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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1998
REGISTRATION NO. 333-
811-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2 /X/
FARM BUREAU LIFE VARIABLE ACCOUNT III
(Exact Name of Registrant)
FARM BUREAU LIFE INSURANCE COMPANY
(Name of Depositor)
5400 University Avenue
West Des Moines, Iowa 50266
(Address of Principal Executive Office)
------------------------
STEPHEN M. MORAIN, ESQUIRE
5400 University Avenue
West Des Moines, Iowa 50266
(Name and Address of Agent for Service of Process)
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COPY TO:
STEPHEN E. ROTH, ESQUIRE
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
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Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
Securities being offered: Flexible Premium Variable Life Insurance Policies
------------------------
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
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RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 Caption in Prospectus
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1. Cover Page
2. Cover Page
3. Not Applicable
4. Distribution of the Policies
5. Farm Bureau Life Insurance Company; The Variable Account
6. The Variable Account
7. Not Required
8. Not Required
9. Legal Proceedings
10. Summary; The Variable Account; Investment Options; Charges
and Deductions; Policy Benefits; Voting Rights; General
Provisions
11. Summary; Investment Options
12. Summary; Investment Options
13. Summary; Charges and Deductions; Investment Options
14. Summary; Premiums
15. Premiums
16. Premiums; Investment Options
17. Summary; Charges and Deductions; Policy Benefits; Investment
Options
18. Investment Options; Premiums
19. General Provisions; Voting Rights
20. Not Applicable
21. Policy Benefits; General Provisions
22. Not Applicable
23. Safekeeping of the Variable Account's Assets
24. General Provisions
25. Farm Bureau Life Insurance Company
26. Not Applicable
27. Farm Bureau Life Insurance Company
28. Executive Officers and Directors of Farm Bureau Life
Insurance Company
29. Farm Bureau Life Insurance Company; State Regulation and
Ownership of the Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Distribution of the Policies
36. Not Required
37. Not Applicable
38. Summary; Distribution of the Policies
39. Summary; Distribution of the Policies
40. Not Applicable
41. Farm Bureau Life Insurance Company; Distribution of the
Policies
</TABLE>
i
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<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 Caption in Prospectus
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42. Not Applicable
43. Not Applicable
44. Premiums
45. Not Applicable
46. Policy Benefits
47. Investment Options
48. Not Applicable
49. Not Applicable
50. The Variable Account
51. Cover Page; Summary; Charges and Deductions; Policy
Benefits; Premiums
52. Investment Options
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Required
57. Not Required
58. Not Required
59. Not Required
</TABLE>
ii
<PAGE>
PROSPECTUS
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FARM BUREAU LIFE VARIABLE ACCOUNT III
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
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This Prospectus describes a flexible premium variable life insurance policy (the
"Policy") issued by Farm Bureau Life Insurance Company (the "Company"). This
type of life insurance is also commonly called variable universal life. The
Policy is designed to provide lifetime insurance protection to age 115. The
Policy permits the policyowner to vary premium payments and adjust the death
proceeds payable under the Policy. The Policy has been designed for maximum
flexibility in meeting changing insurance needs.
The minimum specified amount for which a Policy will be issued is normally
$50,000. The Policy provides for the payment of the death proceeds upon the
death of the insured and for a net surrender value or net accumulated value that
can be obtained upon surrender or partial withdrawal of the Policy. Death
proceeds may, and accumulated value will, vary with the investment experience of
Farm Bureau Life Variable Account III (the "Variable Account"). THE POLICYOWNER
BEARS THE ENTIRE INVESTMENT RISK; THERE IS NO GUARANTEED MINIMUM ACCUMULATED
VALUE. The Policy also provides for loans using the Policy as collateral. The
Policy will remain in force so long as net accumulated value or net surrender
value is sufficient to pay certain monthly charges imposed in connection with
the Policy.
A policyowner may allocate net premiums under a Policy to one or more of the
subaccounts of the Variable Account. Each Subaccount invests exclusively in
shares of the corresponding Investment Options of EquiTrust Variable Insurance
Series Fund: Value Growth Portfolio, High Grade Bond Portfolio, High Yield Bond
Portfolio, Money Market Portfolio and Blue Chip Portfolio; T. Rowe Price Equity
Series, Inc.: Equity Income Portfolio, Mid-Cap Growth Portfolio, New America
Growth Portfolio and Personal Strategy Balanced Portfolio; T. Rowe Price
International Series, Inc.: International Stock Portfolio or [Additional
Investment Options to be filed by amendment.] The accompanying prospectus for
each Fund describes the investment objectives and attendant risks of each
Investment Option.
A policy owner may also allocate net premiums to the Declared Interest Option.
The Declared Interest Option is supported by the Company's General Account.
Accumulated value allocated to the Declared Interest Option is credited with
interest at a declared annual rate guaranteed to be at least 4.0%.
This Prospectus generally describes only the portion of the Policy involving the
Variable Account. For a brief summary of the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
A policy may be treated as a modified endowment contract depending upon the
amount of premiums paid in relation to the death benefit provided under such
Policy. If a contract is a modified endowment contract, any loan, partial
withdrawal, surrender and/or assignment of the policy could result in adverse
tax consequences and/or penalties. (See "FEDERAL TAX MATTERS.")
It may not be advantageous to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if the purchaser already owns another flexible premium variable life insurance
policy.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR EACH
FUND'S INVESTMENT OPTIONS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
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Issued By
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
1-800-247-4170
THE DATE OF THIS PROSPECTUS IS , 1998.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
DEFINITIONS............................................................... 3
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SUMMARY OF THE POLICY..................................................... 5
The Policy...................................................... 5
The Variable Account............................................ 5
The Declared Interest Option.................................... 5
Premiums........................................................ 5
Policy Benefits................................................. 6
Charges......................................................... 7
Distribution of the Policies.................................... 9
Other Policies.................................................. 9
Tax Treatment................................................... 9
Cancellation Privilege.......................................... 9
Illustrations................................................... 9
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FARM BUREAU LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT............... 9
Farm Bureau Life Insurance Company.............................. 9
Iowa Farm Bureau Federation..................................... 10
The Variable Account............................................ 10
Investment Options.............................................. 10
Addition, Deletion or Substitution of Investments............... 12
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THE POLICY................................................................ 13
Purpose of the Policy........................................... 13
Purchasing the Policy........................................... 13
Premiums........................................................ 14
Policy Lapse and Reinstatement.................................. 15
Examination of Policy (Cancellation Privilege).................. 16
Special Transfer Privilege...................................... 16
Exchange Privilege.............................................. 17
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POLICY BENEFITS........................................................... 18
Accumulated Value Benefits...................................... 19
Transfers....................................................... 21
Loan Benefits................................................... 21
Death Proceeds.................................................. 23
Accelerated Payments of Death Proceeds.......................... 26
Benefits at Maturity............................................ 26
Payment Options................................................. 27
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CHARGES AND DEDUCTIONS.................................................... 28
Premium Expense Charge.......................................... 28
Monthly Deduction............................................... 28
Transfer Charge................................................. 30
Partial Withdrawal Fee.......................................... 30
Surrender Charge................................................ 30
Variable Account Charges........................................ 31
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THE DECLARED INTEREST OPTION.............................................. 31
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GENERAL PROVISIONS........................................................ 32
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DISTRIBUTION OF THE POLICIES.............................................. 35
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FEDERAL TAX MATTERS....................................................... 35
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ADDITIONAL INFORMATION.................................................... 39
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FINANCIAL STATEMENTS...................................................... 47
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APPENDIX A................................................................ A-1
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APPENDIX B................................................................ B-1
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APPENDIX C................................................................ C-1
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</TABLE>
The Policy is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE
TO AN INVESTMENT IN A MUTUAL FUND.
2
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DEFINITIONS
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<TABLE>
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ACCUMULATED VALUE............ The total amount invested under the Policy. It is the sum of the values of
the Policy in each subaccount of the Variable Account, the value of the
Policy in the Declared Interest Option and any outstanding Policy Debt.
ATTAINED AGE................. The Insured's age on his or her last birthday on the Policy Date plus the
number of Policy Years since the Policy Date.
BENEFICIARY.................. The person or entity named by the Policyowner in the application or by
later designation to receive the death proceeds upon the death of the
Insured.
BUSINESS DAY................. Each day that the New York Stock Exchange is open for trading, except 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 and is unable to segregate orders and redemption requests
received on that day.
COMPANY...................... Farm Bureau Life Insurance Company.
DECLARED INTEREST OPTION..... A part of the Company's General Account. Net Premiums may be allocated, and
Accumulated Value may be transferred, to the Declared Interest Option.
Accumulated Value in the Declared Interest Option is credited with interest
at a declared annual rate guaranteed to be at least 4.0%.
DELIVERY DATE................ The date which the Policy is issued and mailed to the Policyowner.
DUE PROOF OF DEATH........... Proof of death that is satisfactory to the Company. Such proof may consist
of the following if acceptable to the Company:
(a) A certified copy of the death certificate;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FUND......................... An open-end diversified management investment company in which the Variable
Account invests.
GENERAL ACCOUNT.............. The assets of the Company other than those allocated to the Variable
Account or any other separate account.
GRACE PERIOD................. The 61-day period beginning on the date the Company sends notice to the
Policyowner that Net Accumulated Value or Net Surrender Value is
insufficient to cover the monthly deduction.
HOME OFFICE.................. The principal offices of the Company at 5400 University Avenue, West Des
Moines, Iowa 50266.
INSURED...................... The person upon whose life the Policy is issued.
INVESTMENT OPTION............ A separate investment portfolio of a Fund.
MATURITY DATE................ The Insured's Attained Age 115. It is the date on which the Policy
terminates and the Policy's Accumulated Value less Policy Debt becomes
payable to the Policyowner or the Policyowner's estate.
MONTHLY DEDUCTION DAY........ The same date in each month as the Policy Date. The monthly deduction is
made on the Business Day coinciding with or immediately following the
Monthly Deduction Day. (See "CHARGES AND DEDUCTIONS--Monthly Deduction.")
NET ASSET VALUE.............. The total current value of each Subaccount's securities, cash, receivables
and other assets less liabilities.
NET ACCUMULATED VALUE........ The Accumulated Value of the Policy reduced by any outstanding Policy Debt
and increased by any unearned loan interest.
NET PREMIUM.................. The amount of premium remaining after the premium expense charge (see
"CHARGES AND DEDUCTIONS--Premium Expense Charge") has been deducted. This
amount will be allocated, according to the Policyowner's instructions,
among the Subaccounts of the Variable Account and the Declared Interest
Option.
