973
------------------------------------
$842,149 $704,356
====================================
</TABLE>
The following table lists the Company's investment in impaired mortgage loans
and related allowance for credit losses at December 31. The table also includes
the average recorded investment in impaired loans and interest income on
impaired loans:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Impaired mortgage loans $1,069 $2,516 $5,160
Allowance for credit losses 244 691 1,651
-------------------------------------------
Net recorded investment in impaired loans $ 825 $1,825 $3,509
===========================================
Average recorded investment in impaired loans $1,325 $2,667 $2,902
===========================================
Interest income on impaired loans $ 57 $ 115 $ 403
===========================================
</TABLE>
3. INVESTMENT OPERATIONS (CONTINUED)
Bonds, mortgage loans, preferred stocks and common stocks approximating
$4,600,000 and $4,200,000 were on deposit with regulatory authorities at
December 31, 1997 and 1996, respectively.
Set forth below is a summary of consolidated net investment income for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------
(In Thousands)
Fixed maturities:
<S> <C> <C> <C>
Bonds $ 92,741 $ 86,066 $ 73,930
Redeemable preferred stocks 1,309 814 1,176
Equity securities:
Common stocks 793 579 521
Nonredeemable preferred stocks 541 438 330
Mortgage loans on real estate 66,053 52,973 41,770
Policy loans 3,906 3,953 3,952
Short-term investments 2,955 3,016 4,779
Other 1,223 269 340
-------------------------------------------------
169,521 148,108 126,798
Less:
Investment income from discontinued operations - - 211
Investment expenses 2,175 2,479 1,982
=================================================
Net investment income from continuing operations $167,346 $145,629 $124,605
=================================================
</TABLE>
3. INVESTMENT OPERATIONS (CONTINUED)
Realized gains (losses) on securities disposed of during 1997, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------
(In Thousands)
Fixed maturity securities:
<S> <C> <C> <C>
Gross realized gains $10,499 $7,953 $10,246
Gross realized losses (4,690) (1,622) (4,388)
Equity securities:
Gross realized gains 3,204 2,001 1,789
Gross realized losses (777) - (376)
Other investments (3,115) (2,426) (2,981)
--------------------------------------------------------
Net realized gains $ 5,121 $5,906 $ 4,290
========================================================
</TABLE>
Sales of investments in securities in 1997, 1996 and 1995, excluding maturities
and calls, resulted in gross realized gains of $8,362,000, $9,798,800 and
$11,887,000 and gross realized losses of $1,017,000, $1,290,500 and $4,564,000
respectively.
The net carrying value of nonincome-producing investments at December 31, 1996,
which were nonincome producing during the year, consisted of mortgage loans of
$1,293,000 and bonds of $1,200,000. There were no nonincome producing
investments at December 31, 1997.
4. INVESTMENT CONTRACTS
The carrying amounts and fair values of the Company's liabilities for
investment-type insurance contracts (included with future policy benefits and
contract account balances in the balance sheet) at December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------- --------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------------------------- --------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Guaranteed investment contracts $ 660,782 $ 662,281 $ 596,499 $ 598,241
Flexible and single premium
deferred annuities 539,616 516,343 501,322 480,085
Separate accounts 76,964 77,505 - -
-----------------------------------------------------------------
Total investment-type insurance
contracts $1,277,362 $1,256,129 $1,097,821 $1,078,326
=================================================================
</TABLE>
4. INVESTMENT CONTRACTS (CONTINUED)
Fair values of the Company's insurance contracts other than investment contracts
are not required to be disclosed. However, the fair values of liabilities under
all insurance contracts are taken into consideration in the Company's overall
management of interest rate risk which minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts.
5. COMMITMENTS AND CONTINGENCIES
The Company leases equipment and certain office facilities from others under
operating leases through 2003. Certain other equipment and facilities are rented
monthly. Rental expense amounted to $2,137,000, $2,117,000 and $2,742,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. As of December
31, 1997, the minimum future payments under noncancelable operating leases for
each of the next five years and in the aggregate subsequent to 2002 are as
follows:
1998 $1,093,000
1999 945,000
2000 491,000
2001 386,000
2002 168,000
Subsequent to 2002 2,000
===================
Total $3,085,000
===================
Total outstanding commitments to fund mortgage loans were $74,496,000 and
$46,735,000 at December 31, 1997 and 1996, respectively.
