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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-8B-2
REGISTRATION STATEMENT OF UNIT INVESTMENT
TRUSTS WHICH ARE CURRENTLY
ISSUING SECURITIES
Dated August 25, 1998
Pursuant to Section 8(b) of the
Investment Company Act of 1940
EQUITRUST LIFE VARIABLE ACCOUNT II
(Name of Unit Investment Trust)
5400 University Avenue
WEST DES MOINES, IOWA 50266
(Address of Principal Office of Registrant)
Issuer of periodic payment plan certificates
only for purposes of information provided herein
Page 1 of 56 Pages
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I.
ORGANIZATION AND GENERAL INFORMATION
1. (a) Furnish name of the trust and the Internal Revenue Service Employer
Identification Number.
EquiTrust Life Variable Account II (the "Variable
Account"). The Variable Account has no Internal Revenue
Service Employer Identification Number.
(b) Furnish title of each class or series of securities issued by the
trust.
Flexible Premium Variable Life Insurance Policy ("Policy").
2. Furnish name and principal business address and ZIP code and the Internal
Revenue Service Employer Identification Number of each depositor of the
trust.
EquiTrust Life Insurance Company (the "Company")
5400 University Avenue
West Des Moines, Iowa 50266
Internal Revenue Service Employer
Identification Number: 42-1468417
3. Furnish name and principal business address and ZIP code and the Internal
Revenue Service Employer Identification Number of each custodian or trustee
of the trust indicating for which class or series of securities each
custodian or trustee is acting.
The Company will hold in its own custody all of the securities.
4. Furnish name and principal business address and ZIP code and the Internal
Revenue Service Employer Identification Number of each principal
underwriter currently distributing securities of the trust.
Distribution of the Policy has not commenced. When distribution
commences, the principal underwriter will be:
EquiTrust Marketing Services, Inc. ("EquiTrust Marketing")
5400 University Avenue
West Des Moines, Iowa 50266
Internal Revenue Service Employer
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Identification Number: 42-0954364
5. Furnish name of state or other sovereign power, the laws of which govern
with respect to the organization of the trust.
Iowa.
6. (a) Furnish the dates of execution and termination of any indenture or
agreement currently in effect under the terms of which the trust was
organized and issued or proposes to issue securities.
The Variable Account was established under the laws of the State
of Iowa pursuant to resolutions adopted by the Board of Directors
of the Company on _January 6, 1998_. The Variable Account will
continue in existence until the Board of Directors directs that
it be terminated. The Policy will be issued pursuant to the
resolution.
(b) Furnish the dates of execution and termination of any indenture or
agreement currently in effect pursuant to which the proceeds of
payments on securities issued or to be issued by the trust are held by
the custodian or trustee.
Not applicable.
7. Furnish in chronological order the following information with respect to
each change of name of the trust since January 1, 1930.
The Variable Account has never been known by any other name.
8. State the date on which the fiscal year of the trust ends.
December 31.
MATERIAL LITIGATION
9. Furnish a description of any pending legal proceedings, material with
respect to the security holders of the trust by reason of the nature of the
claim or the amount thereof, to which the trust, the depositor, or the
principal underwriter is a party or of which the assets of the trust are
the subject, including the substance of the claims involved in such
proceeding and the title of the proceeding. Furnish a similar statement
with respect to any pending administrative proceeding commenced by a
governmental authority or any such proceeding or legal proceeding known to
be contemplated by a governmental authority. Include any proceeding which,
although immaterial itself, is representative of, or one of, a group which
in the aggregate is material.
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There are no pending administrative proceedings commenced by, or known
to be contemplated by, a governmental authority and no pending legal
proceedings, material with respect to prospective purchasers of the
Policies, to which the Variable Account, the Company or FBL Marketing
is a party or to which the assets of the Variable Account are subject.
II.
GENERAL DESCRIPTION OF THE TRUST
AND SECURITIES OF THE TRUST
GENERAL INFORMATION CONCERNING THE SECURITIES OF THE TRUST AND THE RIGHTS OF
HOLDERS
10. Furnish a brief statement with respect to the following matters for each
class or series of securities issued by the trust:
(a) Whether the securities are of the registered or bearer type.
The Policies which are to be issued are of the registered type
insofar as each Policy is personal to the owner of a Policy
("Policyowner") and the records concerning the Policyowner are
maintained by or on behalf of the Company. The Variable Account
concurrently is filing a registration statement on Form S-6
registering the Policies with the Securities and Exchange
Commission. Capitalized terms used in this Form N-8B-2 have the
same meaning as in the Form S-6.
(b) Whether the securities are of the cumulative or distributive type.
Each Policy is of the cumulative type, providing for no direct
distribution of income, dividends, or capital gains. Such
amounts are not separately identifiable but are reflected in the
Net Surrender Value upon surrender and in the payment of the
death benefit upon the death of the Insured.
(c) The rights of security holders with respect to withdrawal or
redemption.
The Policyowner may cancel the Policy by delivering or mailing
written notice to the Company at its Home Office, and returning
the Policy to the Company at its Home Office before midnight of
the twentieth day after the Policyowner receives the Policy.
Notice given by mail and return of the Policy by mail are
effective on being postmarked, properly addressed and postage
prepaid.
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The Company will refund, within seven days after receipt of
the returned Policy at its Home Office, the greater of
premiums paid or the Policy's Accumulated Value plus an amount
equal to any charges that have been deducted from premiums,
Accumulated Value and the Variable Account.
At any time prior to the Maturity Date while the Policy is in
force, a Policyowner may surrender the Policy or make a partial
withdrawal by sending a written request to the Company at its
Home Office. A surrender charge will apply to any surrender
during the first six Policy Years, as well as during the first
six years following an increase in Specified Amount.
The amount payable upon surrender of the Policy is the Net
Surrender Value at the end of the Valuation Period during which
the request is received. This amount may be paid in a lump sum
or under one of the payment options specified in the Policy as
requested by Policyowner. Upon surrender, all insurance in force
will terminate.
A Policyowner may obtain a portion of the Policy's Net
Accumulated Value. A partial withdrawal must be at least $500
and cannot exceed the lesser of (i) the Net Accumulated Value
less $500 or (2) 90% of the Net Accumulated Value. A Partial
Withdrawal Fee equal to the lesser between $25 and 2% of the
amount withdrawn will be deducted from the Accumulated Value upon
each partial withdrawal. The Policyowner may request that the
proceeds of a partial withdrawal may be paid in a lump sum or
under one of the payment options specified in the Policy.
A partial withdrawal will be allocated among the Subaccounts and
the Declared Interest Option in accordance with the written
instructions of the Policyowner. If no such instructions are
received with the request for partial withdrawal, the partial
withdrawal will be allocated among the Subaccounts and the
Declared Interest Option in the same proportion that the
Accumulated Value in each of the Subaccounts and the Accumulated
Value in the Declared Interest Option reduced by any outstanding
Policy Debt bears to the total Accumulated Value reduced by any
outstanding Policy Debt on the date the request is received at
the Home Office.
Partial withdrawals will affect both the Policy's Accumulated
Value and the death proceeds payable under the Policy. The
Policy's Accumulated Value will be reduced by the amount of the
partial withdrawal. If the death benefit payable under either
death benefit option both before and after the partial withdrawal
are equal to the Cash Value multiplied by the specified amount
factor set forth in the Policy, a partial withdrawal will
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result in a reduction in death proceeds equal to the amount of
the partial withdrawal, multiplied by the specified amount factor
then in effect. If the death benefit is not so affected by the
specified amount factor, the reduction in death proceeds will be
equal to the partial withdrawal.
Partial withdrawals will reduce the Policy's Specified Amount by
the amount of Cash Value withdrawn if Option B is in effect at
the time of the withdrawal. If Option A is in effect at the time
of the withdrawal, there will be no effect on Specified Amount.
The Specified Amount remaining in force after a partial
withdrawal may not be less than the minimum Specified Amount for
the Policy in effect on the date of the partial surrender, as
published by the Company. As a result, the Company will not
process any partial withdrawal that would reduce the Specified
Amount below this minimum. If increases in the Specified Amount
previously have occurred, a partial withdrawal will first reduce
the Specified Amount of the most recent increase, then the next
most recent increases successively, then the coverage under the
original application. Thus, a partial withdrawal may affect the
amount of the cost of insurance charge.
Payment of amounts in connection with a surrender or partial
withdrawal ordinarily will be mailed to the Policyowner within
seven (7) days after the Company receives a signed request for
withdrawal at its Home Office. Payment may be postponed
whenever: (i) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New
York Stock Exchange is restricted as determined by the Securities
and Exchange Commission ("Commission"); (ii) the Commission by
order permits postponement for the protection of Policyowners; or
(iii) an emergency exists, as determined by the Commission, as a
result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to determine the
value of the net assets of the Variable Account. In addition,
requests for withdrawal of Accumulated Value derived from any
amount paid by check or draft may be postponed until such time as
the Company is satisfied that the check or draft has cleared the
bank upon which it was drawn.
(d) The rights of security holders with respect to conversion, transfer,
partial redemption, and similar matters.
A Policyowner may, at any time prior to the Maturity Date while
the Policy is in force, convert the Policy to a flexible premium
fixed-benefit life insurance policy by requesting that all of the
Accumulated Value in the Variable Account be transferred to the
Declared Interest Option. The
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Policyowner may exercise this special transfer privilege once
each Policy Year. Once a Policyowner exercises the special
transfer privilege, all future premium payments will
automatically be credited to the Declared Interest Option, until
such time as the Policyowner requests a change in allocation. No
charge will be imposed for any transfers resulting from the
exercise of the special transfer privilege.
Policyowners may transfer amounts among the Subaccounts of the
Variable Account an unlimited number of times in a Policy Year.
Amounts may be transferred between the Variable Account and the
Declared Interest Option only once in a Policy Year. Transfers
are made by written request to the Home Office or, if the
Policyowner has elected the "Telephone Transfer Authorization" on
the supplemental application by calling the Home Office toll-free
at (800) 349-4656. The amount of the transfer must be at least
$100 or the total Accumulated Value in the Subaccount or in the
Declared Interest Option (reduced, in the case of the Declared
Interest Option, by any outstanding Policy Debt), if less than
$100. The Company may, at its discretion, waive the $100 minimum
requirement. The transfer will be effective as of the end of the
Valuation Period during which the request is received at the Home
Office.
The first transfer in each Policy Year will be made without
charge; each time amounts are subsequently transferred in that
Policy Year, a transfer charge of $25 may be assessed. The
transfer charge, unless paid in cash, will be deducted from the
amount transferred. Once a Policy is issued, the amount of the
transfer charge is guaranteed for the life of the Policy.
For purposes of these limitations and charges, all transfers
effected on the same day will be considered a single transfer.
The Policyowner may obtain Policy Loans, as described in Item 21.
The Policyowner may make surrenders and partial withdrawals, as
described in Item 10(c).
(e) If the trust is the issuer of periodic payment plan certificates, the
substance of the provisions of any indenture or agreement with respect
to lapses or defaults by security holders in making principal
payments, and with respect to reinstatement.
The Policy will lapse if, on a Monthly Deduction Day, the Net
Accumulated Value during the first three Policy Years, or Net
Surrender Value after three Policy Years, is insufficient to
cover the monthly deduction and a Grace Period expires without a
sufficient payment. The
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Company allows a 61-day Grace Period for payment of a premium
that, when reduced by the premium expense charge, will be at
least equal to three times the monthly deduction due on such
Monthly Deduction Day. The Grace Period will begin on the date
the Company mails notice of the insufficiency to the Policyowner.
Failure to make a sufficient payment by the end of the Grace
Period will cause the Policy to lapse and terminate without
value.
Insurance coverage continues during the Grace Period, but the
Policy will be deemed to have no Accumulated Value for purposes
of Policy Loans and surrenders during such Grace Period.