NET SURRENDER VALUE.......... The Surrender Value minus any Policy Debt plus any unearned loan interest.
</TABLE>
3
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<TABLE>
<S> <C>
PARTIAL WITHDRAWAL FEE....... A fee assessed at the time of any partial withdrawal, equal to the lesser
of $25 or 2% of the amount withdrawn.
POLICY....................... The flexible premium variable life insurance policy offered by the Company
and described in this Prospectus, which term includes the Policy described
in this Prospectus, the Policy application, any supplemental applications
and any endorsements.
POLICY ANNIVERSARY........... The same date in each year as the Policy Date.
POLICY DATE.................. The date set forth on the Policy data page which is 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. (See "THE POLICY--Purchasing the Policy.")
POLICY DEBT.................. The sum of all outstanding Policy Loans and any due and unpaid Policy Loan
interest.
POLICY LOAN.................. An amount borrowed by the Policyowner from the Company for which the Policy
serves as the sole security. Interest on Policy Loans is payable in advance
(for the remainder of the Policy Year) upon taking a Policy Loan and upon
each Policy Anniversary thereafter (for the following Policy Year) until
the Policy Loan is repaid.
POLICY MONTH................. A one-month period beginning on a Monthly Deduction Day and ending on the
day immediately preceding the next Monthly Deduction Day.
POLICYOWNER.................. The person who owns a Policy. The original Policyowner is named in the
application.
POLICY YEAR.................. A twelve-month period that starts on the Policy Date or on a Policy
Anniversary.
SPECIFIED AMOUNT............. The minimum death benefit payable under a Policy so long as the Policy
remains in force. The Specified Amount as of the Policy Date is set forth
on the data page in each Policy.
SUBACCOUNT................... A subdivision of the Variable Account which invests exclusively in shares
of a designated Investment Option of a Fund.
SURRENDER CHARGE............. A charge assessed at the time of any surrender during the first ten Policy
Years and for ten years following an increase in Specified Amount.
SURRENDER VALUE.............. The Accumulated Value minus the Surrender Charge.
TARGET PREMIUM............... A premium amount specified by the Company. It is used to calculate the
premium expense charge during time periods when the Company has declared a
premium expense charge less than the 7.0% guaranteed premium expense
charge. The Company may declare a lower percentage of premium expense
charge on premiums paid in excess of the Target Premium during a Policy
Year. It is also used to calculate compensation to registered
representatives.
UNIT VALUE................... The value determined by dividing each Subaccount's Net Asset Value by the
number of units outstanding at the time of calculation.
VALUATION PERIOD............. 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.
VARIABLE ACCOUNT............. Farm Bureau Life Variable Account III, a separate investment account
established by the Company to receive and invest the Net Premiums paid
under the Policies.
</TABLE>
4
<PAGE>
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SUMMARY OF THE POLICY
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THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, THE DESCRIPTION OF THE POLICY CONTAINED IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND
THAT THERE IS NO OUTSTANDING POLICY DEBT.
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THE POLICY Under the Policy, subject to certain limitations, the
Policyowner has flexibility in determining the frequency
and amount of premiums. (See "THE POLICY-- Premiums.")
The amount and/or duration of the life insurance coverage
and the Accumulated Value of the Policy is not guaranteed
and may increase or decrease, depending upon the
investment experience of the assets supporting the
Policy. Accordingly, the Policyowner bears the investment
risk of any depreciation of, but reaps the benefit of any
appreciation in, the value of the underlying assets. As
long as the Policy remains in force, the Policy will
provide for death proceeds payable to the Beneficiary
upon the Insured's death, the accumulation of Accumulated
Value, withdrawal and surrender options and policy loan
privileges. 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.
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THE VARIABLE ACCOUNT 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. (See "THE POLICY--Premiums--ALLOCATION OF NET
PREMIUMS.") The Variable Account consists of fifteen
Subaccounts: the Value Growth Subaccount, the High Grade
Bond Subaccount, the High Yield Bond Subaccount, the
Money Market Subaccount, the Blue Chip Subaccount, the
Equity Income Subaccount, the Mid-Cap Growth Subaccount,
the New America Growth Subaccount, the Personal Strategy
Balanced Subaccount, the International Stock Subaccount.
[Additional Investment Options to be filed by amendment.]
Each Subaccount invests exclusively in shares of the
corresponding Investment Option.
Accumulated Value will, and death proceeds may, vary with
the investment experience of the Subaccounts, as well as
with the frequency and amount of premium payments, any
partial withdrawals and any charges imposed in connection
with the Policy. (See "POLICY BENEFITS--Accumulated Value
Benefits.")
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THE DECLARED INTEREST OPTION
As an alternative to the Variable Account, the
Policyowner may allocate or transfer all or a portion of
the Accumulated Value to the Declared Interest Option,
which guarantees a specified minimum rate of return. (See
"THE DECLARED INTEREST OPTION.")
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PREMIUMS The Company may require the Policyowner to pay an initial
premium that, when reduced by the premium expense charge
(see "CHARGES AND DEDUCTIONS-- 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. The Policyowner is not
required to pay premiums in accordance with the planned
periodic premium schedule. (See "THE
POLICY--Premiums--PLANNED PERIODIC PREMIUMS.") The
schedule will provide for a premium payment of a level
amount at a fixed interval over a specified period of
time. Failure to pay premiums in accordance with the
schedule will not itself cause the Policy to lapse. (See
"THE POLICY--Policy Lapse and Reinstatement--LAPSE.")
Subject to certain restrictions, unscheduled premium
payments may also be made. (See "THE POLICY--
Premiums--UNSCHEDULED PREMIUMS.")
A Policy will lapse during the first three Policy Years
when Net Accumulated Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction, or after
5
<PAGE>
three Policy Years when Net Surrender Value is
insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "CHARGES AND DEDUCTIONS--Monthly
Deduction"), and a Grace Period expires without a
sufficient payment (see "THE POLICY--Policy Lapse and
Reinstatement--LAPSE"). With respect to premiums,
therefore, the Policy differs in two important ways from
a conventional life insurance policy. First, the failure
to pay a planned periodic premium will not in itself
automatically cause the Policy to lapse. Second, a Policy
can lapse even if planned periodic premiums or premiums
in other amounts have been paid.
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POLICY BENEFITS ACCUMULATED VALUE BENEFITS. The Policy provides for an
Accumulated Value. The Accumulated Value will reflect the
amount and frequency of premium payments, the investment
experience of the chosen subaccounts of the Variable
Account, the interest earned on the Accumulated Value in
the Declared Interest Option, any Policy Loans, any
partial surrenders and the charges imposed in connection
with the Policy. The entire investment risk for amounts
allocated to the Variable Account is borne by the
Policyowner; the Company does not guarantee a minimum
Accumulated Value. (See "POLICY BENEFITS--Accumulated
Value Benefits--CALCULATION OF ACCUMULATED VALUE.")
The Policyowner may, at any time, surrender a Policy and
receive the Net Surrender Value. Subject to certain
limitations, the Policyowner may also obtain a partial
withdrawal of Net Accumulated Value (minimum $500) at any
time prior to the Maturity Date. Partial withdrawals will
reduce both the Accumulated Value and death proceeds
payable under the Policy. (See "POLICY
BENEFITS--Accumulated Value Benefits--SURRENDER AND
WITHDRAWAL PRIVILEGES.") A charge will be assessed upon
surrender or partial withdrawal. (See "CHARGES AND
DEDUCTIONS--Partial Withdrawal Fee, and --Surrender
Charge.")
TRANSFERS. A Policyowner may transfer amounts (minimum
$100) among the subaccounts of the Variable Account an
unlimited number of times in a Policy Year; however, only
one transfer per Policy Year may be made between the
Declared Interest Option and the Variable Account. The
first transfer in a Policy Year is free; subsequent
transfers in that Policy Year will be assessed a charge
of $25. The transfer charge, unless paid in cash, will be
deducted from the amount transferred. (See "POLICY
BENEFITS--Transfers.") A transfer from the Variable
Account to the Declared Interest Option requested in
connection with the exercise of the special transfer
privilege under the Policy (see "THE POLICY--Special
Transfer Privilege") will not be considered a transfer
for purposes of the one-transfer limit or the $25 charge.
A transfer made in connection with the initial allocation
of Net Premiums (See "THE POLICY--Premiums--ALLOCATION OF
NET PREMIUMS") will not be considered a transfer for
purposes of the one-transfer limit or the $25 charge.
POLICY LOANS. So long as a Policy is in force and has a
positive Net Surrender Value, the Policyowner may borrow
up to 90% of the Policy's Net Surrender Value as of the
end of the Valuation Period during which the request for
the Policy Loan is received at the Home Office, less any
previously outstanding Policy Debt. (See "POLICY
BENEFITS-- Loan Benefits.") A loan taken from, or secured
by, a Policy may have federal income tax consequences.
(See "FEDERAL TAX MATTERS--Policy Proceeds.")
DEATH PROCEEDS. The Policies provide for the payment of
death proceeds following receipt by the Company (at its
Home Office) of Due Proof of Death of the Insured. The
Policy contains two death benefit options. Under Option
A, the death benefit is the greater of the sum of the
Specified Amount and the Policy's Accumulated Value, or
the Accumulated Value multiplied by the specified amount
factor for the Insured's Attained Age, as set forth in
the Policy. Under Option B, the death benefit is the
greater of the Specified Amount, or the Accumulated Value
multiplied by the specified amount factor for the
Insured's Attained Age, as set forth in the Policy. For
this purpose, all calculations are made as of the end of
the Business Day coinciding with or immediately following
the date of death.
Under either death benefit option, so long as the Policy
remains in force, the death benefit will not be less than
the Specified Amount of the Policy on the date of death.
The death benefit may, however, exceed the Specified
Amount. The amount by which the death benefit exceeds the
Specified Amount depends upon the death benefit
6
<PAGE>
option chosen and the Accumulated Value of the Policy.
(See "POLICY BENEFITS-- Death Proceeds.") 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. The proceeds may be paid in a lump sum or in
accordance with a payment option. (See "POLICY
BENEFITS--Payment Options.")
Anytime after the first Policy Year, the Policyowner may,
subject to certain restrictions, adjust the death benefit
payable under the Policy by increasing or decreasing the
Specified Amount. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN EXISTING COVERAGE.") In addition, the
Policyowner may, at any time, change the death benefit
option in effect. (See "POLICY BENEFITS--Death
Proceeds--CHANGE IN DEATH BENEFIT OPTION.")