The Company and its subsidiaries are parties to certain claims and legal actions
arising during the ordinary course of business. In the opinion of management,
after consulting with legal counsel, these matters will not have a materially
adverse effect on the operations or financial position of the Company.
6. PROPERTY, EQUIPMENT AND SOFTWARE
A summary of property, equipment and software at December 31 and their
respective depreciation rates is as follows:
<TABLE>
<CAPTION>
RATE OF
DEPRECIATION 1997 1996
------------------- ------------------------------------
(In Thousands)
Home office building, including land with
<S> <C> <C> <C> <C>
a cost of $425,000 2% $23,158 $23,158
Other real estate not held-for-sale or
rental 4% 973 1,126
Less accumulated depreciation (12,530) (11,963)
------------------------------------
11,601 12,321
Equipment and software 5%-33% 23,937 29,010
Less accumulated depreciation (18,785) (22,441)
------------------------------------
5,152 6,569
------------------------------------
Total property, equipment and software $16,753 $18,890
====================================
</TABLE>
7. FEDERAL INCOME TAXES
The components of the provision for income taxes and the temporary differences
generating deferred income taxes for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current $10,948 $ 6,757 $ 4,830
Deferred:
Deferred policy acquisition costs 143 1,322 4,139
Future policy benefits 3,783 2,424 4,010
Accrual of discount 197 408 494
Tax on realized gains greater than book 571 (1,076) (1,034)
Recognition of tax effect previously deferred on sale of
affiliate stock in prior period (11,169) - -
Employee benefit plans (2,206) 86 (148)
Other, net 265 982 (436)
-----------------------------------------------
(8,416) 4,146 7,025
-----------------------------------------------
Total 2,532 10,903 11,855
Less taxes from discontinued operations:
Current - (149) 1,539
Deferred - 884 1,813
-----------------------------------------------
- 735 3,352
-----------------------------------------------
Total taxes from continuing operations $ 2,532 $10,168 $ 8,503
===============================================
</TABLE>
The Company did not record any valuation allowances against deferred tax assets
at December 31, 1995, 1996 or 1997.
7. FEDERAL INCOME TAXES (CONTINUED)
Total taxes vary from the amounts computed by applying the federal income tax
rate of 35% to earnings from continuing operations for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------
(In Thousands)
Application of statutory rate to earnings before taxes
<S> <C> <C> <C>
on income $13,552 $ 9,888 $8,375
Tax-exempt municipal bond interest and dividends
received deductions (361) (291) (293)
Recognition of tax effect previously deferred on sale of
affiliate stock in a prior period (11,169) - -
Other 510 571 421
-----------------------------------------
$ 2,532 $10,168 $8,503
=========================================
</TABLE>
The significant components comprising the Company's deferred tax assets and
liabilities as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------
Deferred tax liabilities:
<S> <C> <C>
Deferred acquisition costs $29,641 $27,426
Tax effect of sale of affiliates stock - 14,169
Unrealized investment gains and losses 7,735 1,987
Other 9,655 5,532
------------------------------------------
Total deferred tax liability 47,031 49,114
Deferred tax assets:
Reserve for future policy benefits 21,411 23,012
Accrued expenses 8,504 6,636
Other 4,872 4,554
------------------------------------------
Total deferred tax assets 34,787 34,202
==========================================
Net deferred tax liability $12,244 $14,912
==========================================
</TABLE>
7. FEDERAL INCOME TAXES (CONTINUED)
Certain amounts that were not currently taxed under pre-1984 tax law were
credited to a "policyholders' surplus" account. This account is frozen under the
1984 Tax Act and is taxable only when distributed to stockholders at which time
it is taxed at regular corporate rates. The "policyholders' surplus" of the
Company approximates $87,000,000. The Company has no present plan for
distributing the amount in "policyholders' surplus." Consequently, no provision
has been made in the consolidated financial statements for the taxes thereon.
However, if such taxes were assessed, the amount of taxes payable would be
approximately $30,000,000.
Earnings taxed on a current basis are accumulated in a "shareholder's surplus"
account and can be distributed to the shareholder without tax. The shareholder's
surplus amounted to approximately $247,000,000 at December 31, 1997.
8. BENEFIT PLANS
TRUSTEED EMPLOYEE RETIREMENT PLAN AND JONES & BABSON, INC. PENSION PLAN
The Company has a trusteed employee retirement plan for the benefit of salaried
employees who have reached age 21 and who have completed one year of service.