If the Insured dies during the Grace Period, the death proceeds
payable during the Grace Period will equal the amount of the
death proceeds payable immediately prior to the commencement of
the Grace Period, reduced by any due and unpaid monthly
deductions.
Prior to the Maturity Date, a lapsed Policy may be reinstated at
any time within five years of the Monthly Deduction Day
immediately preceding the Grace Period which expired without
payment of the required premium. Reinstatement is effected by
submitting the following items to the Company: (i) a written
application for reinstatement signed by the Policyowner and the
Insured; (ii) evidence of insurability satisfactory to the
Company; (iii) a premium that, after the deduction of the premium
expense charge, is at least sufficient to keep the Policy in
force for three months; and (iv) an amount equal to the monthly
cost of insurance for the two Policy Months prior to lapse.
(State law may limit the premium to be paid on reinstatement to
an amount less than that described.) To the extent that the first
year monthly administrative charge was not deducted for a total
of twelve Policy Months prior to lapse, such charge will continue
to be deducted following reinstatement of the Policy until such
charge has been assessed, both before and after the lapse, for a
total of 12 Policy Months. The Company will not reinstate a
Policy surrendered for its Net Surrender Value.
The effective date of the reinstated Policy will be the Monthly
Deduction Day coinciding with or next following the date the
Company approves the application for reinstatement.
(f) The substance of the provisions of any indenture or agreement with
respect to voting rights, together with the names of any persons other
than security holders
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given the right to exercise voting rights pertaining to the trust's
securities or the underlying securities and the relationship of such
persons to the trust.
To the extent required by law, the Company will vote the Fund
shares held in the Variable Account at regular and special
shareholder meetings of the Funds in accordance with instructions
received from persons having voting interests in the
corresponding Subaccounts. If, however, the Investment Company
Act of 1940 or any regulation thereunder should be amended or if
the present interpretation thereof should change, and, as a
result, the Company determines that it is permitted to vote the
Fund shares in its own right, it may elect to do so.
The number of votes which a Policyowner has the right to instruct
will be calculated separately for each Subaccount. The number of
votes which each Policyowner has the right to instruct will be
determined by dividing a Policy's Accumulated Value in a
Subaccount by the net asset value per share of the corresponding
Investment Option in which the Subaccount invests. Fractional
shares will be counted. The number of votes of the Investment
Option which the Policyowner has the right to instruct will be
determined as of the date coincident with the date established by
that Investment Option for determining shareholders eligible to
vote at such meeting of the Fund. Voting instructions will be
solicited by written communications prior to such meeting in
accordance with procedures established by each Fund. Each person
having a voting interest in a Subaccount will receive proxy
material, reports and other materials relating to the appropriate
Investment Option.
The Company will vote Fund shares attributable to the Policies as
to which no timely instructions are received (as well as any Fund
shares held in the Variable Account which are not attributable to
the Policies) in proportion to the voting instructions which are
received with respect to all Policies participating in each
Investment Option. Voting instructions to abstain on any item to
be voted upon will be applied on a PRO RATA basis to reduce the
votes eligible to be cast on a matter.
At some future date, Fund shares may also be held by separate
accounts of other affiliated and unaffiliated insurance
companies. The Company expects that those shares will be voted
in accordance with instructions of the owners of insurance
policies and contracts issued by those other insurance companies.
Voting instructions given by owners of other insurance policies
will dilute the effect of voting instructions of Policyowners.
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The Company may, when required by state insurance regulatory
authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
sub-classification or investment objective of an Investment
Option or to approve or disapprove an investment advisory
contract for an Investment Option. In addition, the Company
itself may disregard voting instructions in favor of changes
initiated by a Policyowner in the investment policy or the
investment adviser of an Investment Option if the Company
reasonably disapproves of such changes. A change would be
disapproved only if the proposed change is contrary to state law
or prohibited by state regulatory authorities or the Company
determined that the change would have an adverse effect on the
General Account in that the proposed investment policy for an
Investment Option may result in overly speculative or unsound
investments. In the event the Company does disregard voting
instructions, a summary of that action and the reasons for such
action will be included in the next annual report to
Policyowners.
(g) Whether security holders must be given notice of any change in:
(1) the composition of the assets of the trust.
The Company reserves the right, subject to compliance with
applicable law, to make additions to, deletions from, or
substitutions for the shares of the Investment Options that are
held by the Variable Account or that the Variable Account may
purchase. If the shares of an Investment Option are no longer
available for investment or if, in its judgement, further
investment in any Investment Option should become inappropriate
in view of the purposes of the Variable Account, the Company
reserves the right to dispose of the shares of any Investment
Option of the Fund and to substitute shares of another Investment
Option. The Company will not substitute any shares attributable
to a Policyowner's Accumulated Value in the Variable Account
without notice to and prior approval of the Securities and
Exchange Commission, to the extent required by the Investment
Company Act of 1940 or other applicable law.
The Company also reserves the right to establish additional
subaccounts of the Variable Account, each of which would invest
in shares of a new Investment Option with a specified investment
objective. New subaccounts may be established when, in the sole
discretion of the Company, marketing, tax or investment
conditions warrant, and any new subaccounts may be made available
to existing Policyowners on a basis to be determined by the
Company. Subject to obtaining any approvals or consents required
by applicable law, the assets of one or more Subaccounts may be
transferred to any other Subaccount(s), or one or more
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Subaccounts may be eliminated or combined with any other
Subaccounts if, in the sole discretion of the Company, marketing,
tax, or investment conditions warrant.
In the event of any such substitution or change, the Company may,
by appropriate endorsement, make such changes in these and other
policies as may be necessary or appropriate to reflect such
substitution or change. If deemed by the Company to be in the
best interests of persons having voting rights under the
Policies, the Variable Account may be operated as a management
company under the Investment Company Act of 1940, may be
deregistered under that Act in the event such registration is no
longer required, or, subject to obtaining any approvals or
consents required by applicable law, may be combined with other
Company separate accounts. To the extent permitted by applicable
law, the Company may also transfer the assets of the Variable
Account associated with the Policies to another separate account.
In addition, the Company may, when permitted by law, restrict or
eliminate any voting rights of Policyowners or other persons who
have voting rights as to the Variable Account.
(2) the terms and conditions of the securities issued by the trust.
No changes in the terms and conditions of a Policy that affect
the Policyowner's rights will be made without notice to the
Policyowner to the extent required by law.
(3) the provisions of any indenture or agreement of the trust.
No notice to or consent from Policyowners is required for any
change in the Company's resolution establishing the Variable
Account.
(4) the identity of the depositor, trustee or custodian.
No notice to or consent from Policyowners is required.
(h) Whether the consent of security holders is required in order for
action to be taken concerning any change in:
(1) the composition of the assets of the trust.
Consent of Policyowners is not required when changing the
underlying securities of the Variable Account. However, to
change such securities,
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approval of the Commission may be required by Section 26(b) of
the 1940 Act.
(2) the terms and conditions of the securities issued by the trust.
Except as appropriate to comply with federal or state law or
regulation, no change in the terms and conditions of a Policy can
be made without consent of the Policyowner.
(3) the provisions of any indenture or agreement of the trust.
No consent is required.
(4) the identity of the depositor, trustee or custodian
No consent is required.
(i) Any other principal feature of the securities issued by the trust or
any other principal right, privilege or obligation not covered by
subdivisions (a) to (g) or by any other item in this form.
(1) PREMIUM PAYMENTS. Before it will issue a Policy, the Company may
require the Policyowner to pay an initial premium that, when
reduced by the premium expense charge, will be sufficient to pay
the monthly deduction for the first Policy Month.
Each Policyowner will determine a planned periodic premium
schedule that provides for the payment of a level premium over a
specified period of time on a quarterly, semi-annual or annual
basis. The Company may, at its discretion, permit planned
periodic premium payments to be made on a monthly basis.
Periodic reminder notices ordinarily will be sent to the
Policyowner for each planned periodic premium. Depending on the
duration of the planned periodic premium schedule, the timing of
planned payments could affect the tax status of the Policy.
The Policyowner is not required to pay premiums in accordance
with the planned periodic premium schedule. Furthermore, the
Policyowner has considerable flexibility to alter the amount,
frequency, and the time period over which planned periodic
premiums are paid; however, no planned periodic payment may be
less than $100 without the Company's consent.
A Policyowner may make unscheduled premium payments at any time
prior to the Maturity Date, subject to the minimum and maximum
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premium limitations described below. Each unscheduled premium
payment must be at least $100; however, the Company may, in its
discretion, waive this minimum requirement. The Company reserves
the right to limit the number and amount of unscheduled premium
payments.
In no event may the total of all premiums paid, both planned
periodic and unscheduled, exceed the applicable maximum premium
limitation imposed by federal tax laws. Because the maximum
premium limitation is in part dependent upon the Specified Amount
for each Policy, changes in the Specified Amount may affect this
limitation. If at any time a premium is paid which would result
in total premiums exceeding the applicable maximum premium
limitation, the Company will only accept that portion of the
premium which will make total premiums equal the maximum. Any
part of the premium in excess of that amount will be returned and
no further premiums will be accepted until allowed by the
applicable maximum premium limitation.
Payments made by the Policyowner will be treated first as payment
of any outstanding Policy Debt unless the Policyowner indicates
that the payment should be treated otherwise. Where no
indication is made, any portion of a payment that exceeds the
amount of any outstanding Policy Debt will be treated as a
premium payment.
The Net Premium is the amount available for investment. The Net
Premium equals the premium paid less the premium expense charge.
In the application for a Policy, the Policyowner can allocate Net
Premiums or portions thereof to the Subaccounts of the Variable
Account, to the Declared Interest Option, or both. Net Premiums
will be allocated to the Declared Interest Option if they
are received either before the date the Company obtains a
signed notice from the Policyowner that the Policy has
been received, or before the end of 25-days after the
Delivery Date. Upon the earlier of (i) the date the
Company obtains a signed notice from the Policyowner
that the Policy has been received, or (ii) 25 days after the
Delivery Date, the Accumulated Value in the Declared
Interest Option automatically will be allocated, without
charge, among the Subaccounts and Declared Interest Option
in accordance with the Policyowner's allocation
instructions. Net Premiums received on or after (i) or (ii)
above are allocated in accordance with the instructions of
the Policyowner, to the Variable Account, the Declared
Interest Option, or both. The Policyowner does not waive his
cancellation privilege by sending the signed notice of receipt
and acceptance of the Policy to the Company.
Net Premiums received after the date the Company receives the
signed notice will be allocated in accordance with the
Policyowner's percentage allocation in the application or the
most recent written instructions of the Policyowner. The minimum
percentage of each premium that may be
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allocated to any subaccount of the Variable Account or to the
Declared Interest Option is 10%; no fractional percentages will
be permitted. The allocation for future Net Premiums may be
changed without charge at any time while the Policy is in force
by providing the Company with written notice on a form acceptable
to the Company signed by the Policyowner. The change will take
effect on the date the written notice is received at the Home
Office and will have no effect on prior cash values.
(2) DEATH PROCEEDS. So long as the Policy remains in force, the
Policy provides for the payment of death proceeds upon the death
of the Insured. Proceeds will be paid to the primary Beneficiary
or a contingent Beneficiary. One or more primary Beneficiaries
or contingent Beneficiaries may be named. If no Beneficiary
survives the Insured, the death proceeds will be paid to the
Policyowner or his estate. Death proceeds may be paid in a lump
sum or under a payment option. To determine the death proceeds,
the death benefit will be reduced by any outstanding Policy Debt
and increased by any unearned loan interest and any premiums paid
after the date of death. Proceeds will ordinarily be mailed to
the Policyowner within seven days after receipt by the Company of
Due Proof of Death. Payment may, however, be postponed under
certain circumstances. The Company pays interest on those
proceeds, at an annual rate no less than 3.0%, or any rate
required by law, from the date of death to the date payment is
made.