BENEFITS AT MATURITY. If the Insured is alive and the
Policy is in force on the Maturity Date, the Policyowner
will be paid the Accumulated Value of the Policy as of
the end of the Business Day coinciding with or
immediately following the Maturity Date, reduced by any
outstanding Policy Debt.
- --------------------------------------------------------------------------------
CHARGES PREMIUM EXPENSE CHARGE. The Net Premium equals the
premium paid less a premium expense charge. The premium
expense charge is 7.0% of each premium up to the Target
Premium (or 2% for each premium over the Target Premium)
and 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. (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
ACCUMULATED VALUE CHARGES. Accumulated Value will be
reduced each Policy Month on the Monthly Deduction Day by
a monthly deduction equal to the sum of a cost of
insurance charge, the cost of any additional insurance
benefits added by rider and a policy expense charge of
$5.00 per month (guaranteed not to exceed $7.00 per
month). In addition, 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. This charge is $0.05 per $1,000 of
Specified Amount or increase in Specified Amount and is
guaranteed not to exceed $0.07 per $1,000 of Specified
Amount. Also, during the first twelve Policy Months, the
monthly deduction will include a first year monthly
expense charge of $5.00 per month (guaranteed not to
exceed $7.00 per month). The monthly deduction will vary
in amount from month to month. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.")
Upon partial withdrawal of a Policy, a fee of the lesser
of $25 or 2% of the amount withdrawn will be assessed. At
the time of surrender, a charge will apply during the
first ten Policy Years, as well as during the first ten
Policy Years following an increase in Specified Amount.
The surrender charge is an amount per $1,000 of Specified
Amount which varies by age, sex, underwriting category
and Policy Year. The surrender charge applicable to each
Policyowner will be listed in the Policy. (See "CHARGES
AND DEDUCTIONS--Partial Withdrawal Fee, and --Surrender
Charge.") During a Policy Year, a $25 charge may be
assessed for the second and subsequent transfers of
assets among the Subaccounts and between the Variable
Account and the Declared Interest Option. (See "CHARGES
AND DEDUCTIONS--Transfer Charge.")
CHARGES AGAINST THE VARIABLE ACCOUNT. A daily charge at
the rate of .0024548% of the average daily net assets of
each Subaccount will be imposed to compensate the Company
for certain mortality and expense risks incurred in
connection with the Policies. (See "CHARGES AND
DEDUCTIONS--Variable Account Charges.") This corresponds
to an effective annual rate of 0.90%. (This charge is
guaranteed not to exceed .0028618% of the average daily
net assets of each Subaccount, which corresponds to an
effective annual rate of 1.05%.)
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.
INVESTMENT OPTION EXPENSES. In addition, because the
Variable Account purchases shares of the selected
Investment Options, the value of the net assets of the
Variable Account will reflect the investment advisory fee
and other expenses incurred by each
7
<PAGE>
Investment Option. The fees and expenses for 1997 were as
indicated in the table below. (See "CHARGES AND
DEDUCTIONS--Variable Account Charges--INVESTMENT OPTION
EXPENSES.")
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL EXPENSES
ADVISORY (AFTER WAIVER (AFTER WAIVER
INVESTMENT OPTION FEE OR REIMBURSEMENT) OR REIMBURSEMENT)
- ------------------------------------ ----------- --------------------- ---------------------
<S> <C> <C> <C>
EquiTrust Variable Insurance
Series Fund*
Value Growth 0.45% 0.10% 0.55%(1)
High Grade Bond 0.30% 0.22% 0.52%
High Yield Bond 0.45% 0.12% 0.57%(1)
Money Market 0.25% 0.33% 0.48%(1)
Blue Chip 0.20% 0.13% 0.33%
T. Rowe Price Equity Series, Inc.
Equity Income 0.85% 0.00% 0.85%(2)
Mid-Cap Growth 0.85% 0.00% 0.85%(2)
New America Growth 0.85% 0.00% 0.85%(2)
Personal Strategy Balanced 0.90% 0.00% 0.90%(2)
T. Rowe Price International Series,
Inc.
International Stock 1.05% 0.00% 1.05%(2)
</TABLE>
* The annual investment option expenses for each
Investment Option of the Fund are net of certain
reimbursements by the Fund's investment adviser.
Operating expenses (including the investment
advisory fee but excluding brokerage, interest,
taxes and extraordinary expenses) of an
Investment Option that exceed 1.50% of the
Investment Option's average daily net assets for
any fiscal year are reimbursed by the Fund's
investment adviser up to the amount of the
advisory fee. In addition, the investment
adviser has voluntarily agreed to reimburse each
Portfolio for expenses that exceed 0.65%. Absent
the reimbursements, the total expenses for the
Investment Options for the 1997 fiscal year
would have been: Value Growth 0.58%, High Grade
Bond 0.57%, High Yield Bond 0.65% and Money
Market 0.55%.
(1) Total annual investment option expenses have
been restated for the reduction in management
fees from 0.50% to 0.45% for the Value Growth
and High Yield Bond Investment Options and 0.30%
to 0.25% for the Money Market Investment Option,
effective May 1, 1997.
(2) Total annual investment option expenses are an
all-inclusive fee and pay for investment
management services and other operating costs.
8
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES
The Policies will be distributed by registered
representatives of EquiTrust Marketing Services, Inc.
("EquiTrust Marketing"), a broker-dealer having a selling
agreement with EquiTrust Marketing or a broker-dealer
having a selling agreement with such broker-dealer.
EquiTrust Marketing (formerly FBL Marketing Services,
Inc.), a wholly-owned indirect subsidiary of FBL
Financial Group, Inc. is registered as a broker-dealer
with the Securities and Exchange Commission and is a
member of the National Association of Securities Dealers,
Inc.
- --------------------------------------------------------------------------------
OTHER POLICIES The Company offers other variable life insurance policies
that invest in the same Investment Options of the Funds.
These policies may have different charges that could
affect Subaccount performance, and may offer different
benefits more suitable to a person's needs. To obtain
more information about these policies, contact the
Company.
- --------------------------------------------------------------------------------
TAX TREATMENT If a Policy is issued on the basis of a standard premium
class, while there is some uncertainty, the Company
believes that the Policy should qualify as a life
insurance contract for federal income tax purposes. If a
Policy is issued on a substandard basis, it is not clear
whether or not the Policy would qualify as a life
insurance contract for federal income tax purposes.
Assuming that a Policy qualifies as a life insurance
contract for federal income tax purposes, the Accumulated
Value under a Policy should be subject to the same
federal income tax treatment as Accumulated value under a
conventional fixed-benefit Policy. Under existing tax
law, the Policyowner is not deemed to be in constructive
receipt of Accumulated Values under a Policy until there
is a distribution from the Policy. Like death benefits
payable under conventional life insurance policies, death
proceeds payable under a Policy should be completely
excludable from the gross income of the Beneficiary. As a
result, the Beneficiary generally will not be taxed on
these proceeds. (See "FEDERAL TAX MATTERS.")
- --------------------------------------------------------------------------------
CANCELLATION PRIVILEGE The Policyowner is granted a 20-day period following
receipt of the Policy in which to examine and return the
Policy. The Policyowner will receive the greater of
premiums paid or the Policy's Accumulated Value plus an
amount equal to any charges which have been deducted from
premiums, Accumulated Value and the Variable Account.
(See "THE POLICY--Examination of Policy (Cancellation
Privilege).")
- --------------------------------------------------------------------------------
ILLUSTRATIONS Sample projections of hypothetical Policy values are
included starting at page A-1 of this Prospectus. These
projections of hypothetical values may be helpful in
understanding the long-term effects of different levels
of investment performance, charges and deductions,
electing one or the other death benefit option and
generally in comparing this Policy to other life
insurance policies. NONETHELESS, THE ILLUSTRATIONS ARE
BASED ON HYPOTHETICAL INVESTMENT RATES OF RETURN AND ARE
NOT A REPRESENTATION OF PAST OR FUTURE PERFORMANCE.
Actual rates of return may be more or less than those
reflected in the illustrations and, therefore, actual
values will be different from those illustrated.
This Prospectus describes only those aspects of the
Policy that relate to the Variable Account, except where
Declared Interest Option matters are specifically
mentioned. For a brief summary of the aspects of the
Policy relating to the Declared Interest Option, see "THE
DECLARED INTEREST OPTION."
- --------------------------------------------------------------------------------
FARM BUREAU LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
FARM BUREAU LIFE INSURANCE COMPANY
The Company is a stock life insurance company which was
incorporated in the State of Iowa on October 30, 1944.
One hundred percent of the outstanding voting shares of
the Company are owned by FBL Financial Group, Inc. At
December 31, 1997, 66.36% of the outstanding voting
shares of FBL Financial Group, Inc. was owned by Iowa
Farm Bureau Federation. The Company is principally
engaged in the offering of life insurance policies,
disability income insurance policies and annuity
contracts and is admitted to do business in fifteen
states--Arizona, Colorado, Idaho, Iowa, Kansas,
Minnesota, Montana, Nebraska, New Mexico, North Dakota,
Oklahoma, South Dakota, Utah, Wisconsin and Wyoming. The
principal offices of the Company are at 5400 University
Avenue, West Des Moines, Iowa 50266.
9
<PAGE>
- --------------------------------------------------------------------------------
IOWA FARM BUREAU FEDERATION
Iowa Farm Bureau Federation is an Iowa not-for-profit
corporation, the members of which are county Farm Bureau
organizations and their individual members. Iowa Farm
Bureau Federation is primarily engaged, through various
divisions and subsidiaries, in the formulation, analysis
and promotion of programs (at local, state, national and
international levels) that are designed to foster the
educational, social and economic advancement of its
members. The principal offices of Iowa Farm Bureau
Federation are at 5400 University Avenue, West Des
Moines, Iowa 50266.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT The Variable Account was established by the Company as a
separate account on January 6, 1998. The Variable Account
will receive and invest the Net Premiums paid under the
Policies. In addition, the Variable Account may receive
and invest net premiums for any other variable life
insurance policies issued in the future by the Company.
Although the assets in the Variable Account are the
property of the Company, the assets in the Variable
Account attributable to the Policies generally are not
chargeable with liabilities arising out of any other
business which 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 the
Variable Account's assets exceed its liabilities arising
under the Policies and any other policies supported by
the Variable Account. The Company has the right to
transfer to the General Account any assets of the
Variable Account which are in excess of such reserves and
other policy liabilities.