The plan, which is administered by an Employees' Retirement Committee consisting
of at least three officers appointed by the Board of Directors of the Company,
provides for normal retirement at age 65 or earlier retirement based on minimum
age and service requirements. Retirement may be deferred to age 70. Upon
retirement, the retirees receive monthly benefit payments from the plan's BMA
group pension investment contract. During 1997, approximately $4.3 million of
annual benefits were covered by a group pension investment contract issued by
the Company. Assets of the plan, primarily equities, are held by three trustees
appointed by the Board of Directors.
The Company's subsidiary, Jones & Babson, Inc., had a pension plan covering
substantially all employees. As of January 5, 1995, that plan was merged into
the trusteed plan for BMA salaried employees. The benefits for the Jones &
Babson, Inc. employees in the merged plan were the same as provided in the
previous Jones & Babson, Inc. pension plan. Effective January 1, 1997, the
benefit formula for the Jones & Babson, Inc.
8. BENEFIT PLANS (CONTINUED)
employees was changed to be identical with the benefit formula used for BMA
employees. All benefits accrued prior to January 1, 1997 have been preserved.
Employees of the Company's subsidiary, BMA Financial Services, Inc., became
eligible to participate in the Company's plan effective January 1, 1995.
The following table sets forth the plan's funded status at December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------
(In Thousands)
Actuarial present value of accumulated benefit obligations:
<S> <C> <C>
Vested $ 50,968 $ 45,377
Non-vested 1,397 1,296
------------------------------
Total $ 52,365 $ 46,673
==============================
Projected benefit obligation for service rendered to date $(62,683) $(57,186)
Plan assets at fair value 85,605 79,679
------------------------------
Plan assets in excess of projected benefit obligation 22,922 22,493
Unrecognized net gain from past experience different from that assumed
and effects of changes in assumptions (23,519) (24,732)
Prior service cost not yet recognized in net periodic
pension cost 2,034 2,607
Unrecognized net asset at January 1, 1987 being recognized over
15 years (1,177) (1,471)
Adjustment to recognize minimum liability (50) (57)
------------------------------
Prepaid (accrued) pension cost $ 210 $ (1,160)
==============================
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------
Net pension cost included the following components:
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,767 $1,797 $ 1,758
Interest cost on projected benefit obligation 4,374 4,195 4,089
Actual return on plan assets (10,316) (9,745) (12,888)
Net amortization and deferral 2,812 3,102 7,019
--------------------------------------------
Net pension benefit $ (1,363) $ (651) $ (22)
============================================
</TABLE>
8. BENEFIT PLANS (CONTINUED)
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 7.5% for 1997, 8% for 1996 and
7.5% for 1995, and the rate of increase in future compensation levels used was
5% for 1997, 5.5% for 1996 and 5% for 1995. The expected long-term rate of
return on assets was 8% in 1997, 1996 and 1995.
SUPPLEMENTAL RETIREMENT PROGRAMS AND DEFERRED COMPENSATION PLAN
The Company has supplemental retirement programs for senior executive officers
and for group sales managers and group sales persons who are participants in the
trusteed retirement plan. These programs are not qualified under Section 401(a)
of the Internal Revenue Code and are not prefunded. Benefits are paid directly
by the Company as they become due. Benefits are equal to an amount computed on
the same basis as under the trusteed retirement plan (except incentive
compensation is included and limitations under Sections 401 and 415 of the
Internal Revenue Code are not considered) less the actual benefit payable under
the trusteed plan.
The Company also has a deferred compensation plan for the Company's managers
that provides retirement benefits based on renewal premium income at retirement
resulting from the sales unit developed by the manager. This program is not
qualified under Section 401(a) of the Internal Revenue Code and is not
prefunded. As of January 1, 1987, the plan was frozen with respect to new
entrants. Currently, there are two managers who have not retired and will be
entitled to future benefits under the program. The actuarial present value of
benefits shown below includes these active managers, as well as all managers who
have retired and are entitled to benefits under the program.