Policyowners designate in the initial application one of two
death benefit options offered under the Policy. The amount of
the death benefit payable under a Policy will depend upon the
option in effect at the time of the Insured's death. Under
Option A, the death benefit will be equal to the greater of (i)
the sum of the current Specified Amount and the Accumulated
Value, or (ii) the Accumulated Value multiplied by the specified
amount factor. Accumulated Value will be determined as of the
end of the Business Day coinciding with or immediately following
the date of death. The specified amount factor is 2.50 for an
Insured Attained Age 40 or below on the date of death. For
Insureds with an Attained Age over 40 on the date of death, the
factor declines with age as shown in the Specified Amount Factor
Table in the Policy.
Under Option B, the death benefit will be equal to the greater of
(i) the current Specified Amount, or (ii) the Accumulated Value
(determined as of the end of the Business Day coinciding with or
immediately following the date of death) multiplied by the
specific amount factor. The specified amount factor is the same
as under Option A.
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The death benefit option in effect may be changed at any time by
sending the Company a written request for the change. The
effective date of such a change will be the Monthly Deduction Day
coinciding with or immediately following the date the change is
approved by the Company.
If the death benefit option is changed from Option A to Option B,
the current Specified Amount will not change. If the benefit
option is changed from Option B to Option A, the current
Specified Amount will be reduced by an amount equal to the
Accumulated Value on the effective date of the change. A change
in the death benefit option may not be made if it would result in
a Specified Amount which is less than the minimum Specified
Amount in effect on the effective date of the change or if after
the change the Policy would no longer qualify as life insurance
under federal tax law. No charges will be imposed upon a change
in death benefit option; however, a change in death benefit
option will affect the cost of insurance charges.
After a Policy has been in force for one Policy Year, a
Policyowner may adjust the existing insurance coverage by
increasing or decreasing the Specified Amount. To make a change,
the Policyowner must send a written request to the Company at its
Home Office. Any change in the Specified Amount may affect the
cost of insurance rate and the net amount at risk, both of which
will affect a Policyowner's cost of insurance charge. If
decreases in the Specified Amount cause the premiums paid to
exceed the maximum premium limitations required by federal tax
law, the decrease will be limited to the extent necessary to meet
these requirements.
Any decrease in the Specified Amount will become effective on the
Monthly Deduction Day coinciding with or immediately following
the date the request is approved by the Company. The decrease
will first reduce the Specified Amount provided by the most
recent increase, then the next most recent increases
successively, then the Specified Amount under the original
application. The Specified Amount following a decrease can never
be less than the minimum Specified Amount for the Policy in
effect on the date of the decrease. A Specified Amount decrease
will not reduce the Surrender Charge.
To apply for an increase, evidence of insurability satisfactory
to the Company must be provided. Any approved increase will
become effective on the Monthly Deduction Day coinciding with or
immediately following the date the request is approved by the
Company. An increase will not become effective, however, if the
Policy's Accumulated Value on the
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effective date would not be sufficient to cover the deduction for
the increased cost of the insurance for the next Policy Month. A
Specified Amount increase is subject to its own Surrender Charge.
(3) BENEFITS AT MATURITY. If the Insured is alive and the Policy is
in force on the Maturity Date, the Company will pay to the
Policyowner the Policy's Accumulated Value as of the end of the
Business Day coinciding with or immediately following the
Maturity Date, reduced by any outstanding Policy Debt. Benefits
at maturity may be paid in a lump sum or under a payment option.
The Maturity Date is Attained Age 115.
(4) CALCULATION OF ACCUMULATED VALUE. The Policy provides for the
accumulation of Accumulated Value. Accumulated Value will be
determined on each Business Day. A Policy's Accumulated Value
will reflect a number of factors including Net Premiums paid,
partial surrenders, Policy Loans, charges assessed in connection
with the Policy, the interest earned on the Accumulated Value in
the Declared Interest Option, and the investment performance of
the Subaccounts of the Variable Account to which the Accumulated
Value is allocated. There is no guaranteed minimum Accumulated
Value. The Accumulated Value of the Policy is equal to (1) the
sum of the Accumulated Values in each Subaccount of the Variable
Account, plus (2) the Accumulated Value in the Declared Interest
Option, including amounts transferred to the Declared Interest
Option to secure outstanding Policy Debt.
As of the Issue Date, the Policy's Accumulated Value will equal
the Accumulated Value in the Declared Interest Option, which will
equal the initial Net Premium less the monthly deduction made on
the Policy Date. Thereafter, the Accumulated Value in the
Declared Interest Option will reflect any interest credited, and
any subsequent monthly deductions made on Monthly Deduction Days.
On the Business Day coinciding with or immediately following the
date the Company receives notice that the Policy has been
received and accepted by the Policyowner, the portion of the
Policy's Accumulated Value in the Declared Interest Option which
is to be allocated to the Variable Account pursuant to the
Policyowner's percentage allocation in the application will be
transferred automatically to the Subaccounts of the Variable
Account in accordance with such percentage allocation
instructions. At the end of each Valuation Period thereafter,
the Accumulated Value in a Subaccount of the Variable Account is
(i) plus (ii) plus (iii) minus (iv) minus (v) minus (vi) where:
(i) is the total Subaccount units represented by the Accumulated
Value at the end of the preceding
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Valuation Period, multiplied by the Subaccount's Unit Value for
the current Valuation Period; (ii) is any Net Premiums received
during the current Valuation Period which are allocated to the
Subaccount; (iii) is all Accumulated Values transferred to the
Subaccount from the Declared Interest Option or from another
Subaccount during the current Valuation Period; (iv) is all
Accumulated Values transferred from the Subaccount to another
Subaccount or to the Declared Interest Option during the current
Valuation Period, including amounts transferred to the Declared
Interest Option to secure Policy Debt; (v) is all partial
withdrawals from the Subaccount during the current Valuation
Period; and (vi) is the portion of any monthly deduction charged
to the Subaccount during the current Valuation Period to cover
the Policy Month following the Monthly Deduction Day.
The Policy's total Accumulated Value in the Variable Account
equals the sum of the Policy's Accumulated Value in each
Subaccount.
Each Subaccount has a Unit Value. When Net Premiums are
allocated to, or other amounts are transferred into, a
Subaccount, a number of Units are purchased based on the Unit
Value of the Subaccount as of the end of the Valuation Period
during which the transfer is made. Likewise, when amounts are
transferred out of a Subaccount, Units are redeemed in a similar
manner. On any day, a Policy's Accumulated Value in a Subaccount
is equal to the number of Units held in such Subaccount,
multiplied by the Unit Value of such Subaccount on that date.
For each Subaccount, the Unit Value was initially set at $10 when
the Subaccount first purchased shares of the designated
Investment Option. The Unit Value for each subsequent Valuation
Period is calculated by dividing (a) by (b) where (a) is:
(1) the value of the net assets of the Subaccount at the end of
the preceding Valuation Period, plus (2) the investment income
and capital gains, realized or unrealized, credited to the net
assets of that Subaccount during the Valuation Period for which
the Unit Value is being determined, minus (3) the capital losses,
realized or unrealized, charged against those assets during the
Valuation Period, minus (4) any amount charged against the
Subaccount for taxes, or any amount set aside during the
Valuation Period by the Company as a provision for taxes
attributable to the operation or maintenance of that Subaccount;
and minus (5) a charge no greater than .oo28618% of the average
daily net assets of the Subaccount for each day in the Valuation
Period. This corresponds to an annual rate of 1.05% of
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the average daily net assets of the Subaccount for mortality and
expense risks incurred in connection with the Policies; and
(b) is the number of units outstanding at the end of the
preceding Valuation Period.
The Unit Value for a Valuation Period applies for each day in the
period. The assets in the Variable Account will be valued at
their fair market value in accordance with accepted accounting
practices and applicable laws and regulations.
(5) BUSINESS DAY AND VALUATION PERIOD. A Business Day is each day
that the New York Stock Exchange is open for trading, except for
the day after Thanksgiving, the day before Christmas (in
1998), and any day on which the Home Office is closed because
of a weather-related or comparable type of emergency. A
Valuation Period is the period between the close of business
(3:00 p.m. central time) on a Business Day and the close of
business on the next Business Day.
(6) LOAN PROVISIONS. SEE Item 21.
(7) PAYMENT OF BENEFITS. The Company will usually mail proceeds
of complete surrenders, partial withdrawals and Policy Loans
within seven days after the Policyowner's signed request is
received at the Home Office. The Company will usually mail death
proceeds within seven days after receipt of Due Proof of Death,
and maturity benefits within seven days of the Maturity Date.
However, payment of any amount upon complete surrender or
partial withdrawal, payment of any policy loan, and payment of
death proceeds or benefits at maturity may be postponed whenever:
(a) the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the New York Stock
Exchange is restricted as determined by the Commission; (b) the
Commission by order permits postponement for the protection of
Policyowners; or (c) an emergency exists, as determined by the
Commission, as a result of which disposal of the securities is
not reasonably practicable or it is not reasonably practicable to
determine the value of the net assets of the Variable Account.
Payments under the Policy which are derived from any amount paid
to the Company by check or draft may be postponed until such time
as the Company is satisfied that the check or draft has cleared
the bank upon which it is drawn.
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(8) PAYMENT OPTIONS. Death proceeds and Accumulated Value paid at
maturity, or upon partial withdrawal of a Policy, may be paid in
whole or in part under a payment option. There are currently
five payment options available. Payments may also be made under
any new payment option available at the time proceeds become
payable. In addition, proceeds may be paid in any other manner
acceptable to the Company.
An option may be designated in the application or by notifying
the Company in writing at its Home Office. During the life of
the Insured, the Policyowner may select a payment option; in
addition, during that time the Policyowner may change a
previously selected option by sending written notice to the
Company requesting the cancellation of the prior option and the
designation of a new option. If the Policyowner has not chosen
an option prior to the Insured's death, the Beneficiary may
choose an option. The Beneficiary may change a payment option by
sending a written request to the Company, provided that a prior
option chosen by the Policyowner is not in effect.
If no option is chosen, the Company will pay the proceeds of the
Policy in one sum. The Company will also pay the proceeds in one
sum if (i) the proceeds are less than $2,000; (ii) periodic
payments would be less than $20; or (iii) the payee is an
assignee, estate, trustee, partnership, corporation, or
association.
Amounts paid under a payment option are paid pursuant to a
payment contract. Proceeds applied under a payment option earn
interest at a rate guaranteed to be no less than 3.0% compounded
yearly. The Company may be crediting higher interest rates on
the effective date of the payment contract. The Company may, but
is not obligated to, declare additional interest to be applied to
such funds.
If a payee dies, any remaining payments will be paid to a
contingent payee. At the death of the last payee, the commuted
value of any remaining payments will be paid to the last payee's
estate. A payee may not withdraw funds under a payment option
unless the Company has agreed to such withdrawal in the payment
contract. The Company reserves the right to defer a withdrawal
for up to six months and to refuse to allow partial withdrawals
of less than $250.
Payments under Options 2, 3, 4 or 5 will begin as of the date of
the Insured's death, on surrender, or on the Maturity Date.
Payments under Option 1 will begin at the end of the first
interest period after the date proceeds are otherwise payable.
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The options currently available are:
Option 1 -- Interest Income. Periodic payments of interest
earned from the proceeds will be paid. Payments can be
annual, semiannual, quarterly or monthly, as-selected by the
payee, and will begin at the end of the first period chosen.
Proceeds left under this plan will earn interest at a rate
determined by the Company, in no event less than 3.0%
compounded yearly. The payee may withdraw all or part of
the proceeds at any time.
Option 2 -- Income for a Fixed Term. Periodic payments will
be made for a fixed term not longer than 30 years. Payments
can be annual, semi-annual, quarterly or monthly.
Guaranteed amounts payable under the plan will earn interest
at a rate determined by the Company, in no event less than
3.0% compounded yearly.