The Variable Account currently is divided into fifteen
Subaccounts but may, in the future, include additional
subaccounts. Each Subaccount invests exclusively in
shares of a single corresponding Investment Option.
Income and realized and unrealized gains or losses from
the assets of each Subaccount are credited to or charged
against, that Subaccount without regard to income, gains
or losses from any other Subaccount.
The Variable Account has been registered as a unit
investment trust under the Investment Company Act of 1940
and meets the definition of a separate account under the
federal securities laws. Registration with the Securities
and Exchange Commission does not involve supervision of
the management or investment practices or policies of the
Variable Account or the Company by the Commission. The
Variable Account is also subject to the laws of the State
of Iowa which regulate the operations of insurance
companies domiciled in Iowa.
- --------------------------------------------------------------------------------
INVESTMENT OPTIONS The Variable Account invests in shares of the Investment
Options. The Investment Options currently include the
Value Growth Portfolio, High Grade Bond Portfolio, High
Yield Bond Portfolio, Money Market Portfolio and Blue
Chip Portfolio of EquiTrust Variable Insurance Series
Fund; the Equity Income Portfolio, Mid-Cap Growth
Portfolio, New America Portfolio and Personal Strategy
Balanced Portfolio of T. Rowe Price Equity Series, Inc.
and International Stock Portfolio of T. Rowe Price
International Series, Inc. The Variable Account may, in
the future, provide for additional investment options.
Each Investment Option has its own investment objectives
and the income and losses for each Investment Option will
be determined separately.
Each of these Investment Options was formed as an
investment vehicle for insurance company separate
accounts. The investment objectives and policies of
certain Investment Options are similar to the investment
objectives and policies of other portfolios that may be
managed by the same investment adviser, sub-investment
adviser or manager. The investment results of the
Investment Options, however, may be higher or lower than
the results of such other portfolios. There can be no
assurance, and no representation is made, that the
investment results of any of the Investment Options will
be comparable to the investment results of any other
portfolio, even if the other portfolio has the same
investment adviser, sub-investment adviser or manager.
10
<PAGE>
The investment objectives and policies of each Investment
Option are summarized below. There is no assurance that
any Investment Option will achieve its stated objectives.
More detailed information, including a description of
risks, may be found in the prospectus for each Investment
Option, which must accompany or precede this Prospectus
and which should be read carefully and retained for
future reference.
EQUITRUST VARIABLE INSURANCE SERIES FUND
EquiTrust Investment Management Services, Inc. is the
investment adviser to the Fund. The Fund is comprised of
six portfolios, the following five of which are available
under the Contract:
VALUE GROWTH PORTFOLIO. This Portfolio seeks
long-term capital appreciation. The Portfolio pursues
its objective by investing primarily in equity
securities of companies that the investment adviser
believes have a potential to earn a high return on
equity and/or in equity securities that the
investment adviser believes are undervalued by the
market place. Such equity securities may include
common stock, preferred stock and securities
convertible or exchangeable into common stock.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as
high a level of current income as is consistent with
a high grade portfolio of debt securities. The
Portfolio will pursue this objective by investing
primarily in debt securities rated AAA, AA or A by
Standard & Poor's Corporation and/or Aaa, Aa or A by
Moody's Investors Service, Inc., and in securities
issued or guaranteed by the United States government
or its agencies or instrumentalities.
HIGH YIELD BOND PORTFOLIO. This Portfolio seeks, as a
primary objective, as high a level of current income
as is consistent with investment in a portfolio of
fixed-income securities rated in the lower categories
of established rating services. As a secondary
objective, the Portfolio seeks capital appreciation
when consistent with its primary objective. The
Portfolio pursues these objectives by investing
primarily in fixed-income securities rated Baa or
lower by Moody's Investors Service, Inc. and/or BBB
or lower by Standard & Poor's Corporation, or in
unrated securities of comparable quality. AN
INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN
ORDINARY FINANCIAL RISK. (See the Fund Prospectus
"PRINCIPAL RISK FACTORS--Special Considerations--High
Yield Bonds.")
MONEY MARKET PORTFOLIO. This Portfolio seeks maximum
current income consistent with liquidity and
stability of principal. The Portfolio will pursue
this objective by investing in high quality
short-term money market instruments. AN INVESTMENT IN
THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO
ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
BLUE CHIP PORTFOLIO. This Portfolio seeks growth of
capital and income. The Portfolio pursues this
objective by investing primarily in common stocks of
well-capitalized, established companies. Because this
Portfolio may be invested heavily in particular
stocks or industries, an investment in this Portfolio
may entail relatively greater risk of loss.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Associates, Inc. is the investment adviser
to the Fund.
EQUITY INCOME PORTFOLIO. This Portfolio seeks to
provide substantial dividend income and long-term
capital appreciation by investing primarily in
established companies considered by the adviser to
have favorable prospects for both increasing
dividends and capital appreciation.
MID-CAP GROWTH PORTFOLIO. This Portfolio seeks
long-term capital appreciation by investing primarily
in common stocks of medium-sized (mid-cap) growth
companies which offer the potential for above-average
earnings growth.
11
<PAGE>
NEW AMERICA GROWTH PORTFOLIO. This Portfolio seeks
long-term capital growth by investing primarily in
common stocks of U.S. growth companies operating in
service industries.
PERSONAL STRATEGY BALANCED PORTFOLIO. This Portfolio
seeks the highest total return over time consistent
with an emphasis on both capital appreciation and
income.
T. ROWE PRICE INTERNATIONAL SERIES, INC.
Rowe Price-Fleming International, Inc. is the investment
adviser to the Fund.
INTERNATIONAL STOCK PORTFOLIO. This Portfolio seeks
to provide capital appreciation through investments
primarily in established companies based outside the
United States.
[Additional Investment Options to be filed by amendment.]
The Funds currently sell shares: (a) to the Variable
Account as well as to separate accounts of insurance
companies that may or may not be affiliated with the
Company or each other; and (b) to separate accounts to
serve as the underlying investment for both variable
insurance policies and variable annuity contracts. The
Company currently does not foresee any disadvantages to
Policyowners arising from the sale of shares to support
variable annuity contracts and variable life insurance
policies, or from shares sold to separate accounts of
insurance companies that may or may not be affiliated
with the Company. However, the Company intends to monitor
events in order to identify any material irreconcilable
conflicts that might possibly arise. In that event, it
would determine what action, if any, should be taken in
response to those events or conflicts. In addition, if
the Company believes that a Fund's response to any of
those events or conflicts insufficiently protects
Policyowners, it will take appropriate action on its own,
including withdrawing the Variable Account's investment
in that Fund. (See the Fund prospectuses for more
detail.)
The Company may receive compensation from an affiliate(s)
of one or more of the Funds based upon an annual
percentage of the average assets held in the Investment
Options by the Company. These amounts are intended to
compensate the Company for administrative and other
services provided by the Company to the Funds and/or
affiliate(s).
Each Fund is registered with the Securities and Exchange
Commission as an open-end, diversified management
investment company. Such registration does not involve
supervision of the management or investment practices or
policies of the Fund by the Securities and Exchange
Commission.
- --------------------------------------------------------------------------------
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
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 judgment, 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 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. Nothing contained in this
Prospectus shall prevent the Variable Account from
purchasing other securities for other series or classes
of policies, or from permitting a conversion between
series or classes of policies on the basis of requests
made by Policyowners.
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,
12
<PAGE>
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 Subaccounts may be eliminated or combined with any
other Subaccount(s) 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. (See "ADDITIONAL
INFORMATION--Voting Rights.")
- --------------------------------------------------------------------------------
THE POLICY
- --------------------------------------------------------------------------------
PURPOSE OF THE POLICY The Policy is designed to provide the Policyowner with
both lifetime insurance protection and significant
flexibility in connection with the amount and frequency
of premium payments and the level of death proceeds
payable under a Policy. Unlike conventional life
insurance, the Policyowner is not required to pay
scheduled premiums to keep a Policy in force, but may,
subject to certain limitations, vary the frequency and
amount of premium payments. Moreover, the Policy allows a
Policyowner to adjust the level of death proceeds payable
under a Policy, without having to purchase a new policy,
by increasing or decreasing the Specified Amount. Thus,
as insurance needs or financial conditions change, the
Policyowner has the flexibility to adjust death proceeds
and vary premium payments.
The Policy varies from conventional fixed-benefit life
insurance in a number of additional respects. Because the
death proceeds may, and the Accumulated Value will, vary
with the investment experience of the chosen Subaccounts,
the Policyowner bears the investment risk of any
depreciation of, but reaps the benefit of any
appreciation in, the value of the underlying assets. As a
result, whether or not a Policy continues in force may
depend in part upon the investment experience of the
chosen Subaccounts. The failure to pay a planned periodic
premium will not necessarily cause the Policy to lapse,
but the Policy could lapse even if planned periodic
premiums have been paid, depending upon the investment
experience of the Variable Account.
Life Insurance is not a short-term investment.
Prospective policyowners should consider their need for
insurance coverage and the Policy's long-term investment
potential. A prospective policyowner who already has life
insurance coverage should consider whether or not
changing or adding to existing coverage would be
advantageous. Generally, it is not advisable to purchase
another policy to replace an existing policy.
- --------------------------------------------------------------------------------
PURCHASING THE POLICY Before it will issue a Policy, the Company must receive a
completed application, including payment of the 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 last birthday 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.
13
<PAGE>
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.
The effective date of insurance coverage under the Policy
will be the later 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.
- --------------------------------------------------------------------------------
PREMIUMS Subject to certain limitations, a Policyowner has
flexibility in determining the frequency and amount of
premiums.
PREMIUM FLEXIBILITY. Unlike conventional insurance
policies, the Policy frees the Policyowner from the
requirement that premiums be paid in accordance with a
rigid and inflexible premium schedule. The Company may
require the Policyowner to pay an initial premium that,
when reduced by the premium expense charge (see "CHARGES
AND DEDUCTIONS--Premium Expense Charge"), will be
sufficient to pay the monthly deduction for the first
Policy Month. Thereafter, subject to the minimum and
maximum premium limitations described below, a
Policyowner may also make unscheduled premium payments at
any time prior to the Maturity Date.
The Company offers a conversion program for its term
insurance or Executive Term policies. Under the program,
owners of a term policy issued by the Company can elect
to convert their term insurance policy to a permanent
insurance policy, including the Policy, at any time
between the first and sixth policy anniversaries of their
term policy. Upon conversion, the Company will credit to
the initial premium for the Policy an amount equal to the
annual premium paid on the term policy, up to a limit of
$5.00 per $1,000 of their term insurance face amount.