8. BENEFIT PLANS (CONTINUED)
The following table sets forth the combined supplemental retirement programs'
and deferred compensation plan's funded status at December 31:
<TABLE>
<CAPTION>
1997 1996
-----------------------------
(In Thousands)
Actuarial present value of accumulated benefit obligations:
<S> <C> <C>
Vested $ 9,964 $ 8,535
Non-vested 136 234
-----------------------------
Total $ 10,100 $ 8,769
=============================
Projected benefit obligation for service rendered to date $(11,281) $(10,178)
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions 2,260 1,319
Prior service cost not yet recognized in net periodic pension
cost 678 856
Unrecognized net obligation at January 1, 1987 being recognized
over 15 years 729 911
Adjustment required to recognize minimum liability (2,486) (1,677)
-----------------------------
Accrued pension liability $(10,100) $ (8,769)
=============================
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------
Net pension cost included the following components:
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 190 $ 189 $ 197
Interest cost on projected benefit obligation 783 761 651
Net amortization and deferral 469 513 371
------------------------------------------
Net pension cost $1,442 $1,463 $1,219
==========================================
</TABLE>
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 7.5% for 1997, 8% for 1996 and
7.5% for 1995. The rate of increase in future compensation levels used was 5%
for 1997, 5.5% for 1996 and 5% for 1995.
8. BENEFIT PLANS (CONTINUED)
SAVINGS AND INVESTMENT PLANS
The Company has savings and investment plans qualifying under Section 401(k) of
the Internal Revenue Code. Employees and sales representatives are eligible to
participate after one year of service. Participant contributions are invested by
the trustees for the plans at the direction of the participant in any one or
more of four investment funds. The Company makes matching contributions in
varying amounts. The Company's matching contributions amounted to $1,099,000 in
1997, $1,284,000 in 1996 and $1,336,000 in 1995. Participants are fully vested
in the Company match after five years of service.
The Company has a field force retirement plan for the benefit of agents and
managers. The plan is a defined contribution plan with contributions made
entirely by the Company. Each agent or manager under a standard contract with
one year of service with the Company is eligible to participate. The Company
makes an annual contribution for each participant equal to 3% of eligible
earnings up to the Social Security wage base and 6% of eligible earnings which
are in excess of the Social Security wage base. Each participant is fully vested
in his retirement account after five years of service. Assets of the plan are
deposited in a retirement trust fund and maintained by the plan trustees who are
appointed by the Company. The Company incurred costs related to this plan of
$230,000 in 1997, $225,000 in 1996 and $420,000 in 1995.
DEFINED BENEFIT HEALTH CARE PLAN
In addition to the Company's other benefit plans, the Company sponsors an
unfunded defined benefit health care plan that provides postretirement medical
benefits to full-time employees for whom the sum of the employee's age and years
of service equals or exceeds 75, with a minimum age requirement of 50 and at
least 10 years of service. The plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. The accounting for the plan anticipates a future cost-sharing
arrangement with retirees that is consistent with the Company's past practices.
8. BENEFIT PLANS (CONTINUED)
The following table presents the plan's funded status at December 31:
<TABLE>
<CAPTION>
1997 1996
---------------------------------
(In Thousands)
Accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees $ 9,636 $10,199
Active plan participants 1,854 2,054
---------------------------------
11,490 12,253
Plan assets at fair value - -
---------------------------------
Accumulated postretirement benefit obligation in excess of plan
assets 11,490 12,253
Unrecognized net loss (268) (125)
Unrecognized transition obligation (4,872) (5,199)
Unrecognized prior service costs (2,808) (4,008)
---------------------------------
Accrued postretirement benefit cost $ 3,542 $ 2,921
=================================
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost $ 122 $ 118 $ 153
Interest cost 878 867 771
Amortization of transition obligation over 20 years 327 327 511
Amortization of past service costs 407 407 -
-----------------------------------------
Net periodic postretirement benefit cost $1,734 $1,719 $1,435
=========================================
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) varies per year, equal to
the maximum contractual increase of the Company's contribution. Because the
Company's future contributions are contractually limited as discussed above, an
increase in the health care cost trend rate has a minimal impact on expected
benefit payments.
8. BENEFIT PLANS (CONTINUED)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%, 7.5% and 7.5% at December 31, 1997,
1996 and 1995 respectively.
During the year ended December 31, 1995, the Company recognized a reduction in
the accumulated postretirement benefit obligation of approximately $3,165,000
from a curtailment of the plan due to the disposal of its medical line of
business. The decrease in the accumulated postretirement benefit obligation has
been directly offset by a reduction of the remaining unrecognized transition
obligation. The Company also adopted certain plan amendments during 1995 that
resulted in an increase to the accumulated postretirement benefit obligation of
approximately $4,415,000 related to prior service rendered by plan participants.