Option 3 -- Life Income with Term Certain. Equal periodic
payments will be made for a guaranteed minimum period
elected. If the payee lives longer than the minimum period,
payments will continue for his or her life. The minimum
period can be 0, 5, 10, 15 or 20 years. Guaranteed amounts
payable under this plan will earn interest at a rate
determined by the Company, in no event less than 3.0%
compounded yearly.
Option 4 -- Income of a Fixed Amount. Equal periodic
payments of a definite amount will be paid. Payments can be
annual, semi-annual, quarterly or monthly. The amount paid
each period must be at least $20 for each $1,000 of
proceeds. Payments will continue until the proceeds are
exhausted. The last payment will equal the amount of any
unpaid proceeds. Unpaid proceeds will earn interest at a
rate determined by the Company, in no event less than 3.0%
compounded yearly.
Option 5 -- Joint and Two-Thirds Survivor Monthly Life
Income. Equal monthly payments will be made for as long as
two payees live. The guaranteed amount payable under this
plan will earn interest at a minimum rate of 3.0% compounded
yearly. When one payee dies, payments of two-thirds of the
original monthly payment will be made to the surviving
payee. Payments will stop when the surviving payee dies.
(9) ADDITIONAL INSURANCE BENEFITS. Subject to certain
requirements, one or more of the following additional
insurance benefits may be added to a
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Policy by rider: (i) Cost of Living Increase; (ii) Waiver
of Charges; (iii) Other Adult Universal Life Insurance; (iv)
Children's Term Insurance; and (v) Guaranteed Insurability
Option. The cost of any additional insurance benefits will
be deducted as part of the monthly deduction.
INFORMATION CONCERNING THE SECURITIES UNDERLYING THE TRUST'S SECURITIES
11. Describe briefly the kind or type of securities comprising the unit of
specified securities in which security holders have an interest. (If the
unit consists of a single security issued by an investment company, name
such investment company and furnish a description of the type of securities
comprising the portfolio of such investment company.)
The Variable Account invests in shares of the Investment Options.
Information on the Investment Options may be found in the prospectus.
The investment objectives and policies of each Investment Option,
including a description of risks and other information, may be found
in the prospectus for each Investment Option. There is no assurance
that any Investment Option will achieve its stated objectives.
12. If the trust is the issuer of periodic payment plan certificates and if any
underlying securities were issued by another investment company, furnish
the following information for each such company:
(a) Name of company.
(b) Name and principal business address of depositor.
(c) Name and principal business address of trustee or custodian.
(d) Name and principal business address of principal underwriter.
(e) The period during which the securities of such company have been the
underlying securities.
The name, address, custodian, and principal underwriter for each Investment
Option Where applicable, the above information may be found in the
prospectus for each Investment Option.
INFORMATION CONCERNING LOADS, FEES, CHARGES AND EXPENSES
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13. (a) Furnish the following information with respect to each load, fee,
expense or charge to which (1) principal payments, (2) underlying
securities, (3) distributions, (4) cumulated or reinvested
distributions or income, and (5) redeemed or liquidated assets of the
trust's securities are subject:
(A) the nature of such load, fee, expense or charge;
(B) the amount thereof;
(C) the name of the person to whom such amounts are paid and his
relationship to the trust;
(D) the nature of the services performed by such person in
consideration for such load, fee, expense or charge.
(1) PRINCIPAL PAYMENTS.
PREMIUM EXPENSE CHARGE. The Net Premium equals the premium paid
less a premium expense charge. The premium expense charge is
equal to a maximum of 7.0% of premiums up to the Target Premium,
and 2% of each premium in excess of the Target Premium. The
premium expense charge is used to compensate the Company for
expenses incurred in connection with the distribution of the
Policies and for premium taxes imposed by various states and
subdivisions thereof.
(2) UNDERLYING SECURITIES.
The investment advisory fee and other expenses applicable to each
Investment Option is described in the prospectus for each
Investment Option.
(3) DISTRIBUTIONS.
No load, fee, expense or charge is assessed in connection with
distributions.
(4) CUMULATED OR REINVESTED DISTRIBUTIONS OR INCOME.
All income and other distributions earned by the Variable Account
are reinvested, without charge, at net asset value in shares of
the Portfolio making the distribution.
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(5) REDEEMED OR LIQUIDATED ASSETS. Upon partial withdrawal
of a Policy, a charge equal to the lesser of $25 or 2.0% of the
amount withdrawn will be assessed to compensate the Company for
costs incurred in accomplishing the withdrawal. If not paid in
cash, the partial withdrawal fee will be deducted from
Accumulated Value.
Upon complete surrender of a Policy, a surrender charge will
apply during the first six Policy years, as well as during the
first six years following an increase in Specified Amount. The
surrender charge is an amount per $1,000 of Specified Amount,
declining to $0 in the seventh year. The surrender charge
varies by age, sex, underwriting category and Policy Year.
(b) For each installment payment type of periodic payment plan certificate
of the trust, furnish the following information with respect to sales
load and other deductions from principal payments.
SEE answer to Item 13(a) for a description of the deductions for
sales load and other deductions from payments.
(c) State the amount of total deductions as a percentage of the net amount
invested for each type of security issued by the trust. State each
different sales charge available as a percentage of the public
offering price and as a percentage of the net amount invested. List
any special purchase plans or methods established by rule or exemptive
order that reflect scheduled variations in, or elimination of, the
sales load; and identify each class of individuals or transactions to
which such plans apply.
The amount of sales load as a percentage of
premiums paid is contained in Item 13(a).
(d) Explain fully the reasons for any difference in the price at which
securities are offered generally to the public, and the price at which
securities are offered for any class of transactions to any class or
group of individuals, including officers, directors, or employees of
the depositor, trustee, custodian or principal underwriter.
Not applicable.
(e) Furnish a brief description of any loads, fees, expenses, or charges
not covered in Item 13(a) which may be paid by security holders in
connection with the trust or its securities.
(1) MONTHLY DEDUCTION.
Charges will be deducted monthly from the Accumulated Value of
each Policy ("monthly deduction") to compensate the Company for
the cost of insurance coverage and any additional benefits added
by rider, for underwriting and start-up expenses in connection
with issuing a Policy, and for certain administrative costs. The
monthly deduction will be
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deducted on the Policy Date and on each Monthly Deduction Day.
It will be deducted from the Declared Interest Option and each
Subaccount of the Variable Account in the same proportion that
the Policy's Net Accumulated Value in the Declared Interest
Option and the Policy's Accumulated Value in each Subaccount bear
to the total Net Accumulated Value of the Policy. For purposes
of making deductions from the Declared Interest Option and the
Subaccounts, Accumulated Values will be determined as of the end
of the Business Day immediately preceding the Monthly Deduction
Day. Because portions of the monthly de-auction, such as the
cost of insurance, can vary from month to month, the monthly
deduction itself will vary in amount from month to month.
The monthly deduction will be made on the Business Day coinciding
with or immediately following each Monthly Deduction Day and will
equal: (a) the cost of insurance for the Policy; plus (b) the
cost of any optional insurance benefits added by rider; plus (c)
the monthly policy expense charge.
During the first twelve Policy Months and during the twelve
Policy Months immediately following an increase in Specified
Amount, the monthly deduction will include a first year monthly
administrative charge.
COST OF INSURANCE. This charge is designed to compensate the
Company for the anticipated cost of paying death proceeds to
Beneficiaries of those Insureds who die prior to the Maturity
Date. The cost of insurance is determined on a monthly basis,
and is determined separately for the initial Specified Amount and
for any subsequent increases in Specified Amount. The Company
will determine the monthly cost of insurance charge by dividing
the applicable cost of insurance rate or rates by 1,000 and
multiplying the result by the net amount at risk for each Policy
Month.
NET AMOUNT AT RISK. Under Option A the net amount at risk for a
Policy Month is equal to (a) divided by (b), and under Option B
the net amount at risk for a Policy Month is equal to (a) divided
by (b), minus (c), where: (a) is the Specified Amount; (b) is
1.0032737; and (c) is the Accumulated Value.
The Specified Amount and the Accumulated Value will be determined
as of the end of the Business Day immediately preceding the
Monthly Deduction Day.
The net amount at risk is determined separately for the initial
Specified Amount and any increases in Specified Amount. In
determining the net
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amount at risk for each Specified Amount, the Accumulated Value
will be first considered a part of the initial Specified Amount.
If the Accumulated Value exceeds the initial Specified Amount, it
will be considered to be a part of any increase in the Specified
Amount in the same order as the increases occurred.
COST OF INSURANCE RATE. The cost of insurance rate for the
initial Specified Amount will be based on the Insured's sex,
premium class, and Attained Age. For any increase in Specified
Amount, the cost of insurance rate will be based on the Insured's
sex, premium class, and age nearest birthday on the effective
date of the increase. Actual cost of insurance rates may change
and the actual monthly cost of insurance rates will be determined
by the Company based on its expectations as to future mortality
experience. However, the actual cost of insurance rates will
never be greater than the guaranteed maximum cost of insurance
rates set forth in the Policy. These guaranteed rates are based
on the 1980 Commissioners' Standard Ordinary Non-Smoker and
Smoker Mortality Table, Age Nearest Birthday. Current cost of
insurance rates are generally less than the guaranteed maximum
rates. Any change in the cost of insurance rates will apply to
all persons of the same age, sex, and premium class whose
Policies have been in force the same length of time.
The cost of insurance rates generally increase as the Insured's
Attained Age increases. The premium class of an Insured also
will affect the cost of insurance rate. The Company currently
places Insureds into a standard premium class or into premium
classes involving a higher mortality risk. In an otherwise
identical Policy, Insureds in the standard premium class will
have a lower cost of insurance rate than those in premium classes
involving higher mortality risk. The standard premium class is
also divided into two categories: tobacco and non-tobacco. The
Company may offer preferred classes in addition to the standard
tobacco and non-tobacco classes. Non-tobacco Insureds will
generally have a lower cost of insurance rate than similarly
situated Insureds who use tobacco, and preferred plus Insured's
will generally have a lower cost of insurance rate than similarly
situated standard Insureds.
The cost of insurance rate is determined separately for the
initial Specified Amount and for the amount of any increase in
Specified Amount. In calculating the cost of insurance charge,
the rate for the premium class on the Policy Date will be applied
to the net amount at risk for the initial Specified Amount; for
each increase in Specified
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Amount, the rate for the premium class applicable to the increase
will be used. However, if the death benefit is calculated as the
Accumulated Value times the specified amount factor, the rate for
the premium class for the most recent increase that required
evidence of insurability will be used for the amount of death
benefit in excess of the total Specified Amount.
ADDITIONAL INSURANCE BENEFITS. The monthly deduction will
include charges for any additional benefits provided by rider.
MONTHLY POLICY EXPENSE CHARGE. The Company has primary
responsibility for the administration of the Policy and the
Variable Account. Policy expenses include premium billing and
collection, recordkeeping, processing death benefit claims, cash
withdrawals and Policy changes, and reporting and overhead costs.
As reimbursement for Policy expenses related to the maintenance
of each Policy and the Variable Account, the Company assesses a
monthly policy expense charge against each Policy. This charge
is guaranteed not to exceed $7 per Policy Month.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. A monthly
administrative charge will be deducted from Accumulated Value as
part of the monthly deduction during the first twelve Policy
Months and during the twelve Policy Months immediately following
an increase in Specified Amount. The charge will compensate the
Company for first year underwriting, processing and start-up
expenses incurred in connection with the Policy and the Variable
Account. These expenses include the cost of processing
applications, conducting medical examinations, determining
insurability and the Insured's premium class, and establishing
policy records. The first year monthly administrative charge is
guaranteed not to exceed $0.07 per $1,000 of Specified Amount.