Custom Term II contains a Premium Credit Benefit that
allows the policy owner credit towards the purchase of a
Policy at any time between the first and sixth policy
anniversaries of their term policy. Upon exercise of this
benefit, the Company will credit to the initial premium
for the Policy an amount equal to the annual premium paid
on the term policy, up to a limit of $5.00 per $1,000 of
the term insurance face amount. The existing Custom Term
II policy need not be canceled to use this benefit. These
credits will be treated as a premium for purposes of
Policy provisions applicable to premiums, such as
deduction of the premium expense charge. Please see your
registered representative for more information. A
commission is paid to a registered representative upon a
conversion.
PLANNED PERIODIC PREMIUMS. 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 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. (See "FEDERAL TAX MATTERS.")
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. Changes in the planned premium
schedule may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
14
<PAGE>
The payment of a planned periodic premium will not
guarantee that the Policy remains in force. Instead, the
duration of the Policy depends upon the Policy's
Accumulated Value. Thus, even if planned periodic
premiums are paid by the Policyowner, the Policy will
nevertheless lapse if, during the first three Policy
Years, Net Accumulated Value or, after three Policy
Years, Net Surrender Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction (see
"CHARGES AND DEDUCTIONS--Monthly Deduction") and a Grace
Period expires without a sufficient payment (see "THE
POLICY--Policy Lapse and Reinstatement--LAPSE").
UNSCHEDULED PREMIUMS. 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. An unscheduled premium
payment may have federal income tax consequences. (See
"FEDERAL TAX MATTERS.")
PREMIUM LIMITATIONS. 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
accept only 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.
PAYMENT OF PREMIUMS. 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.
NET PREMIUMS. The Net Premium is the amount available for
investment. The Net Premium equals the premium paid less
the premium expense charge. (See "CHARGES AND
DEDUCTIONS--Premium Expense Charge.")
ALLOCATION OF NET PREMIUMS. In the application for a
Policy, the Policyowner can allocate Net Premiums or
portions thereof to the Subaccounts, 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 of the Policy to the Company
(see "THE POLICY-- Examination of Policy (Cancellation
Privilege)").
The minimum percentage of each premium that may be
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.
- --------------------------------------------------------------------------------
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike conventional life insurance policies, the
failure to make a planned periodic premium payment will
not itself cause a Policy to lapse. Lapse will only occur
15
<PAGE>
during the first three Policy Years when Net Accumulated
Value is insufficient on a Monthly Deduction Day to cover
the monthly deduction, or after three Policy Years when
Net Surrender Value is insufficient on a Monthly
Deduction Day to cover the monthly deduction (see
"CHARGES AND DEDUCTIONS--Monthly Deduction"), and a Grace
Period expires without a sufficient payment. Insurance
coverage will continue 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. 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.
To avoid lapse and termination of the Policy without
value, the Company must receive from the Policyowner
during the Grace Period a premium payment that, when
reduced by the premium expense charge (see "CHARGES AND
DEDUCTIONS-- Premium Expense Charge"), will be at least
equal to three times the monthly deduction due on the
Monthly Deduction Day immediately preceding the Grace
Period (see "CHARGES AND DEDUCTIONS--Monthly Deduction").
A Grace Period of 61 days will commence on the date the
Company sends a notice of any insufficiency to the
Policyowner.
REINSTATEMENT. 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:
1. A written application for reinstatement signed
by the Policyowner and the Insured;
2. Evidence of insurability satisfactory to the
Company;
3. 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
4. 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. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.") The Company will not
reinstate a Policy surrendered for its Net Surrender
Value. The lapse of a Policy with loans outstanding may
have adverse tax consequences (see "FEDERAL TAX
MATTERS--Policy Proceeds").
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.
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EXAMINATION OF POLICY (CANCELLATION PRIVILEGE)
The Policyowner may cancel the Policy by delivering or
mailing written notice or sending a telegram 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.
With respect to all Policies, the Company will refund,
within seven days after receipt of satisfactory notice of
cancellation and 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 which have been
deducted from premiums, Accumulated Value and the
Variable Account.
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SPECIAL TRANSFER PRIVILEGE
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
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<PAGE>
requesting that all of the Accumulated Value in the
Variable Account be transferred to the Declared Interest
Option. The Policyowner may exercise this special
transfer privilege once each Policy Year. Once a
Policyowner exercises the special transfer privilege, all
future premium payments automatically will 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.
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EXCHANGE PRIVILEGE The Company will permit the owner of a flexible premium
fixed-benefit life insurance policy ("fixed-benefit
policy") issued by the Company or Western Farm Bureau
Life Insurance Company (a company held by the same
holding company as the Company), within 12 months of the
policy date shown in such policy, to exchange the
fixed-benefit policy (forms #434-112 and #834-112 only)
for a Policy on the life of the Insured. After the first
12 months following the policy date shown in these fixed-
benefit policies (as well as certain other fixed benefit
policies issued by the Company or Western Farm Bureau
Life Insurance Company), the Company will permit the
owner of such policy to exchange the fixed-benefit policy
for a Policy when the owner applies for an increase of
$25,000 or more in Specified Amount.
The Policy Date will be the date the application for the
Policy is signed. If an exchange occurs in the first 12
months, the Policy will have a Specified Amount equal to
the specified amount of the fixed-benefit policy and will
require no evidence of insurability to exercise the
exchange privilege. The Insured will be placed in the
premium class applicable to the initial specified amount
under the fixed-benefit policy, unless there has been an
underwritten increase in specified amount, in which event
the Insured will be placed, with respect to the entire
Specified Amount under the Policy, in the premium class
applicable to such increase in specified amount.
If an exchange occurs after the first 12 months, the
Policy will have a Specified Amount equal to the
specified amount of the fixed-benefit policy plus the
increase to purchase a Policy, and the increase will
require underwriting to exercise the exchange privilege.
The Insured will be placed in the premium class
applicable to the initial specified amount under the
fixed-benefit policy, unless there has been an
underwritten increase in specified amount, in which event
the Insured will be placed, with respect to the entire
amount exchanged, in the premium class applicable to such
increase in specified amount. With regard to the increase
in Specified Amount, the Insured will be placed in the
premium class applicable to the increase.
The net cash value of the fixed-benefit policy will
initially be allocated to the Declared Interest Option.
When the Company receives, at its Home Office, a notice
signed by the Policyowner that the Policy has been
received and accepted, the Policy's accumulated value in
the Declared Interest Option automatically will be
allocated, without charge, among the Subaccounts and the
Declared Interest Option pursuant to the allocation
instructions set forth in the application for the Policy.
The Company will waive the premium expense charge (see
"CHARGES AND DEDUCTIONS--Premium Expense Charge") on the
net cash value of the fixed-benefit policy applied to the
Policy pursuant to an exchange. In addition, the Company
will assess the First Year Monthly Administrative Charge
(see "CHARGES AND DEDUCTIONS--Monthly Deduction--FIRST
YEAR MONTHLY ADMINISTRATIVE CHARGE") only to the extent
that 12 monthly per $1,000 charges under the fixed-
benefit policy have not been assessed. An increase in
Specified Amount related to a fixed-benefit policy
exchanged after the first 12 months will be assessed the
First Year Monthly Administrative Charge. Otherwise,
charges and deductions will be made in the manner and
amounts described elsewhere in the Prospectus.
With regard to an exchange after the first 12 months of
the fixed-benefit policy, the incontestable and suicide
provisions of the Policy will apply only to the increased
amount of coverage, except for any period remaining on
the fixed-benefit policy.
An exchanging owner will not be permitted to carry over
an outstanding loan under his fixed-benefit policy. Any
outstanding loan and loan interest must be repaid prior
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<PAGE>
to the date of exchange. If not repaid prior to the date
of exchange, the amount of the outstanding loan and
interest thereon will be reflected in the net cash value
of the fixed-benefit policy. To the extent a
fixed-benefit policy with an outstanding loan is
exchanged for an unencumbered Policy, the exchanging
owner could recognize income at the time of the exchange
up to the amount of such loan (including any due and
unpaid interest on such loan). (See "FEDERAL TAX
MATTERS--Tax Treatment of Policy Benefits.")
Riders issued on the original fixed-benefit policy which
are not offered in the Policy will not be available on
the new Policy. Riders which are available may be
exchanged to the new Policy.
Registered representatives will receive commissions on
the increase in face amount only.
The Policy differs from a fixed-benefit policy in many
significant respects. Most importantly, the Accumulated
Value under this Policy may consist, entirely or in part,
of Subaccount value which fluctuates in response to the
net investment return of the Variable Account. In
contrast, the cash values under a fixed-benefit policy
always reflect interest credited by the Company. While a
minimum rate of interest is guaranteed, the Company in
the past has credited interest at higher rates.
Accordingly, cash values under a fixed-benefit policy
reflect changing current interest rates and do not vary
with the investment performance of the Variable Account.
Other significant differences between the Policy and a
fixed-benefit policy include: (1) additional charges
applicable under the Policy not found in a fixed-benefit
policy; (2) different surrender charges; (3) different
death benefits; and (4) differences in federal and state
laws and regulations applicable to each of the types of
policies.
Owners of a fixed-benefit policy should carefully
consider whether it will be advantageous to replace a
fixed-benefit policy with a Policy. It may not be
advantageous to exchange a fixed-benefit policy for a
Policy (or to surrender in full or in part a
fixed-benefit policy and use the surrender or partial
surrender proceeds to purchase a Policy).
The Company believes that an exchange of a fixed-benefit
policy for a Policy generally should be treated as a
nontaxable exchange within the meaning of Section 1035 of
the Internal Revenue Code of 1986, as amended. A Policy
purchased in exchange will generally be treated as a
newly issued contract as of the effective date of the
Policy. This could have various tax consequences. (See
"FEDERAL TAX MATTERS--Tax Treatment of Policy Benefits.")
If you surrender your fixed-benefit policy in whole or in
part and after receipt of the proceeds you use the
surrender proceeds or partial surrender proceeds to
purchase a Policy, it will not be treated as a
non-taxable exchange. The surrender proceeds will
generally be includible in income.
Owners of a fixed-benefit policy should consult their tax
advisers before exchanging a fixed-benefit policy for
this Policy, or before surrendering in whole or in part
their fixed-benefit policy and using the proceeds to
purchase a Policy.