This amount has been deferred and will be amortized over the remaining service
period of active plan participants.
9. REINSURANCE
The Company actively solicits reinsurance from other companies. The Company also
cedes portions of the insurance it writes as described in the next paragraph.
The effect of reinsurance on premiums earned from continuing operations was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Direct $118,192 $124,912 $153,476
Assumed 134,541 116,154 102,212
Ceded (54,613) (38,114) (77,604)
----------------------------------------------
Total net premium 198,120 202,952 178,084
Less net premium from discontinued operations - - 430
----------------------------------------------
Total net premium from continuing operations $198,120 $202,952 $177,654
==============================================
</TABLE>
The Company reinsures with other companies portions of the insurance it writes,
thereby limiting its exposure on larger risks. Normal retentions without
reinsurance are $750,000 on an individual life policy, $750,000 on individual
life insurance assumed and $200,000 on an individual life insured under a single
group life policy. As of December 31, 1997, the Company had ceded to other life
insurance companies individual life insurance in force of approximately $24.1
billion and group life of approximately $654 million.
9. REINSURANCE (CONTINUED)
Benefits and reserves ceded to other insurers amounted to $42,069,000,
$28,132,000 and $53,672,000 during the years ended December 31, 1997, 1996 and
1995, respectively. At December 31, 1997 and 1996, policy reserves ceded to
other insurers were $55,568,000 and $43,573,000, respectively. Claim reserves
ceded amounted to $16,432,000 and $14,604,000 at December 31, 1997 and 1996,
respectively. The Company remains contingently liable on all reinsurance ceded
by it to others. This contingent liability would become an actual liability in
the event an assuming reinsurer should fail to perform its obligations under its
reinsurance agreement with the Company.
10. RELATED-PARTY TRANSACTIONS
The Company reimburses Generali's U.S. branch for certain expenses incurred on
the Company's behalf. These expenses were not material in 1997, 1996 or 1995.
The Company retrocedes a portion of the life insurance it assumes to Generali.
In accordance with this agreement, the Company ceded premiums of $873,000,
$1,035,000 and $1,023,000 during 1997, 1996 and 1995, respectively. The Company
ceded no claims during 1997, 1996 or 1995.
In 1995, the Company entered into a modified coinsurance agreement with Generali
to cede 50% of certain single-premium deferred annuity contracts issued. In
accordance with this agreement, $35 million, $60 million and $137 million in
account balances were ceded to Generali in 1997, 1996 and 1995, respectively,
and Generali loaned such amounts back to the Company. Account balances ceded and
loaned back at December 31, 1997 and 1996 were $213 million and $193 million,
respectively. The recoverable amount from Generali was offset against the loan.
The net expense related to this agreement was $1,895,000, $1,344,000 and
$136,000 for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company held payables to Generali of $799,000 and $972,000 at December 31, 1997
and 1996, respectively.
11. STOCKHOLDER'S EQUITY
The components of the balance sheet caption "net unrealized gain on securities"
in stockholder's equity are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
(In Thousands)
Net unrealized gains (losses) on securities:
<S> <C> <C>
Fixed maturities $17,560 $2,046
Equity securities 10,999 3,706
Securities held in separate account 334 -
------------------------------------
Net unrealized gains (losses) 28,893 5,752
Adjustment to deferred policy acquisition costs (7,224) (35)
Adjustment to unearned revenue reserve 430 (44)
Deferred income taxes (7,735) (1,987)
------------------------------------
Net unrealized gains (losses) $14,364 $3,686
====================================
</TABLE>
12. DISCONTINUED OPERATIONS
In June of 1994, the Company adopted a plan to dispose of its medical line of
business. Accordingly, the medical line of business was considered a
discontinued operation for the years ended 1996 and 1995, and the consolidated
financial statements report separately the net assets and operating results of
the discontinued operations.
During 1994, the Company entered into an agreement to dispose of the Company's
Kansas and Missouri group medical business and sell the Company's wholly-owned
HMO, BMA Selectcare. The transaction closed on December 31, 1994. The agreement
provided for the full reinsurance of the Company's Kansas and Missouri group
medical business through the renewal dates of the related group contracts. The
estimated gain on disposal of this business was recorded in 1994. An additional
gain of $661,000, net of tax, was recorded in 1995 reflecting various
adjustments to initial estimates.