FIRST YEAR MONTHLY EXPENSE CHARGE. A monthly expense charge
guaranteed not to exceed $7 per Policy Month will be deducted
from Accumulated Value as part of the monthly deduction during
the first 12 Policy Months.
(2) TRANSACTION CHARGES.
A transfer charge of $25 will be imposed for the second and each
subsequent transfer during a Policy Year to compensate the
Company for the costs in effectuating the transfer. Once a
Policy is issued, the amount of this charge is guaranteed for the
life of the Policy. The transfer charge, unless paid in cash,
will be deducted from the amount transferred. The transfer
charge will not be imposed on transfers that occur as a result of
Policy Loans, the exercise of the special transfer privilege, or
the
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reallocation of Accumulated Value to the Subaccounts and the
Declared Interest Option following acceptance of the Policy by
the Policyowner.
Currently there is no charge for changing the net premium
allocation instructions.
(3) MORTALITY AND EXPENSE RISK CHARGE.
The Company deducts a daily mortality and expense risk charge
from each Subaccount of the Variable Account at an annual rate of
up to 1.05% of the average daily net assets of the Subaccounts.
The mortality risk assumed by the Company is that Insureds may
die sooner than anticipated and that therefore the Company will
pay an aggregate amount of life insurance proceeds greater than
anticipated. The expense risk assumed is that expenses incurred
in issuing and administering the Policies will exceed the amounts
realized from the administrative charges assessed against the
Policies.
(4) FEDERAL TAXES.
Currently no charge is made to the Variable Account for federal
income taxes that may be attributable to the Variable Account.
The Company may, however, make such a charge in the future.
Charges for other taxes, if any, attributable to the Variable
Account may also be made.
(5) INVESTMENT OPTION EXPENSES.
The value of net assets of the Variable Account will reflect the
investment advisory fee and other expenses incurred by the Fund.
(f) State whether the depositor, principal underwriter, custodian or
trustee, or any affiliated person of the foregoing may receive profits
or other benefits not included in answer to Item 13(a) or 13(d)
through the sale or purchase of the trust's securities or underlying
securities or interests in underlying securities, and describe fully
the nature and extent of such profits or benefits.
Neither the Company nor the principal underwriter nor any
affiliated person of the foregoing may receive any profit or any
other benefit from premium payments under the Policy or the
investments held in the Variable Account not included in answer
to Item 13(a) or (d) through the sale or purchase of the Policy
or shares of the Investment Options, except that (1) the Company
may receive a profit to the extent that the cost of
27
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insurance built into the Policy exceeds the actual cost of
insurance needed to pay benefits; (2) favorable mortality or
expense experience may cause the insurance provided under the
Policy to be profitable to the Company; (3) the Company will
compensate certain others, including the Company agents, for
services rendered in connection with the distribution of the
Policy, as described in Item 38, but such payments will be made
from the Company's General Account; and (4) the Adviser will
receive an advisory fee from the Fund, as described in Item
13(a)(2).
(g) State the percentage that the aggregate annual charges and deductions
for maintenance and other expenses of the trust bear to the dividend
and interest income from the trust property during the period covered
by the financial statements filed herewith.
Not applicable.
INFORMATION CONCERNING THE OPERATIONS OF THE TRUST
14. Describe the procedure with respect to applications (if any) and the
issuance and authentication of the trust's securities, and state the
substance of the provisions of any indenture or agreement pertaining
thereto.
Before it will issue a Policy, the Company must receive a completed
application and an initial premium at its Home Office. A Policy
ordinarily will be issued only for Insureds who are 0 to 80 years of
age at their birthday nearest the Policy Date and who supply
satisfactory evidence of insurability to the Company. Acceptance is
subject to the Company's underwriting rules and the Company may, in
its sole discretion, reject any application or premium for any reason.
The minimum Specified Amount for which a Policy will be issued is
normally $50,000, although the Company may in its discretion issue
Policies with Specified Amounts of less than $50,000.
The Policy Date will be the later of (i) the date of the initial
application, or (ii) if additional medical or other information is
required pursuant to the Company's underwriting rules, the date all
such additional information is received by the Company at its Home
Office. The Policy Date may also be any other date mutually agreed to
by the Company and the Policyowner. If the later of (i) and (ii)
above is the 29th, 30th or 31st of any month, the Policy Date will be
the 28th of such month. The Policy Date is the date used to determine
Policy Years, Policy Months, and Policy Anniversaries. The Policy
Date may, but will not always, coincide with the effective date of
insurance coverage under the Policy.
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The effective date of insurance coverage under the Policy will be the
latest of (i) the Policy Date, (ii) if an amendment to the initial
application is required pursuant to the Company's underwriting rules,
the date the Insured signs the last such amendment, or (iii) the date
on which the full initial premium is received by the Company at its
Home Office.
15. Describe the procedure with respect to the receipt of payments from
purchasers of the trust's securities and the handling of the proceeds
thereof, and state the substance of the provisions of any indenture or
agreement pertaining thereto.
Before it will issue a Policy, the Company may require the Policyowner
to pay an initial premium that, when reduced by the premium
expense charge, will be sufficient to pay the monthly deduction for
the first Policy Month. Premiums are payable at the Company's Home
Office. SEE ALSO Items 13(a), 14-16 and 18.
The Policyowner has considerable flexibility to alter the amount,
frequency, and time period over which premiums are paid. The schedule
of planned periodic premiums is not mandatory and, subject to the
limitations described below, the Policyowner may make unscheduled
premium payments, skip periodic premium payments and change the
schedule of planned periodic premiums.
In no event may the total of all premiums paid, both planned periodic
and unscheduled, exceed the current maximum premium limitations
established by federal tax laws. If at any time a premium is paid
which would result in total premiums exceeding the current maximum
premium limitation, the Company will only accept that portion of the
premium which will make total premiums equal the maximum. Any part of
the premium in excess of that amount will be returned and no further
premiums will be accepted until allowed by the applicable maximum
premium limitations.
16. Describe the procedure with respect to the acquisition of underlying
securities and the disposition thereof, and state the substance of the
provisions of any indenture or agreement pertaining thereto.
The Variable Account purchases or redeems shares of the Fund based on
a netting of all transactions for that day, including the amount of
Net Premiums invested in the Variable Account, Policy Loans, loan
repayments, payments upon surrender, charges, and the payment of
benefits to be effected on that day.
17. (a) Describe the procedure with respect to withdrawal or redemption by
security holders.
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The procedures with respect to surrenders or redemption of security
holders are described in response to Items 10(c), (d), (e) and (i).
(b) Furnish the names of any persons who may redeem or repurchase, or are
required to redeem or repurchase, the trust's securities or underlying
securities from security holders, and the substance of the provisions
of any indenture or agreement pertaining thereto.
The Company is required to process all surrender requests as
described in Item 10(c). The Fund will redeem its shares upon
the Company's request in accordance with the Investment Company
Act of 1940. Redeemed shares may later be reissued.
(c) Indicate whether repurchased or redeemed securities will be canceled
or may be resold.
A Policy, once completely surrendered, may not be resold or
reinstated.
18. (a) Describe the procedure with respect to the receipt, custody and
disposition of the income and other distributable funds of the trust
and state the substance of the provisions of any indenture or
agreement pertaining thereto.
All dividend and capital gains distributions of the Fund will be
automatically reinvested in shares of the distributing Portfolio at
its net asset value on the record date.
(b) Describe the procedure, if any, with respect to the reinvestment of
distributions to security holders and state the substance of the
provisions of any indenture or agreement pertaining thereto.
Not applicable.
(c) If any reserves or special funds are created out of income or
principal, state with respect to each such reserve or fund the purpose
and ultimate disposition thereof, and describe the manner of handling
of same.
Net Premiums placed in the Variable Account constitute certain
reserves for benefits under the Policy.
(d) Submit a schedule showing the periodic and special distributions which
have been made to security holders during the three years covered by
the financial statements filed herewith. State for each such
distribution the aggregate amount and amount per share. If
distributions from sources other than current income
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have been made, identify each such other source and indicate whether
such distribution represents the return of principal payments to
security holders. If payments other than cash were made, describe the
nature thereof, the account charged and the basis of determining the
amount of such charge.
No distributions have been made.
19. Describe the procedure with respect to the keeping of records and accounts
of the trust, the making of reports and the furnishing of information to
security holders, and the substance of the provisions of any indenture or
agreement pertaining thereto.
The Company has primary responsibility for the administration of the
Policy and the Variable Account. Administrative expenses include
premium billing and collection; recordkeeping; processing death
benefit claims, cash surrenders and Policy changes; and reporting and
overhead costs. As reimbursement for administrative expenses related
to the maintenance of each Policy and the Variable Account, the
Company assesses a monthly policy expense charge against each Policy.
The Company may administer the Policy itself. The Company may
purchase administrative services from such sources (including
affiliates) as may be available. Such services will be acquired on a
basis which, in the Company's sole discretion, affords the best
services at the lowest cost. The Company reserves the right to select
a company to provide services which the Company deems, in its sole
discretion, is the best able to perform such services in a
satisfactory manner even though the costs for such services may be
higher than would prevail elsewhere.
The Company will send such reports as are required by the Investment
Company Act of 1940 and regulations promulgated thereunder.
The Company will mail to the Policyowner, at least once each year, an
annual report. The annual report will show the current death benefit,
the Accumulated Value in each Subaccount and in the Declared Interest
Option, outstanding Policy Debt and premiums paid, partial surrenders
made and charges assessed since the last report. The report will also
include any other information required by state law or regulation.
Each person having a voting interest in a Subaccount will receive
proxy material, reports, and other materials relating to the
corresponding Investment Option.
20. State the substance of the provisions of any indenture or agreement
concerning the trust with respect to the following:
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(a) Amendments to such indenture or agreement.
Not applicable.
(b) The extension or termination of such indenture or agreement.
Not applicable.
(c) The removal or resignation of the trustee or custodian, or the failure
of the trustee or custodian to perform its duties, obligations and
functions.
The Company acts as custodian. There are no provisions relating to the
removal or resignation of the custodian or the failure of the
custodian to perform its duties, obligations and functions.
(d) The appointment of a successor trustee and the procedure if a
successor trustee is not appointed.
The Variable Account has no trustee.
(e) The removal or resignation of the depositor, or the failure of the
depositor to perform its duties, obligations and functions.
There are no provisions relating to the removal or resignation of
the depositor or the failure of the depositor to perform its
duties, obligations and functions.
(f) The appointment of a successor depositor and the procedure if a
successor depositor is not appointed.
There are no provisions relating to the appointment of a
successor depositor and the procedure if a successor depositor is
not appointed.
21. (a) State the substance of the provisions of any indenture or agreement
with respect to loans to security holders.
So long as the Policy remains in force and has a positive Net
Surrender Value, a Policyowner may borrow money from the Company
at any time using the Policy as the sole security for the Policy
Loan. The maximum amount that may be borrowed at any time is 90%
of the Net Surrender Value as of the end of the Valuation Period
during which the request for a Policy Loan is received at the
Home Office. The Company's claim for repayment of Policy Debt has
priority over the claims of any assignee or other person.
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During any time that there is outstanding Policy Debt, payments
made by the Policyowner will be treated first as payment of
outstanding Policy Debt, unless the Policyowner indicates that
the payment should be treated otherwise. Where no indication is
made, any portion of a payment that exceeds the amount of any
outstanding Policy Debt will be treated as a premium payment.
When a Policy Loan is made, an amount equal to the Policy Loan
will be segregated within the Declared Interest Option as
security for the Policy Loan. If, immediately prior to the Policy
Loan, the Accumulated Value in the Declared Interest Option less
Policy Debt outstanding immediately prior to such Policy Loan is
less than the amount of such Policy Loan, the difference will be
transferred from the Subaccounts of the Variable Account which
have Accumulated Value in the same proportions that the Policy's
Accumulated Value in each Subaccount bears to the Policy's total
Accumulated Value in the Variable Account. Accumulated Values
will be determined as of the end of the Valuation Period during
which the request for the Policy Loan is received at the Home
Office.