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POLICY BENEFITS
- --------------------------------------------------------------------------------
While a Policy is in force, it provides for certain
benefits prior to the Maturity Date. Subject to certain
limitations, the Policyowner may at any time obtain all
or a portion of the Net Accumulated Value by surrendering
or taking a partial withdrawal from the Policy. (See
"POLICY BENEFITS--Accumulated Value Benefits--SURRENDER
AND WITHDRAWAL PRIVILEGES.") In addition, the Policyowner
has certain policy loan privileges under the Policies.
(See "POLICY BENEFITS--Loan Benefits--POLICY LOANS.") The
Policy also provides for the payment of death proceeds
upon the death
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<PAGE>
of the Insured under one of two death benefit options
selected by the Policyowner (see "POLICY BENEFITS--Death
Proceeds--DEATH BENEFIT OPTIONS"), and benefits upon the
maturity of a Policy (see "POLICY BENEFITS--Benefits at
Maturity").
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ACCUMULATED VALUE BENEFITS
SURRENDER AND WITHDRAWAL PRIVILEGES. 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 ten Policy Years, as well as
during the first ten years following an increase in
Specified Amount. A Partial Withdrawal Fee to cover the
cost of processing a withdrawal will be payable upon each
partial withdrawal. (See "CHARGES AND DEDUCTIONS--Partial
Withdrawal Fee, and --Surrender Charge.") Surrender and
withdrawal proceeds ordinarily will be mailed to the
Policyowner within seven days after the Company receives
a signed request for a surrender at its Home Office,
although payments may be postponed under certain
circumstances. (See "GENERAL PROVISIONS--Postponement of
Payments.")
SURRENDERS. 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
the Policyowner. (See "POLICY BENEFITS--Payment
Options.") Upon surrender, all insurance in force will
terminate. For a discussion of the tax consequences
associated with Surrenders, see "FEDERAL TAX MATTERS."
PARTIAL WITHDRAWALS. A Policyowner may obtain a portion
of the Policy's Net Surrender Value. The amount requested
for partial withdrawal must be at least $500 and cannot
exceed the lesser of (1) the Net Surrender Value less
$500, or (2) 90% of the Net Surrender Value. The Partial
Withdrawal Fee will be deducted from the remaining
Accumulated Value. The Policyowner may request that the
proceeds of a partial withdrawal be paid in a lump sum or
under one of the payment options specified in the Policy.
(See "POLICY BENEFITS--Payment Options.")
A partial withdrawal (together with the Partial
Withdrawal Fee) 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 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 is equal to
the Accumulated Value multiplied by the specified amount
factor set forth in the Policy, a partial withdrawal will
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. (See "POLICY BENEFITS--Death
Proceeds.")
Partial withdrawals will reduce the Policy's Specified
Amount by the amount of Accumulated 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. (See "POLICY
BENEFITS--Death Proceeds--DEATH BENEFIT OPTIONS.") 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 withdrawal, 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
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<PAGE>
recent increases successively, then the coverage under
the original application. Thus, a partial withdrawal may
either increase or decrease the amount of the cost of
insurance charge, depending upon the particular
circumstances. (See "CHARGES AND DEDUCTIONS--Monthly
Deduction--COST OF INSURANCE.") For a discussion of the
tax consequences associated with partial withdrawals, see
"FEDERAL TAX MATTERS."
NET ACCUMULATED VALUE. Net Accumulated Value equals the
Policy's Accumulated Value reduced by any outstanding
Policy Debt and increased by any unearned loan interest.
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 withdrawals, 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 to which the Accumulated Value is
allocated. There is no guaranteed minimum Accumulated
Value. The Accumulated Value of the Policy is equal to
the sum of the Accumulated Values in each Subaccount,
plus the Accumulated Value in the Declared Interest
Option, including amounts transferred to the Declared
Interest Option to secure outstanding Policy Debt.
As of the Policy Date, the Policy's Accumulated Value
equals the initial Net Premium less the monthly deduction
made on the Policy Date.
On the Business Day coinciding with or immediately
following the date the Company receives notice that the
Policy has been received by the Policyowner, but no later
than 25 days after the Delivery Date, the Policy's
Accumulated Value (all of which is in the Declared
Interest Option) be transferred automatically among the
Subaccounts and the Declared Interest Option in
accordance with such percentage allocation instructions.
At the end of each Valuation Period thereafter, the
Accumulated Value in a Subaccount will equal:
(1) The total Subaccount units represented by
the accumulated value at the end of the
preceding valuation period, multiplied by
the Subaccount's unit value for the current
valuation period; PLUS
(2) Any Net Premiums received during the current
Valuation Period which are allocated to the
Subaccount; PLUS
(3) All Accumulated Values transferred to the
Subaccount from the Declared Interest Option
or from another Subaccount during the
current Valuation Period; MINUS
(4) 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; MINUS
(5) All partial withdrawals (and any portion of
the Partial Withdrawal Fee) deducted from
the Subaccount during the current Valuation
Period; MINUS
(6) 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.
UNIT VALUE. 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
20
<PAGE>
which the transfer is made. Likewise, when amounts are
transferred out of a Subaccount, units are redeemed on
the same basis. 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 Net Asset Value 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 equal to .0024548% of
the average daily net assets of the
Subaccount for each day in the Valuation
Period. This corresponds to an effective
annual rate of 0.90% of the average daily
net assets of the Subaccount for mortality
and expense risks incurred in connection
with the Policies. (This charge is
guaranteed not to exceed .0028618% of the
average daily net assets on each Subaccount,
which corresponds to an effective annual
rate of 1.05%.)
(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.
- --------------------------------------------------------------------------------
TRANSFERS Policyowners may transfer amounts among the Subaccounts
an unlimited number of times in a Policy Year; however,
only one transfer per Policy Year may be made between the
Declared Interest Option and the Variable Account.
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 800-247-4170. 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. (See "CHARGES AND
DEDUCTIONS--Transfer Charge.")
For purposes of these limitations and charges, all
transfers effected on the same day will be considered a
single transfer.
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LOAN BENEFITS POLICY LOANS. 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. A loan
taken from, or secured by, a Policy may have federal
income tax consequences. (See "FEDERAL TAX MATTERS.")
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 the 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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<PAGE>
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.
ALLOCATION OF POLICY LOAN. 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 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.
Loan proceeds will normally be mailed to the Policyowner
within seven days after receipt of a written request.
Postponement of a Policy Loan may take place under
certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.")
Amounts segregated within the Declared Interest Option as
security for Policy Debt will bear interest at an
effective annual rate set by the Company. (See "POLICY
BENEFITS--Loan Benefits--EFFECT ON INVESTMENT
PERFORMANCE.")
LOAN INTEREST CHARGED. 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 for the calendar
month ending two months before the date on which the rate
is determined; or 5.5%. 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 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. (See
"POLICY BENEFITS-- Loan Benefits--ALLOCATION OF POLICY
LOAN.")
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.
EFFECT ON INVESTMENT PERFORMANCE. Amounts transferred
from the Variable Account as security for Policy Debt
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.
From time to time, the Company may allow, by Company
practice, a loan spread of 0% on the gain in a Policy in
effect a minimum of ten years.
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<PAGE>
Even though Policy Debt may be repaid in whole or in part
at any time prior to the Maturity Date if the Policy is
still in force, Policy Loans will affect the Accumulated
Value of a Policy and may affect the death proceeds
payable. The effect could be favorable or unfavorable
depending upon whether the investment performance of the
Subaccount(s) from which the Accumulated Value was
transferred is less than or greater than the interest
rates actually credited to the Accumulated Value
segregated within the Declared Interest Option as
security for Policy Debt while Policy Debt is
outstanding. In comparison to a Policy under which no
Policy Loan was made, Accumulated Value will be lower
where such interest rates credited were less than the
investment performance of the Subaccount(s), but will be
greater where such interest rates were greater than the
performance of the Subaccount(s). In addition, death
proceeds will reflect a reduction of the death benefit by
any outstanding Policy Debt.
POLICY DEBT. Policy Debt equals the sum of all unpaid
Policy Loans and any due and unpaid policy loan interest.
Policy Debt is not included in Net Accumulated Value,
which is equal to Accumulated Value less Policy Debt. If,
during the first three Policy Years, Net Accumulated
Value or, after three Policy Years, Net Surrender Value
is insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "Charges and Deductions--Monthly
Deduction"), the Company will notify the Policyowner. To
avoid lapse and termination of the Policy without value
(see "THE POLICY--Policy Lapse and
Reinstatement--LAPSE"), the Policyowner must, during the
Grace Period, make a premium payment that, when reduced
by the premium expense charge (see "CHARGES AND
DEDUCTIONS--Premium Expense Charge"), will be at least
equal to three times the monthly deduction due on the
Monthly Deduction Day immediately preceding the Grace
Period (see "CHARGES AND DEDUCTIONS--Monthly Deduction").
Therefore the greater the Policy Debt under a Policy, the
more likely it would be to lapse.
REPAYMENT OF POLICY DEBT. 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 surrender or from the maturity
benefit. Any payments made by a Policyowner will be
treated first as the repayment of any outstanding Policy
Debt, unless the Policyowner indicates otherwise. Upon
repayment of Policy Debt, the portion of 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
Policy Debt, but will remain in the Declared Interest
Option unless and until transferred to the Variable
Account by the Policyowner.
For a discussion of the tax consequences associated with
Policy Loans and lapses, see "FEDERAL TAX MATTERS."
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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. (See "POLICY BENEFITS--Payment Options.")
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
within seven days after receipt by the Company of Due
Proof of Death. Payment may, however, be postponed under
certain circumstances. (See "GENERAL PROVISIONS--
Postponement of Payments.") The Company pays interest on
those proceeds, at an annual rate of no less than 3.0% or
any rate required by law, from the date of death to the
date payment is made.
DEATH BENEFIT OPTIONS. 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
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<PAGE>
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 Appendix B.
Accordingly, under Option A, the death proceeds will
always vary as the Accumulated Value varies (but will
never be less than the Specified Amount). Policyowners
who prefer to have favorable investment performance and
additional premiums reflected in increased death benefits
generally should select Option A.
Under Option B, the death benefit will be equal to the
greater of the current Specified Amount or the
Accumulated Value (determined as of the end of the
Business Day coinciding with or immediately following the
date of death) multiplied by the specified amount factor.
The specified amount factor is the same as under Option
A. Accordingly, under Option B the death benefit will
remain level at the Specified Amount unless the
Accumulated Value multiplied by the specified amount
factor exceeds the current Specified Amount, in which
case the amount of the death benefit will vary as the
Accumulated Value varies. Policyowners who are satisfied
with the amount of their insurance coverage under the
Policy and who prefer to have favorable investment
performance and additional premiums reflected in higher
Accumulated Value, rather than increased death benefits,
generally should select Option B.