The Company also entered into an agreement during 1994 to dispose of the
remainder of its medical line of business effective January 1, 1995. This
transaction closed January 31, 1995 and, accordingly, was reflected in the 1995
financial statements. The agreement provided for the reinsurance of
substantially all of the Company's remaining group and
12. DISCONTINUED OPERATIONS (CONTINUED)
individual medical business through the renewal dates of the related contracts.
Under the agreement, the Company continued to remain primarily liable for
claims, billing and receipts through the next anniversary dates of the policies
reinsured. The estimated gain on disposal of this business of $5,694,000, net of
income taxes, was recorded in 1995. An additional gain of $1,416,000, net of
income taxes, was recorded in 1996 reflecting various adjustments to initial
estimates.
13. IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer systems were written using two digits rather than
four to define the applicable year. As a result, those computer systems will not
recognize the year 2000 which, if not corrected, could cause disruptions of
operations, including, among other things, an inability to process transactions
or engage in similar normal business activities.
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has begun converting critical data processing
systems. The Company currently expects the project to be substantially complete
by late 1998 which is prior to any anticipated impact on its operating systems.
Based on this plan, the Company does not believe that the costs to complete such
system modifications or replacements will be material to the Company's financial
statements.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
The following financial statements of the Separate Account are included in
Part B hereof:
1. Statement of Assets and Liabilities - June 30, 1998 (unaudited)
2. Statement of Operations and Changes in Net Assets for the Six
Months Ended June 30, 1998 (unaudited)
3. Notes to Unaudited Financial Statements - June 30, 1998
4. Report of Independent Auditors
5. Statement of Assets and Liabilities - December 31, 1997
6. Statement of Operations and Changes in Net Assets for the Period
from November 24, 1997 (inception) to December 31, 1997
7. Notes to Financial Statements - December 31, 1997
The following financial statements of the Company are included in Part B hereof:
1. Report of Independent Auditors
2. Consolidated Balance Sheets - December 31, 1997 and 1996
3. Consolidated Statements of Operations for the Years Ended December 31,
1997, 1996 and 1995
4. Consolidated Statements of Stockholder's Equity for the Years Ended
December 31, 1997, 1996 and 1995
5. Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
6. Notes to Consolidated Financial Statements - December 31, 1997
b. Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account*
2. Not Applicable
3.(a) Principal Underwriter's Agreement **
3.(b) Form of Selling Agreement**
4.(a) Individual Variable Annuity Contract*
4.(b) Waiver of Withdrawal Charge and Interest Adjustment Rider**
4.(c) Death Benefit Endorsement
5. Application for Individual Variable Annuity Contract**
6. (i) Copy of Articles of Incorporation of the Company**
(ii) Copy of the Bylaws of the Company**
7. Not Applicable
8. Form of Fund Participation Agreement**
9. Opinion and Consent of Counsel***
10. Independent Auditors' Consent
11. Not Applicable
12. Not Applicable
13. Not Applicable
14. Company Organizational Chart**
27. Not Applicable
*Incorporated by reference to Registrant's Form N-4, as electronically
filed on August 5, 1997.
**Incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to
Form N-4, as electronically filed on October 17, 1997.
***Incorporated by reference to Registrant's Post-Effective Amendment No.2 to
Form N-4, as electronically filed on July 8, 1998.
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
<S> <C>
Giorgio Balzer Director, Chairman of the Board and
BMA Tower Chief Executive Officer
700 Karnes Blvd.
Kansas City, MO 64108-3306
Robert Thomas Rakich Director, President and Chief Operating Officer
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Dennis Keith Cisler Senior Vice President - Information
BMA Tower Systems
700 Karnes Blvd.
Kansas City, MO 64108-3306
David Lee Higley Senior Vice President & Chief Financial
BMA Tower Officer
700 Karnes Blvd.
Kansas City, MO 64108-3306
Stephen Stanley Soden Senior Vice President - BMA Financial
BMA Tower Group
700 Karnes Blvd.
Kansas City, MO 64108-3306
Michael Kent Deardorff Vice President - BMA Financial Group
BMA Tower Marketing
700 Karnes Blvd.
Kansas City, MO 64108-3306
James Evan Kilmer Vice President - Taxes
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Edward Scott Ritter Vice President - Corporate Development
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
David A. Gates Director - Regulatory Affairs
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Martin Jefferson Fuller Senior Vice President - Insurance