Policy Loan proceeds will normally be mailed to the Policyowner
within seven days after receipt of a written request.
Postponement of a loan may take place under certain
circumstances.
Amounts segregated within the Declared Interest Option as
security for Policy Debt will bear interest at an effective
annual rate set by the Company.
The interest rate charged on Policy Loans is not fixed. The
maximum annual loan interest rate will be no greater than the
"Published Monthly Average of the Composite Yield on Seasoned
Corporate Bonds" as published by Moody's Investors Service, Inc.
or any successor thereto. The Company may at any time elect to
change the interest rate. The Company will send notice of any
change in rate to the Policyowner. The new rate will take effect
on the Policy Anniversary coinciding with or next following the
date the rate is changed.
Interest is payable in advance at the time any Policy Loan is
made (for the remainder of the Policy Year) and on each Policy
Anniversary thereafter (for the entire Policy Year) so long as
there is Policy Debt outstanding. Interest payable at the time a
Policy Loan is made will be subtracted from the loan proceeds.
Thereafter, interest not paid when due will be added to the
existing Policy Debt and bear interest at the same rate charged
for
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Policy Loans. The amount equal to unpaid interest will be
segregated within the Declared Interest Option in the same manner
that amounts for Policy Loans are segregated within the Declared
Interest Option.
Because interest is charged in advance, any interest that has not
been earned will be added to the death benefit payable at the
Insured's death and to the Accumulated Value upon complete
surrender, and will be credited to the Accumulated Value in the
Declared Interest Option upon repayment of Policy Debt.
Amounts transferred from the Variable Account as security for
Policy Loans will no longer participate in the investment
performance of the Variable Account. All amounts held in the
Declared Interest option as security for Policy Debt will be
credited with interest on each Monthly Deduction Day at an
effective annual rate equal to the greater of 4.0% or the current
effective loan interest rate minus no more than 3.0%, as
determined and declared by the Company. No additional interest
will be credited to these amounts. The interest credited will
remain in the Declared Interest Option unless and until
transferred by the Policyowner to the Variable Account, but will
not be segregated within the Declared Interest Option as security
for Policy Debt.
Policy Debt equals the sum of all unpaid Policy Loans and any due
and unpaid policy loan interest. If Net Accumulated Value (or Net
Surrender Value as applicable) is insufficient on a Monthly
Deduction Day to cover the monthly deduction, the Company will
notify the Policyowner. To avoid lapse and termination of the
Policy without value, the Policyowner must, during the Grace
Period, make a premium payment that, when reduced by the premium
expense charge, will be at least equal to three times the monthly
deduction due on such Monthly Deduction Day.
Policy Debt may be repaid in whole or in part any time during the
Insured's life and before the Maturity Date so long as the Policy
is in force. Any Policy Debt not repaid is subtracted from the
death benefit payable at the Insured's death, from Surrender
Value upon complete surrender, or from the maturity benefit. Upon
repayment of Policy Debt, the Accumulated Value in the Declared
Interest Option securing the repaid portion of the Policy Debt
will no longer be segregated within the Declared Interest Option
as security for the Policy Debt, but will remain in the Declared
Interest Option unless and until transferred to the Variable
Account by the Policyowner.
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(b) Furnish a brief description of any procedure or arrangement by which
loans are made available to security holders by the depositor,
principal underwriter, trustee or custodian, or any affiliated person
of the foregoing.
Proceeds of a Policy Loan will normally be mailed within seven
days after receipt of a written request for such loan. Payment of
any Policy Loan may be postponed whenever: (i) the New York Stock
Exchange is closed other than customary weekend and holiday
closings, or trading on the New York Stock Exchange is restricted
as determined by the Commission; (ii) the Commission by order
permits postponement for the protection of Policyowners; (iii) an
emergency exists, as determined by the Commission, as a result of
which disposal of securities is not reasonably practicable or it
is not reasonably practicable to determine the value of the net
assets of the Variable Account. In addition, the payment of
Policy Loans allocated to the Declared Interest Option may be
delayed for up to six months. In addition, payment of loan
proceeds made available as a result of Accumulated Value derived
from premiums paid by check or draft may be delayed until such
time as the Company is satisfied that the check or draft has
cleared the bank upon which it is drawn.
SEE paragraph (a) of this Item.
(c) If such loans are made, furnish the aggregate amount of loans
outstanding at the end of the last fiscal year, the amount of interest
collected during the last fiscal year allocated to the depositor,
principal underwriter, trustee or custodian or affiliated person of
the foregoing and the aggregate amount of loans in default at the end
of the last fiscal year covered by financial statements filed
herewith.
Not applicable.
22. State the substance of the provisions of any indenture or agreement with
respect to limitations on the liabilities of the depositor, trustee or
custodian, or any other party to such indenture or agreement.
There is no such provision or agreement.
23. Describe any bonding arrangement for officers, directors, partners or
employees of the depositor or principal underwriter of the trust, including
the amount of coverage and the type of bond.
Additional protection for the assets of the Variable Account is
afforded by a blanket fidelity bond issued by _Chubb Insurance Group_
in the amount of $_5,000,000_ covering all of the officers and
employees of the Company.
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24. State the substance of any other material provisions of any indenture or
agreement concerning the trust or its securities and a description of any
other material functions or duties of the depositor, trustee or custodian
not stated in Item 10 or Items 14 to 23 inclusive.
THE CONTRACT. The Policy is issued in consideration of the statements
in the application and the payment of the initial premium. The Policy,
the application, and any supplemental applications and endorsements
make up the entire contract. In the absence of fraud, the statements
made in an application or supplemental application will be treated as
representations and not as warranties. No statement will void the
Policy or be used in defense of a claim unless contained in the
application or any supplemental application.
INCONTESTABILITY. The Policy is incontestable, except for fraudulent
statements made in the application or supplemental applications, after
it has been in force during the lifetime of the Insured for two years
from the Policy Date or date of reinstatement. This provision does not
apply to riders that provide disability or accidental death benefits.
Any increase in Specified Amount will be incontestable only after it
has been in force during the lifetime of the Insured for two years
from the effective date of the increase.
CHANGE OF PROVISIONS. The Company reserves the right to change the
Policy, in the event of future changes in the federal tax law, to the
extent required to maintain the Policy's qualification as life
insurance under federal tax law.
Except as provided in the foregoing paragraph, no one can change any
part of the Policy except the Policyowner and the President, a Vice
President, or the Secretary or Assistant Secretary of the Company.
Both must agree to any change and such change must be in writing. No
agent may change the Policy or waive any of its provisions.
MISSTATEMENT OF AGE OR SEX. If the Insured's age or sex was misstated
in the application, each benefit and any amount to be paid under the
Policy will be adjusted to reflect the correct age and sex.
SUICIDE EXCLUSION. If the Policy is in force and the Insured commits
suicide, while sane or insane, within two years from the Policy Date,
life insurance proceeds payable under the Policy will be limited to
all premiums paid, reduced by any outstanding Policy Debt and any
partial withdrawals, and increased by any unearned loan interest. If
the Policy is in force and the Insured commits suicide, while sane or
insane, within two years from the effective date of any increase in
Specified Amount, any increase in the death benefit resulting from the
requested
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increase in specified amount will not be paid. Instead, the Company
will refund to the Policyowner an amount equal to the total cost of
insurance applied to the increase.
ANNUAL REPORT. At least once each year, an annual report will be sent
to each Policyowner. The report will show the current death benefit,
the Accumulated Value in each Subaccount and in the Declared Interest
Option, outstanding Policy Debt, and premiums paid, partial
withdrawals made, and charges assessed, since the last report. The
report will also include any other information required by state law
or regulation. Further, the Company will send the Policyowner the
reports required by the Investment Company Act of 1940.
NON-PARTICIPATION. The Policy does not participate in the Company's
profits or surplus earnings. No dividends are payable.
OWNERSHIP OF ASSETS. The Company shall have the exclusive and absolute
ownership and control over assets, including the assets of the
Variable Account.
WRITTEN NOTICE. Any written notice should be sent to the Company at
its Home Office. The notice should include the policy number and the
Insured's full name. Any notice sent by the Company to a Policyowner
will be sent to the address shown in the application unless an
appropriate address change form has been filed with the Company.
POSTPONEMENT OF PAYMENTS. The Company will usually mail the proceeds
of complete surrenders, partial withdrawals and Policy Loans within
seven days after the Policyowner's signed request is received at the
Home Office. The Company will usually mail death proceeds within seven
days after receipt of Due Proof of Death, and maturity benefits within
seven days of the Maturity Date. However, payment of any amount upon
complete surrender or partial withdrawal, payment of any policy loan,
and payment of death proceeds or benefits at maturity may be postponed
whenever: (a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New York
Stock Exchange is restricted as determined by the Commission; (b) the
Commission by order permits postponement for the protection of
Policyowners; or (c) an emergency exists, as determined by the
Commission, as a result of which disposal of the securities is not
reasonably practicable or it is not reasonably practicable to
determine the value of the net assets of the Variable Account.
Transfers may also be postponed under these circumstances.
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Payments under the Policy which are derived from any amount paid to
the Company by check or draft may be postponed until such time as the
Company is satisfied that the check or draft has cleared the bank upon
which it is drawn.
CONTINUANCE OF INSURANCE. The insurance under a Policy will continue
until the earlier of: (a) the end of the Grace Period following the
Monthly Deduction Day on which the Net Accumulated Value or Net
Surrender Value is less than the monthly deduction for the following
Policy Month; (b) the date the Policyowner surrenders the Policy for
its entire Net Surrender Value; (c) the death of the Insured; or (d)
the Maturity Date.
Any rider to a Policy will terminate on the date specified in the
rider.
OWNERSHIP. The Policy belongs to the Policyowner. The original
Policyowner is the person named as owner in the application. Ownership
of the Policy may change according to the ownership option selected as
part of the original application or by a subsequent endorsement to the
Policy. During the Insured's lifetime, all rights granted by the
Policy belong to the Policyowner, except as otherwise provided for in
the Policy.
Special ownership rules may apply if the Insured is under legal age
(as defined by the law of the state in which the Policy is issued) on
the Policy Date.
The Policyowner may assign the Policy as collateral security. The
Company assumes no responsibility for the validity or effect of any
collateral assignment of the Policy. No assignment will bind the
Company unless in writing and until received by the Company at its
Home Office. The assignment is subject to any payment or action taken
by the Company before it received the assignment at the Home Office.
THE BENEFICIARY. The primary Beneficiaries and contingent
Beneficiaries are designated by the Policyowner in the application. If
changed, the primary Beneficiary or contingent Beneficiary is as shown
in the latest change filed with the Company. One or more primary or
contingent beneficiaries may be named in the application. In such
case, the proceeds will be paid in equal shares to the survivors in
the appropriate beneficiary class, unless requested otherwise by the
Policyowner.
Unless a payment option is chosen, the proceeds payable at the
Insured's death will be paid in a lump sum to the primary Beneficiary.
If the primary Beneficiary dies before the Insured, the proceeds will
be paid to the contingent Beneficiary. If
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no Beneficiary survives the Insured, the proceeds will be paid to the
Policyowner or the Policyowner's estate.
CHANGING THE POLICYOWNER OR BENEFICIARY. During the Insured's life,
the Policyowner and the Beneficiary may be changed. To make a change,
written request must be sent to the Company at its Home Office. The
request and the change must be in a form satisfactory to the Company
and must actually be received and recorded by the Company. The change
will take effect as of the date the request is signed by the
Policyowner. The change will be subject to any payment made before the
change is recorded by the Company. The Company may require return of
the Policy for endorsement.
III.
ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS
OF DEPOSITOR
ORGANIZATION AND OPERATIONS OF DEPOSITOR
25. State the form or organization of the depositor of the trust, the name of
the state or other sovereign power under the laws of which the depositor
was organized and the date of organization.