Examples illustrating Option A and Option B can be found
in Appendix B.
CHANGE IN DEATH BENEFIT OPTION. The death benefit option
in effect may be changed at any time by sending a written
request for the change to the Company at its Home Office.
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. A change
in death benefit options may have federal income tax
consequences. (See "FEDERAL TAX MATTERS.")
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 in connection with a change in
death benefit option; however, a change in death benefit
option will affect the cost of insurance charges. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction--COST OF
INSURANCE.")
CHANGE IN EXISTING COVERAGE. 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. (See "CHARGES AND DEDUCTIONS-- Monthly
Deduction--COST OF INSURANCE RATE, and --NET AMOUNT AT
RISK.") If decreases in the Specified Amount cause the
premiums paid to exceed the maximum premium limitations
imposed by federal tax law (see "THE POLICY--Premiums--
PREMIUM LIMITATIONS"), the decrease will be limited to
the extent necessary to meet these requirements. A change
in existing coverage may have federal income tax
consequences. (See "FEDERAL TAX MATTERS--Tax Treatment of
Policy Benefits.")
Any decrease in the Specified Amount will become
effective on the Monthly Deduction Day coinciding with or
immediately following the date the request is
24
<PAGE>
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 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.
CHANGES IN INSURANCE PROTECTION. A Policyowner may
increase or decrease the pure insurance protection
provided by a Policy--the difference between the death
benefit and the Accumulated Value--in one of several ways
as insurance needs change. These ways include increasing
or decreasing the Specified Amount of insurance, changing
the level of premium payments and, to a lesser extent,
partially withdrawing Accumulated Value. Although the
consequences of each of these methods will depend upon
the individual circumstances, they may be summarized as
follows:
(a) A decrease in the Specified Amount will,
subject to the applicable specified amount
factor limitations (see "POLICY
BENEFITS--Death Proceeds-- DEATH BENEFIT
OPTIONS"), decrease the pure insurance
protection and the cost of insurance charges
under the Policy without generally reducing
the Accumulated Value.
(b) An increase in the Specified Amount may
increase the amount of pure insurance
protection, depending on the amount of
Accumulated Value and the resultant
applicable specified amount factor. If the
insurance protection is increased, the cost
of insurance charge generally will increase
as well.
(c) If Option B is elected, an increased level
of premium payments will increase the
Accumulated Value and reduce the pure
insurance protection, until the Accumulated
Value multiplied by the applicable specified
amount factor exceeds the Specified Amount.
Increased premiums should also increase the
amount of funds available to keep the Policy
in force.
(d) If Option B is elected, a reduced level of
premium payments generally will increase the
amount of pure insurance protection,
depending on the applicable specified amount
factor. It also will result in a reduced
amount of Accumulated Value and will
increase the possibility that the Policy
will lapse.
(e) A partial withdrawal will reduce the death
benefit. (See "POLICY BENEFITS--Accumulated
Value Benefits--SURRENDER AND WITHDRAWAL
PRIVILEGES.") However, it only affects the
amount of pure insurance protection if the
death benefit payable is based on the
specified amount factor, because otherwise
the decrease in the benefit is offset by the
amount of Accumulated Value withdrawn. The
primary use of a partial withdrawal is to
withdraw cash and reduce Accumulated Value.
In comparison, an increase in the death benefit due to
the operation of the specified amount factor occurs
automatically and is intended to help assure that the
Policy remains qualified as life insurance under federal
tax law. The calculation of the death benefit based upon
the specified amount factor occurs only when the
Accumulated Value of a Policy reaches a certain
proportion of the Specified Amount (which may or may not
occur). Additional premium payments, favorable investment
performance and large initial premiums tend to increase
the likelihood of the specified amount
25
<PAGE>
factor becoming operational after the first few Policy
Years. Such increases will be temporary, however, if the
investment performance becomes unfavorable and/or premium
payments are stopped or decreased.
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ACCELERATED PAYMENTS OF DEATH PROCEEDS
In the event that the Insured becomes terminally ill (as
defined below), the Policyowner (if residing in a state
that has approved such an endorsement) may, by written
request and subject to the conditions stated below, have
the Company pay all or a portion of the accelerated death
benefit immediately to the Policyowner. If not attached
to the Policy beforehand, the Company will issue an
accelerated death benefit endorsement (the "Endorsement")
providing for this right.
For this purpose, an Insured is terminally ill when a
physician (as defined by the Endorsement) certifies that
he or she has a life expectancy of 12 months or less.
The accelerated death benefit is equal to the Policy's
death benefit as described on page 6, up to a maximum of
$250,000 (the $250,000 maximum applies in aggregate to
all policies issued by the Company on the Insured), less
an amount representing a discount for 12 months at the
interest rate charged for loans under the Policy. The
accelerated death benefit does not include the amount of
any death benefit payable under a rider that covers the
life of someone other than the Insured.
In the event that there is a loan outstanding under the
Policy on the date that the Policyowner requests a
payment under the Endorsement, the accelerated death
benefit is reduced by a portion of the outstanding loan
in the same proportion that the requested payment under
the Endorsement bears to the total death benefit under
the Policy. If the amount requested by the Policyowner to
be paid under the Endorsement is less than the total
death benefit under the Policy and the Specified Amount
of the Policy is equal to or greater than the minimum
Specified Amount, the Policy will remain in force with
all values and benefits under the Policy being reduced in
the same proportion that the new Policy benefit bears to
the Policy benefit before exercise of the Endorsement.
There are several other restrictions associated with the
Endorsement. These are: (1) the Endorsement is not valid
if the Policy is within five years of being matured, (2)
the consent of any irrevocable beneficiary or assignee is
required to exercise the Endorsement, (3) the Company
reserves the right, in its sole discretion, to require
the consent of the Insured or of any beneficiary,
assignee, spouse or other party of interest before
permitting the exercise of the Endorsement, (4) the
Company reserves the right to obtain the concurrence of a
second medical opinion as to whether any Insured is
terminally ill and (5) the Endorsement is not effective
where (a) the Insured or the Policyowner would be
otherwise required by law to use the Endorsement to meet
the claims of creditors, or (b) the Insured would be
otherwise required by any government agency to exercise
the Endorsement in order to apply for, obtain or keep a
government benefit or entitlement.
The Endorsement will terminate at the earlier of the end
of the grace period for which any premium is unpaid, upon
receipt in the Home Office of a written request from the
Policyowner to cancel the Endorsement or upon termination
of the Policy.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated death benefit payment received under an
accelerated death benefit endorsement should be fully
excludable from the gross income of the beneficiary, as
long as the beneficiary is the insured under the Policy.
However, the Policyowner should consult a qualified tax
adviser about the consequences of adding this Endorsement
to a Policy or requesting an accelerated death benefit
payment under this Endorsement.
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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
26
<PAGE>
outstanding Policy Debt. (See "POLICY BENEFITS--Loan
Benefits--REPAYMENT OF POLICY DEBT.") Benefits at
maturity may be paid in a lump sum or under a payment
option. The Maturity Date is Attained Age 115.
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PAYMENT OPTIONS Death proceeds and Accumulated Value paid at maturity, or
upon surrender or 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 and will not depend upon the
investment performance of the Variable Account. 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.
OPTION 1--INTEREST INCOME. Periodic payments of
interest earned from the proceeds will be paid.
Payments can be annual, semi-annual, 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.
27
<PAGE>
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.
ALTERNATE PAYMENT OPTION. In lieu of one of the above
options, the accumulated value, net surrender value
or death benefit, as applicable, may be settled under
any other payment option made available by the
Company or requested and agreed to by the Company.
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CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges will be deducted in connection with the Policy to
compensate the Company for providing the insurance
benefits set forth in the Policy and any additional
benefits added by rider, for distributing and
administering the Policy, for applicable taxes and for
assuming certain risks in connection with the Policy. The
nature and amount of these charges are described more
fully below.
- --------------------------------------------------------------------------------
PREMIUM EXPENSE CHARGE Prior to allocation of Net Premiums among the Subaccounts
and the Declared Interest Option, premiums paid will be
reduced by a premium expense charge. The premium less the
premium expense charge equals the Net Premium.
The premium expense charge is 7.0% of each premium up to
the Target Premium (or 2% for each premium over the
Target Premium) and is intended to compensate the Company
for expenses incurred in distributing the Policy,
including agent sales commissions, the cost of printing
prospectuses and sales literature, and advertising costs
and to compensate for the amount the Company considers
necessary to pay all taxes on premiums received by
insurance companies imposed by various states and
subdivisions thereof. Premium taxes charged by the
various states currently range from 1% to 3%.
The premium expense charge in any Policy Year is not
necessarily related to actual distribution expenses in
that year. Instead, the Company expects to incur the
majority of distribution expenses in the early Policy
Years and to recover any deficiency over the life of the
Policy and from the Company's general assets, including
amounts derived from the mortality and expense risk
charge.
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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 (See "GENERAL
PROVISIONS-- Additional Insurance Benefits"), for
underwriting and start-up expenses in connection with
issuing a Policy and for certain administrative costs.
The monthly deduction will be deducted on the Policy Date
and on each Monthly Deduction Day. (If the Monthly
Deduction Day falls on Thanksgiving, the Friday following
Thanksgiving or the weekend following Thanksgiving; or on
the 27th or 28th day of February, 1999, the monthly
deduction will be deducted on the preceding Business
Day.) It will be deducted from the Declared Interest
Option and each Subaccount 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 coinciding with or immediately following the Monthly
Deduction Day. (If the Monthly Deduction Day falls on
Thanksgiving, the Friday following Thanksgiving or the
weekend following Thanksgiving; or on the 27th or 28th
day of February, 1999, Accumulated Values will
28
<PAGE>
be determined as of the end of the preceding Business
Day.) Because portions of the monthly deduction, 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;(1) and
(c) is the Accumulated Value.
The Specified Amount and the Accumulated Value will be
determined as of the end of the Business Day coinciding
with or immediately following 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 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
at last birthday on the effective date of the increase.
Actual cost of insurance rates may change and 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. 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
- --------------
(1)Dividing by 1.0032737 reduces the net amount at risk, solely for the purposes
of computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4.0%.