BMA Tower Distribution
700 Karnes Blvd.
Kansas City, MO 64108-3306
Robert Noel Sawyer Senior Vice President & Chief Investment
BMA Tower Officer
700 Karnes Blvd.
Kansas City, MO 64108-3306
Vernon Wirt Voorhees II Director, Senior Vice President -
BMA Tower Corporate Services & Secretary
700 Karnes Blvd.
Kansas City, MO 64108-3306
Margaret Mary Heidkamp Vice President - Management Services
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Jay Brian Kinnamon Vice President & Corporate Actuary
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Susan Annette Sweeney Vice President - Treasurer & Controller
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Gerald W. Selig Actuary - Accumulation Products
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Thomas Morton Bloch Director
Gianguido Castagno Director
William Thomas Grant II Director
Donald Joyce Hall, Jr. Director
Allan Drue Jennings Director
David Woods Kemper Director
Giorgio Liveris Director
John Kessander Lundberg Director
John Pierre Mascotte Director
Giovanni Perissinotto Director
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
The Company organizational chart was filed as Exhibit 14 in Pre-Effective
Amendment No. 1 to Form N-4 and is incorporated herein by reference.
Item 27. As of July 2, 1998, there were 26 Non-Qualified Contract
Owners and 5 Qualified Contract Owners.
Not Applicable
Item 28. Indemnification
The Bylaws of the Company (Article IV) provide that:
Section 1: Indemnification. Each person who is or was a Director, officer or
employee of the Corporation or is or was serving at the request of the
Corporation as a Director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person) shall be indemnified by the
Corporation as a right to the full extent permitted or authorized by the laws of
the State of Missouri, as now in effect and as hereafter amended, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by such
person in his capacity as or arising out of his status as a Director, officer or
employee of the Corporation, or if serving at the request of the Corporation, as
a Director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise. The indemnification provided by this Bylaw
provision shall not be exclusive of any other rights to which those indemnified
may be entitled under any other bylaw or under any agreement, vote of
shareholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnifications with respect to the same or different persons or classes of
persons.
Without limiting the foregoing, the Corporation is authorized to enter into an
agreement with any Director, officer or employee of the Corporation providing
indemnification for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the right of the
Corporation, that arises by reason of the fact that such person is or was a
Director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent allowed by law, whether or not such indemnification would otherwise be
provided for in this Bylaw, except that no such agreement shall indemnify any
person from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company 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, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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
Company 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.
Item 29. Principal Underwriters
a. Jones & Babson, Inc. is the principal underwriter for the Contracts.
b. The following are the officers and directors of Jones & Babson, Inc.:
<TABLE>
<CAPTION>
Name and Positions and Offices
Business Address with Underwriter
- ------------------------- ---------------------
<S> <C>
Larry D. Armel President,
5540 Belinder Director and CEO
Shawnee Mission, KS 66205
P. Bradley Adams Vice President, Chief
12019 Cherokee Lane Financial Officer and
Leawood, KS 66209 Treasurer
Michael A. Brummel Vice President
1304 NE Oakwood Drive Asst. Sec. and Asst. Treas.
Lee's Summit, MO 64086
Martin A. Cramer Vice President and
13885 S. Brougham Drive Secretary
Olathe, KS 66062
John G. Dyer Asst. Secretary and
36-L Street Legal Counsel
Lake Latowana, MO 64086
Constance B. Martin Asst. Vice President
2305 W 95th Street
Leawood, KS 66206
Stephen S. Soden Chairman of the Board and
BMA Tower Director
One Penn Valley Park
Kansas City, MO 64141
Giorgio Balzer Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert T. Rakich Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Edward S. Ritter Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert N. Sawyer Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Vernon W. Voorhees Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
</TABLE>
Item 30. Location of Accounts and Records
The physical possession of the accounts, books or documents of the Separate
Account which are required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated thereunder will be
maintained by the Company at 700 Karnes Boulevard, Kansas City Missouri 64108.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Business Men's Assurance Company of America ("Company") hereby
represents that the fees and charges deducted under the Contracts described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Registration Statement and
has caused this Registration Statement to be signed on its behalf in the City of
Kansas City and the State of Missouri, on this 13th day of August, 1998.