The Company is a stock life insurance company incorporated in the
State of Iowa on June 3, 1966.
26. (a) Furnish the following information with respect to all fees received by
the depositor of the trust in connection with the exercise of any
functions or duties concerning securities of the trust during the
period covered by the financial statements filed herewith.
Not applicable.
(b) Furnish the following information with respect to any fee or any
participation in fees received by the depositor from any underlying
investment company or any affiliated person or investment adviser of
such company.
Not applicable.
27. Describe the general character of the business engaged in by the depositor
including a statement as to any business other than that of depositor of
the trust. If the depositor acts or has acted in any capacity with respect
to any investment company or companies other than the trust, state the name
or names of such company or companies, their relationship, if any, to the
trust, and the nature of the depositor's activities therewith. If the
depositor
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has ceased to act in such named capacity, state the date of and circumstance
surrounding such cessation.
The Company is principally engaged in offering life insurance, annuity
contracts and disability income insurance and is admitted to do business in
38 states -- Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa,
Kansas, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio,
Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah,
Virginia, Washington, Wisconsin and Wyoming.
Officials and Affiliated Persons of Depositor
28. (a) Furnish as at latest practicable date the following information with
respect to the depositor of the trust, with respect to each officer,
director, or partner of the depositor, and with respect to each
natural person directly or indirectly owning, controlling or holding
with power to vote 5% or more of the outstanding voting securities of
the depositor.
(i) name and principal business address;
(ii) nature of relationship or affiliation with depositor of the
trust;
(iii) ownership of all securities of the depositor;
(iv) ownership of all securities of the trust;
(v) other companies of which each person named above is presently
officer, director, or partner.
See answer to Item 28(b) and Item 29.
(b) Furnish a brief statement of the business experience during the last
five years of each officer, director or partner of the depositor.
OFFICERS AND DIRECTORS OF FARM BUREAU LIFE INSURANCE COMPANY
PLEASE REFER TO THE FORM S-6 REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE VARIABLE ACCOUNT FOR A CURRENT LIST OF OFFICERS
AND DIRECTORS OF THE COMPANY.
COMPANIES OWNING SECURITIES OF DEPOSITOR
29. Furnish as at latest practicable date the following information with
respect to each company which directly or indirectly owns, controls or
holds power to vote 5% or more of the outstanding voting securities of the
depositor: (a) name and principal business address; (b) nature of business;
(c) ownership of all securities of the depositor.
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Please see the prospectus for this information.
CONTROLLING PERSONS
30. Furnish as at latest practicable date the following information with
respect to any person, other than those covered by Items 28, 29, and 42 who
directly or indirectly controls the depositor.
None.
COMPENSATION OF OFFICERS AND DIRECTORS OF DEPOSITOR
COMPENSATION OF OFFICERS
31. Furnish the following information with respect to the remuneration for
services paid by the depositor during the last fiscal year covered by
financial statements filed herewith:
(a) directly to each of the officers or partners of the depositor directly
receiving the three highest amounts of remuneration:
(b) directly to all officers or partners of the depositor as a group
exclusive of persons whose remuneration is included under Item 31(a),
stating separately the aggregate amount paid by the depositor itself
and the aggregate amount paid by all the subsidiaries;
(c) indirectly or through subsidiaries to each of the officers or partners
of the depositor.
Not applicable. As of this date, the Variable Account has not yet
commenced operations. Even when operations commence, meaningful
allocations may not be able to be made.
COMPENSATION OF DIRECTORS
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32. Furnish the following information with respect to the remuneration for
services, exclusive of remuneration reported under Item 31, paid by the
depositor during the last fiscal year covered by financial statements filed
herewith:
(a) the aggregate direct remuneration to directors;
(b) indirectly or through subsidiaries to directors.
Not applicable. SEE Item 31.
COMPENSATION TO EMPLOYEES
33. (a) Furnish the following information with respect to the aggregate amount
of remuneration for services of all employees of the depositor
(exclusive of persons whose remuneration is reported in Items 31 and
32) who received remuneration in excess of $10,000 during the last
fiscal year covered by financial statements filed herewith from the
depositor and any of its subsidiaries.
Not applicable. SEE Item 31.
(b) Furnish the following information with respect to the remuneration for
services paid directly during the last fiscal year covered by
financial statements filed herewith to the following classes of
persons (exclusive of those persons covered by Item 33(a)): (1) Sales
managers, branch managers, district managers and other persons
supervising the sale of registrant's securities; (2) Salesmen, sales
agents, canvassers and other persons making solicitations but not in
supervisory capacity; (3) Administrative and clerical employees; and
(4) Others (specify). If a person is employed in more than one
capacity, classify according to predominant type of work.
Not applicable. SEE Item 31.
COMPENSATION TO OTHER PERSONS
34. Furnish the following information with respect to the aggregate amount of
compensation for services paid any person (exclusive of persons whose
remuneration is reported in Items 31, 32 and 33), whose aggregate
compensation in connection with services rendered with respect to the trust
in all capacities exceeded $10,000 during the last fiscal year covered by
financial statements filed herewith from the depositor and any of its
subsidiaries.
Not applicable. SEE Item 31.
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IV.
DISTRIBUTION AND REDEMPTION OF SECURITIES
DISTRIBUTION OF SECURITIES
35. Furnish the names of the states in which sales of the trust's securities
(A) are currently being made, (B) are presently proposed to be made, and
(C) have been discontinued, indicating by appropriate letter the status
with respect to each state.
No sales are currently being made. It is proposed that the
Policy will ultimately be offered in the states where the
Company is licensed to do business.
36. If sales of the trust's securities have at any time since January 1, 1936
been suspended for more than a month, describe briefly the reasons for such
suspension.
Not applicable.
37. (a) Furnish the following information with respect to each instance where
subsequent to January 1, 1937, any federal or state governmental
officer, agency, or regulatory body denied authority to distribute
securities of the trust, excluding a denial which was merely a
procedural step prior to any determination by such officer, etc. and
which denial was subsequently rescinded.
(1) Name of officer, agency or body.
(2) Date of denial.
(3) Brief statement of reason given for revocation.
Not applicable.
(b) Furnish the following information with regard to each instance where,
subsequent to January 1, 1937, the authority to distribute securities
of the trust has been revoked by any federal or state governmental
officer, agency or regulatory body.
Not applicable.
38. (a) Furnish a general description of the method of distribution of
securities of the trust.
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The Policy will be sold by individuals who, in addition to being
licensed as life insurance agents for the Company, are also
registered representatives of EquiTrust Marketing, the principal
underwriter of the Policies, a broker-dealer having a selling
agreement with EquiTrust Marketing or a broker-dealer having a
selling agreement with such broker-dealer. EquiTrust Marketing is
registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc.
(b) State the substance of any current selling agreement between each
principal underwriter and the trust or the depositor, including a
statement as to the inception and termination dates of the agreement,
any renewal and termination provisions, and any assignment provisions.
The Company will enter into an agreement with EquiTrust Marketing, the
principal underwriter, pursuant to which the Company will pay
commissions for services in distributing the Policy.
(c) State the substance of any current agreements or arrangements of each
principal underwriter with dealers, agents, salesmen, etc. with
respect to commissions and overriding commissions, territories,
franchises, qualifications and revocations. If the trust is the issuer
of periodic payment plan certificates, furnish schedules of
commissions and the bases thereof. In lieu of a statement concerning
schedules of commissions, such schedules of commissions may be filed
as Exhibit A(3)(c).
SEE Exhibit A (3) (c).
INFORMATION CONCERNING PRINCIPAL UNDERWRITER
39. (a) State the form of organization of each principal underwriter of
securities of the trust, the name of the state or other sovereign
power under the laws of which each underwriter was organized and the
date of organization.
EquiTrust Marketing, the principal underwriter of the Policy, is a
corporation incorporated on May 7, 1970 under the laws of Delaware.
(b) State whether any principal underwriter currently distributing
securities of the trust is a member of the National Association of
Securities Dealers, Inc.
No Policies are currently being offered. EquiTrust Marketing is a
member of the National Association of Securities Dealers, Inc.
40. (a) Furnish the following information with respect to all fees received by
each principal underwriter of the trust from the sale of securities of
the trust and any other functions in connection therewith exercised by
such underwriter in such capacity or otherwise during the period
covered by the financial statements filed herewith.
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Not applicable.
(b) Furnish the following information with respect to any fee or any
participation in fees received by each principal underwriter from any
underlying investment company or any affiliated person or investment
adviser of such company:
(1) The nature of such fee or participation.
(2) The name of the person making payment.
(3) The nature of the services rendered in consideration for such
fee or participation.
(4) The aggregate amount received during the last fiscal year
covered by the financial statements filed herewith.
No fees have yet been paid.
41. (a) Describe the general character of the business engaged in by each
principal underwriter, including a statement as to any business other
than the distribution of securities of the trust. If a principal
underwriter acts or has acted in any capacity with respect to any
investment company or companies other than the trust, state the name
or names of such company or companies, their relationship, if any, to
the trust and the nature of such activities. If a principal
underwriter has ceased to act in such named capacity, state the date
of and the circumstances surrounding such cessation.
Upon registration, EquiTrust Marketing will act as principal
underwriter of the Policy. In the future, EquiTrust Marketing may
underwrite or distribute other variable insurance policies or other
securities.
(b) Furnish as at latest practicable date the address of each branch
office of each principal underwriter currently selling securities of
the trust and furnish the name and residence address of the person in
charge of office.
Not applicable. The sale of the Policy has not yet commenced.
(c) Furnish the number of individual salesmen of each principal
underwriter through whom any of the securities of the trust were
distributed for the last fiscal year of the trust covered by the
financial statements filed herewith and furnish the aggregate amount
of compensation received by such salesmen in such year.
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Not applicable.
42. Furnish as at latest practicable date the following information with
respect to each principal underwriter currently distributing securities of
the trust and with respect to each of the officers, directors or partners
of such underwriter: (a) name and principal business address; (b) position
with principal underwriter; (c) ownership of securities of the trust.
Not applicable. The sale of the Policy has not yet commenced.
43. Furnish, for the last fiscal year covered by the financial statements filed
herewith, the amount of brokerage commissions received by any principal
underwriter who is a member of a national securities exchange and who is
currently distributing the securities of the trust or effecting
transactions for the trust in the portfolio securities of the trust.
Not applicable.
OFFERING PRICE OR ACQUISITION VALUATION OF SECURITIES OF THE TRUST
44. (a) Furnish the following information with respect to the method of
valuation used by the trust for purposes of determining the offering
price to the public of securities issued by the trust or the valuation
of shares or interests in the underlying securities acquired by the
holder of a periodic payment plan certificate:
(1) The source of quotations used to determine the value of
portfolio securities.
Fund shares are valued at the net asset value per share as
supplied to the Company by the Fund or its agent.
(2) Whether opening, closing, bid, asked or any other price is
used.
SEE Items 44(a)(1) and 16.
(3) Whether price is as of the day of sale or as of any other time.
SEE Item 16.
(4) A brief description of the methods used by registrant for
determining other assets and liabilities including accrual for
expenses and taxes (including taxes on unrealized
appreciation).
The assets of the Variable Account and liabilities (such as
charges against the Variable Account) are valued in accordance
with generally accepted accounting principles on an accrual
basis. Because of its current tax status,
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the Company does not expect to incur any federal income tax
liabilities that would be chargeable to the Variable Account,
and the Company does not intend to make a charge for federal
income taxes. The Company may, however, incur state and local
taxes (in addition to premium taxes) in several states. At
present, these taxes are not significant. If there is a
material change in state or local tax laws, charges for such
taxes, if any, attributable to the Variable Account may be
made.
(5) Other items which registrant adds to the net asset value in
computing offering price of its securities.
Not applicable.