BMA VARIABLE ANNUITY ACCOUNT A
(Registrant)
By: BUSINESS MEN'S ASSURANCE COMPANY
OF AMERICA
(Depositor)
By: /s/ DAVID A. GATES
--------------------------------
BUSINESS MEN'S ASSURANCE COMPANY
OF AMERICA
(Depositor)
By: /s/ STEPHEN S. SODEN
---------------------------------
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE AND TITLE
<TABLE>
<CAPTION>
<S> <C> <C>
Giorgio Balzer*
- --------------------- Director, Chairman of the Board 8/13/98
Giorgio Balzer and Chief Executive Officer ---------
Date
Thomas Morton Bloch* 8/13/98
- --------------------- Director ---------
Thomas Morton Bloch Date
Gianguido Castagno* 8/13/98
- -------------------------- Director ---------
Gianguido Castagno Date
William Thomas Grant II * 8/13/98
- --------------------------- Director ---------
William Thomas Grant II Date
Donald Joyce Hall, Jr.* 8/13/98
- --------------------------- Director --------
Donald Joyce Hall, Jr. Date
Allan Drue Jennings* 8/13/98
- --------------------------- Director ---------
Allan Drue Jennings Date
David Woods Kemper* 8/13/98
- --------------------------- Director ---------
David Woods Kemper Date
Giorgio Liveris* 8/13/98
- --------------------------- Director ---------
Giorgio Liveris Date
John Kessander Lundberg* 8/13/98
- --------------------------- Director ----------
John Kessander Lundberg Date
John Pierre Mascotte* 8/13/98
- ---------------------------- Director ----------
John Pierre Mascotte Date
Giovanni Perissinotto* 8/13/98
- --------------------------- Director ----------
Giovanni Perissinotto Date
/s/ ROBERT T. RAKICH 8/13/98
- --------------------------- Director, President and Chief ---------
Robert Thomas Rakich Operating Officer Date
/S/ VERNON W. VOORHEES II 8/13/98
- --------------------------- Director, Senior Vice President - ---------
Vernon Wirt Voorhees II Corporate Services & Secretary Date
/S/ DAVID L. HIGLEY 8/13/98
- -------------------------- Senior Vice President & Chief ---------
David Lee Higley Financial Officer Date
/S/ SUSAN A. SWEENEY 8/13/98
- -------------------------- Vice President - Treasurer & --------
Susan Annette Sweeney Controller Date
</TABLE>
*By: /S/ VERNON W. VOORHEES II
-------------------------
Attorney-in-Fact
*By: /S/ ROBERT T. RAKICH
---------------------------
Attorney-in-Fact
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 3 TO
FORM N-4
BMA VARIABLE ANNUITY ACCOUNT A
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
INDEX TO EXHIBITS
Exhibit Page
EX-99.B4(c) Death Benefit Endorsement
EX-99.B10 Independent Auditors' Consent
DEATH BENEFIT ENDORSEMENT
This Endorsement is part of the Contract to which it is attached and is
effective upon the Issue Date shown on the Contract Schedule. This Endorsement
amends the Contract as follows:
The Death Benefit Amount During the Accumulation Period in the Death Benefit
Provision is deleted in its entirety and replaced with the following:
The death benefit will be as described below. The death benefit is determined as
of the date due proof of death, Authorized Request for payment, and all other
requirements are received at the BMA Service Center.
The amount of the death benefit is the greater of:
1. The death benefit reset amount described below after adjustments for
Purchase Payments, partial withdrawals and any charges made since the last reset
date; or
2. The Contract Value.
The first death benefit reset amount is equal to the initial Purchase Payment.
The death benefit reset amount is then re-determined on the last day of each
Contract Year prior to your 81st birthday. On these determination dates, the
death benefit reset amount is set to be the greater of:
1. The prior year's death benefit reset amount after adjustments for
Purchase Payments, partial withdrawals and any charges made in the past year; or
2. The Contract Value.
Signed for Business Men's Assurance Company of America.
/s/ Vernon Wirt Voorhees II
Secretary
VA33 (7/98)
Consent of Independent Auditors
We consent to the references to our firm under the captions "Experts" and
"Financial Statements" and to the use of our reports dated February 6, 1998 with
respect to the consolidated financial statements of Business Men's Assurance
Company of America and the financial statements of BMA Variable Annuity Account
A included in Post-Effective Amendment No. 3 to the Registration Statement (Form
N-4 No. 333-32887) and the related Statement of Additional Information
accompanying the Prospectus of BMA Variable Annuity Account A.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Kansas City, Missouri
August 13, 1998