(6) Whether adjustments are made for fractions:
(i) before adding distributor's compensation (load); and
(ii) after adding distributor's compensation (load).
Not applicable because the Variable Account does not compute
per-unit values and sales loads in the manner presupposed by
this Item and Item 44(b).
Appropriate adjustments will be made for fractions in all
computations.
(b) Furnish a specimen schedule showing the components of the
offering price of the trust's securities as at the latest
practicable date.
No Policies have yet been offered for sale to the public.
(c) If there is any variation in the offering price of the trust's
securities to any person or classes of persons other than
underwriters, state the nature and amount of such variation and
indicate the person or classes of persons to whom such offering
is made.
The Company does not require premium payments of a fixed amount at
designated intervals for a specified time period. The Policyowner may,
subject to the limitations set forth in Item 10(i), pay premiums at
any frequency and in any amount. Nonetheless, Policyowners will need
to pay sufficient premiums to maintain adequate Accumulated Value to
pay monthly charges, including the cost of insurance. The cost of
insurance will vary, depending upon the Insured's age, sex and premium
class. In addition, there will be additional charges if additional
insurance benefits are elected. Thus, for the Policy to remain in
force, a
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Policyowner will need to take the cost of insurance, as well as other
factors such as investment performance, into consideration in
determining the amount and frequency of premium payments.
45. Furnish the following information with respect to any suspension of the
redemption rights of the securities issued by the trust during the three
fiscal years covered by the financial statements filed herewith.
Not applicable.
REDEMPTION VALUATION OF SECURITIES OF THE TRUST
46. (a) Furnish the following information with respect to the method of
determining the redemption or withdrawal valuation of securities
issued by the trust:
(1) The source of quotations used to determine the value of
portfolio securities.
SEE Item 44(a)(1).
(2) Whether opening, closing, bid, asked or any other price is
used.
SEE Item 44(a)(2).
(3) Whether price is as of the day of sale or as of any other time.
The price is as of the end of the Valuation Period during which
the surrender request is received at the Company's Home Office.
(4) A brief description of the methods used by registrant for
determining other assets and liabilities including accrual for
expenses and taxes (including taxes on unrealized
appreciation).
SEE Items 44(a)(4) and 18(c).
(5) Other items which registrant deducts from the net asset value
in computing redemption value of its securities:
SEE Answer to Item 10(c).
(6) Whether adjustments are made for fractions.
Not applicable.
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(b) Furnish a specimen schedule showing the components of the redemption
price to the holders of the trust's securities as at latest
practicable date.
No Policies have yet been offered for sale to the public.
PURCHASE AND SALE OF INTERESTS IN UNDERLYING SECURITIES FROM AND TO SECURITY
HOLDERS
47. Furnish a statement as to the procedure with respect to the maintenance of
a position in the underlying securities or interests in the underlying
securities, the extent and nature thereof and the person who maintains such
a position. Include a description of the procedure with respect to the
purchase of underlying securities or interests in underlying securities
from security holders who exercise redemption or withdrawal rights and the
sale of such underlying securities and interests in the underlying
securities to other security holders. State whether the method of valuation
of such underlying securities or interests in underlying securities differs
from that set forth in Items 44 and 46. If any item of expenditure included
in the determination of the valuation is not or may not actually be
incurred or expended, explain the nature of such item and who may benefit
from the transaction.
Shares of the Fund are purchased at net asset value. Shares of the Fund
will be issued only to the Company, its affiliates and non-affiliated life
insurance companies for investment of the assets of separate accounts that
hold assets from the sale of variable insurance products, and will not be
sold directly to the general public. The Company will redeem sufficient
shares of the Fund to pay certain life insurance proceeds, benefits at
maturity, or surrender proceeds, or for other purposes contemplated by the
Policy.
V.
INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Furnish the following information as to each trustee or custodian of the
trust:
(a) Name and principal business address.
(b) Form of organization.
(c) State or other sovereign power under the laws of which the trustee or
custodian was organized.
(d) Name of governmental supervising or examining authority.
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The Company acts as custodian and holds the assets of the Variable
Account and maintains records of all purchases and redemptions of
shares of the Fund held by the Variable Account. The assets are kept
physically segregated and held separate and apart from the Company's
General Account. SEE ALSO Item 2.
49. State the basis for payment of fees or expenses of the trustee or custodian
for services rendered with respect to the trust and its securities, and the
aggregate amount thereof for the last fiscal year. Indicate the person
paying such fees or expenses. If any fees or expenses are prepaid, state
the unearned amount.
Not applicable.
50. State whether the trustee or custodian or any other person has or may
create a lien on the assets of the trust, and if so, give full particulars,
outlining the substance of the provisions of any indenture or agreement
with respect thereto.
The assets of the Variable Account are not chargeable with liabilities
arising out of any other business that the Company may conduct. The
assets of the Variable Account are available to cover the general
liabilities of the Company only to the extent that assets in the
Variable Account exceed liabilities arising under the Policy. The
income, capital gains, and capital losses of each Subaccount are
credited to or charged against the assets held in that Subaccount in
accordance with the terms of the Policy.
VI.
INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
51. Furnish the following information with respect to insurance of holders of
securities:
(a) The name and address of the insurance company.
The name and address of the Company are set forth in the Answer
to Item 2.
(b) The types of Policies and whether individual or group Policies.
The Policy is a flexible premium variable life insurance policy
issued on an individual basis.
(c) The types of risks insured and excluded.
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The Company assumes the risk that the deductions made for
mortality risks will prove inadequate to cover actual insurance
costs. The Company also assumes the risk that deductions for
expenses may be inadequate. See Item 10(i).
(d) The coverage of the Policies.
The minimum Specified Amount is stated in each Policy. Death
proceeds will be reduced by any outstanding Policy Debt and any
due and unpaid monthly deductions, and increased by any
unearned loan interest and any premiums paid after the date of
death. See Paragraph (c) of this Item.
(e) The Beneficiaries of such Policies and the uses to which the proceeds
of Policies must be put.
The recipient of the benefits of the insurance undertakings described
in the Answer to Items 10(i) and 51(c) is either the Policyowner or
the primary Beneficiary or contingent Beneficiary specified in the
Policy. There are no restrictions on the use of the proceeds other
than those established by the Policyowner.
(f) The terms and manners of cancellation and of reinstatement.
The insurance undertakings described in the Answer to Item 51(c) are
an integral part of the Policy and may not be terminated while the
Policy remains in force.
(g) The method of determining the amount of premiums to be paid by holders
of securities.
SEE Answers to Items 13(a) and 13(e) for the amount of charges
imposed. See Items 10(i) and 44(c) for the manner in which the premium
is determined.
(h) The amount of aggregate premiums paid to the insurance company during
the last fiscal year.
Not applicable.
(i) Whether any person other than the insurance company receives any part
of such premiums, the name of each such person and the amounts
involved, and the nature of the SERVICES rendered therefor.
No person other than the Company receives any part of the
amounts deducted for assumption of mortality and expense risks.
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(j) The substance of any other material provisions of any indenture or
agreement of the trust relating to insurance.
None.
VII .
POLICY OF REGISTRANT
52. (a) Furnish the substance of the provisions of any indenture or agreement
with respect to the conditions upon which and the method of selection
by which particular portfolio securities must or may be eliminated
from assets of the trust or must or may be replaced by other portfolio
securities. If an investment adviser or other person is to be employed
in connection with such selection, elimination or substitution, state
the name of such person, the nature of any affiliation to the
depositor, trustee or custodian, and any principal underwriter, and
the amount of remuneration to be received for such services. If any
particular person is not designated in the indenture or agreement,
describe briefly the method of selection of such person.
SEE Answers to Items 10(g) and 10(h) as regards the Company's right to
substitute any other investment for shares of any Portfolio of the
Fund.
(b) Furnish the following information with respect to each transaction
involving the elimination of any underlying security during the period
covered by the financial statements filed herewith.
Not applicable.
(c) Describe the Policy of the trust with respect to the substitution and
elimination of the underlying securities of the trust with respect to:
(1) the grounds for elimination and substitution;
(2) the type of securities which may be substituted;
(3) whether the acquisition of such substituted security or
securities would constitute the concentration of investment in
a particular industry or group of industries or would conform
to a Policy of concentration of investment in a particular
industry or group of industries;
(4) whether such substituted securities may be the securities of
another investment company; and
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(5) the substance of the provisions of any indenture or agreement
which authorize or restrict the Policy of the registrant in
this regard.
SEE Answer to Items 10(g) and 10(h).
(d) Furnish a description of any policy (exclusive of policies covered by
paragraphs (a) and (b) herein) of the trust which is deemed a matter
of fundamental policy and which is elected to be treated as such.
None.
53. (a) State the taxable status of the trust.
The Company does not expect to incur any income tax upon the earnings
or the realized capital gains attributable to the Variable Account.
Based upon these expectations, no charge is being made currently to
the Variable Account for federal income taxes which may be
attributable to the Variable Account. If, however, the Company
determines that it may incur such taxes, it may assess a charge for
those taxes from the Variable Account.
The Company may also incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in state or local tax laws,
charges for such taxes, if any, attributable to the Variable Account
may be made.
(b) State whether the trust qualified for the last taxable year as a
regulated investment company as defined in Section 851 of the Internal
Revenue Code of 1954, and state its present intention with respect to
such qualifications during the current taxable year.
Not applicable. SEE Answer to Item 53(a).
VIII.
FINANCIAL AND STATISTICAL INFORMATION
54. If the trust is not the issuer of periodic payment plan certificates,
furnish the following information with respect to each class or series
of its securities.
Not applicable.
55. If the trust is the issuer of periodic payment plan certificates, a
transcript of a hypothetical account shall be filed in approximately the
following form on the basis of the certificate
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calling for the smallest amount of payments. The schedule shall cover a
certificate of the type currently being sold assuming that such certificate
had been sold at a date approximately ten years prior to the date of
registration or at the approximate date of organization of the trust.
Not applicable.
56. If the trust is the issuer of periodic payment plan certificates, furnish
by years for the period covered by the financial statements filed herewith
in respect of certificates sold during each period, the following
information for each fully paid type and each installment payment type of
periodic payment plan certificate currently being issued by the trust.
Not applicable.
57. If the trust is the issuer of periodic payment plan certificates, furnish
by years for the period covered by the financial statements filed herewith
the following information for each installment payment type of periodic
payment plan certificate currently being issued by the trust.
Not applicable.
58. If the trust is the issuer of periodic payment plan certificates, furnish
the following information for each installment payment type of periodic
payment plan certificate outstanding as at the latest practicable date.
Not applicable.
59. Financial statements:
FINANCIAL STATEMENTS OF THE TRUST
Financial statements, if any, will be contained in a pre-effective
amendment to the registration statement for the Policy on Form S-6
filed under the Securities Act of 1933. They are incorporated herein
by reference.
FINANCIAL STATEMENTS OF THE DEPOSITOR
The financial statements of the Company accompany the registration
statement on Form S-6 filed by the Registrant pursuant to the
Securities Act of 1933. They are incorporated herein by reference.
IX.
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EXHIBITS
The required exhibits to the EquiTrust Life Variable Account II
registration statement on Form S-6 are incorporated by reference.
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SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940 the
depositor of the registrant has caused this registration statement to be duly
signed on behalf of the registrant in the City of West Des Moines, State of Iowa
on August 13, 1998.
EQUITRUST LIFE VARIABLE ACCOUNT II
-------------------------------------------
(Name of registrant)
BY: EQUITRUST LIFE INSURANCE COMPANY
--------------------------------------
(Name of depositor)
By: /s/ Edward M. Wiederstein
----------------------------------------
(Print name) /s/ Edward M. Wiederstein
-------------------------------
(Title) President
------------------------------------
EquiTrust Life Insurance Company
Attest: /s/Richard D. Harris
Richard D. Harris
Senior Vice President & Secretary-Treasurer
56