29
<PAGE>
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-using
Insureds will generally have a lower cost of insurance
rate than similarly situated Insureds who use tobacco,
and preferred Insureds 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 Amount, the rate for the premium class
applicable to the increase will be used. However, if the
death benefit is calculated as the Cash 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. (See "GENERAL PROVISIONS--Additional Insurance
Benefits.")
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, surrenders 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 currently is $5.00 per Policy
Month and is guaranteed not to exceed $7 per Policy
Month.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. Monthly
administrative charges 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 currently is $0.05 per $1,000 of
Specified Amount, or increase in Specified Amount and is
guaranteed not to exceed $0.07 per $1,000 of Specified
Amount.
FIRST YEAR MONTHLY EXPENSE CHARGE. A monthly expense
charge will be deducted from Accumulated Value as part of
the monthly deduction during the first twelve Policy
Months. This charge currently is $5 per Policy Month and
is guaranteed not to exceed $7 per Policy Month.
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TRANSFER CHARGE A transfer charge of $25 may be imposed for the second
and each subsequent transfer during a Policy Year to
compensate the Company for the costs in effectuating the
transfer. The transfer charge, unless paid in cash, will
be deducted from the amount transferred. Once a Policy is
issued, the amount of this charge is guaranteed for the
life of the Policy. 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 initial allocation of Accumulated Value among 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.
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PARTIAL WITHDRAWAL FEE Upon partial withdrawal of a Policy, a fee equal to the
lesser of $25 or 2% of the amount withdrawn will be
assessed to compensate the Company for costs incurred in
accomplishing the withdrawal. The fee will be deducted
from Accumulated Value.
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SURRENDER CHARGE At the time of surrender, a Surrender Charge will apply
during the first ten Policy Years, as well as during the
first ten years following an increase in Specified
Amount. The Surrender Charge is an amount per $1,000 of
Specified Amount, declining to $0
30
<PAGE>
in the eleventh year. The Surrender Charge varies by age,
sex, underwriting category and Policy Year. The Surrender
Charge is level within each Policy Year. (See "Appendix
C--Maximum Surrender Charges.") At the time of a
requested decrease in Specified Amount, the full original
Surrender Charge stays in place. The Surrender Charge may
be waived after the first Policy Year if the insured is
terminally ill or stays in a qualified nursing care
center for 90 days.
At the time of a partial withdrawal, no Surrender Charge
applies.
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VARIABLE ACCOUNT CHARGES
MORTALITY AND EXPENSE RISK CHARGE. The Company deducts a
daily mortality and expense risk charge from each
Subaccount at an effective annual rate of 0.90% of the
average daily net assets of the Subaccounts and is
guaranteed not to exceed 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 therefore,
the Company may 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.
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 Account may also
be made. (See "FEDERAL TAX MATTERS--Taxation of the
Company.")
INVESTMENT OPTION EXPENSES. The value of net assets of
the Variable Account will reflect the investment advisory
fee and other expenses incurred by each Investment
Option. The investment advisory fee and other expenses
applicable to each Investment Option are listed in the
"SUMMARY OF THE POLICY" and described in the prospectus
for each Fund's Investment Option.
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THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
Policyowners may allocate Net Premiums and transfer
Accumulated Value to the Declared Interest Option.
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE DECLARED INTEREST OPTION HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THE
DECLARED INTEREST OPTION HAS NOT BEEN REGISTERED AS AN
INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF
1940. ACCORDINGLY, NEITHER THE DECLARED INTEREST OPTION
NOR ANY INTERESTS THEREIN ARE SUBJECT TO THE PROVISIONS
OF THESE ACTS AND, AS A RESULT, THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE
DISCLOSURES IN THIS PROSPECTUS RELATING TO THE DECLARED
INTEREST OPTION. DISCLOSURES REGARDING THE DECLARED
INTEREST OPTION MAY, HOWEVER, BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES
LAWS RELATING TO THE ACCURACY AND COMPLETENESS OF
STATEMENTS MADE IN PROSPECTUSES.
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GENERAL DESCRIPTION The Declared Interest Option is supported by the General
Account. The General Account consists of all assets owned
by the Company other than those in the Variable Account
and other separate accounts. Subject to applicable law,
the Company has sole discretion over the investment of
the assets of the General Account.
A Policyowner may elect to allocate Net Premiums to the
Declared Interest Option, the Variable Account, or both.
The Policyowner may also transfer Accumulated Value from
the Subaccounts to the Declared Interest Option, or from
the Declared Interest Option to the Subaccounts. The
allocation or transfer of funds to the Declared Interest
Option does not entitle a Policyowner to share in the
investment experience of the General Account. Instead,
the Company guarantees that Accumulated Value in the
Declared Interest Option will accrue interest at an
effective annual rate of at least 4.0%, independent of
the actual investment experience of the General Account.
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<PAGE>
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THE POLICY This Prospectus describes a flexible premium variable
life insurance policy. This Prospectus is generally
intended to serve as a disclosure document for the
aspects of the Policy involving the Variable Account. For
complete details regarding the Declared Interest Option,
see the Policy itself.
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DECLARED INTEREST OPTION ACCUMULATED VALUE
Net premiums allocated to the Declared Interest Option
are credited to the Policy. The Company bears the full
investment risk for these amounts. The Company guarantees
that interest credited to each Policyowner's Accumulated
Value in the Declared Interest Option will not be less
than an effective annual rate of 4.0%. The Company may,
in its sole discretion, credit a higher rate of interest,
although it is not obligated to credit interest in excess
of 4.0% per year, and might not do so. Any interest
credited on the Policy's Accumulated Value in the
Declared Interest Option in excess of the guaranteed rate
of 4.0% per year will be determined in the sole
discretion of the Company and may be changed at any time
by the Company, in its sole discretion. The Policyowner
assumes the risk that the interest credited may not
exceed the guaranteed minimum rate of 4.0% per year. The
interest credited to the Policy's Accumulated Value in
the Declared Interest Option that equals Policy Debt may
be greater than 4.0%, but will in no event be greater
than the current effective loan interest rate minus no
more than 3.0%. From time to time, the Company may allow,
by Company practice, a loan spread of 0% on the gain in a
Policy in effect a minimum of ten years. The Accumulated
Value in the Declared Interest Option will be calculated
no less frequently than each Monthly Deduction Day.
The Company guarantees that, at any time prior to the
Maturity Date, the Accumulated Value in the Declared
Interest Option will not be less than the amount of the
Net Premiums allocated or Accumulated Value transferred
to the Declared Interest Option, plus interest at the
rate of 4.0% per year, plus any excess interest which the
Company credits, less the sum of all policy charges
allocable to the Declared Interest Option and any amounts
deducted from the Declared Interest Option in connection
with partial withdrawals or transfers to the Variable
Account.
- --------------------------------------------------------------------------------
TRANSFERS, PARTIAL WITHDRAWALS, SURRENDERS AND POLICY LOANS
Amounts may be transferred between the Subaccounts and
the Declared Interest Option. A transfer charge of $25
may be imposed in connection with the transfer unless
such transfer is the first transfer requested by the
Policyowner during such Policy Year. Unless paid in cash,
the transfer charge will be deducted from the amount
transferred. A Policyowner may make only one transfer
between the Variable Account and the Declared Interest
Option in each Policy Year. No more than 50% of the Net
Accumulated Value in the Declared Interest Option may be
transferred from the Declared Interest Option unless the
balance in the Declared Interest Option immediately after
the transfer will be less than $1,000. If the balance in
the Declared Interest Option after a transfer would be
less than $1,000, the full Net Accumulated Value in the
Declared Interest Option may be transferred. A
Policyowner may also make partial withdrawals, surrenders
and obtain Policy Loans from the Declared Interest Option
at any time prior to the Policy's Maturity Date.
Transfers, partial withdrawals and surrenders from, and
payments of Policy Loans allocated to, the Declared
Interest Option may be delayed for up to six months.
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GENERAL PROVISIONS
- --------------------------------------------------------------------------------
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.
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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
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<PAGE>
Insured for two years from the Policy Date or date of
reinstatement. 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, the Secretary or an
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 one year 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 one year from the effective date
of any increase in Specified Amount, any increase in the
death benefit resulting from the requested 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 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 Securities
and Exchange Commission;
b) the Securities and Exchange Commission by
order permits postponement for the
protection of Policyowners; or
c) an emergency exists, as determined by the
Securities and Exchange 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.
33
<PAGE>
Transfers may also be postponed under these
circumstances.
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 during the first three
Policy Years, or Net Surrender Value after
three Policy Years, is less than the monthly
deduction for the following Policy Month;
b) the date the Policyowner surrenders the
Policy for its entire Net Accumulated 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 state law in the state in which
the Policy is delivered) 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 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.
- --------------------------------------------------------------------------------
ADDITIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more of the
following additional insurance benefits may be added to a
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. (See "CHARGES AND DEDUCTIONS--Monthly
Deduction.") Detailed information concerning available
riders may be obtained from the agent selling the Policy.
34
<PAGE>
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DISTRIBUTION OF THE POLICIES
- --------------------------------------------------------------------------------
The Policies will be sold by individuals who in addition
to being licensed as life insurance agents for the
Company, are registered representatives of the principal
underwriter of the Policies, EquiTrust Marketing, a
broker-dealer having a selling agreement with EquiTrust
marketing or a broker-dealer having a selling agreement
with such broker-dealer. EquiTrust Marketing (formerly
FBL Marketing Services, Inc.), a corporation organized on
May 7, 1970, under the laws of the State of Delaware, is
registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association
of Securities Dealers, Inc. EquiTrust Marketing currently
receives annual compensation of $100 per registered
representative for acting as principal underwriter.
For Policies sold in states other than Kansas, writing
agents will receive commissions based on a commission
schedule and rules. The Company may pay agents first year
commissions at a rate not exceeding 50% of Target
Premiums and 4% above Target Premiums paid in the first
Policy Year. Agents will be paid renewal commissions at a
rate equal to 5% of Target Premiums and 4% above Target
Premiums paid after the first Policy Year. Additional
commissions at a rate not exceeding 50% of the increase
in Target Premiums may be paid during the first year
following an increase in Specified Amount.
For Policies sold in Kansas, writing agents will receive
commissions based on a commission schedule and rules. The
Company may pay agents first year commissions at a rate
not exceeding 60% of Target Premiums and 3% above Target
Premiums paid in the first Policy Year. Agents will be
paid renewal commissions at a rate equal to 4% of Target
Premiums and 3% above Target Premiums paid after the
first Policy Year. Additional commissions at a rate not
exceeding 60% of the increase in Target Premiums may be
paid during the first year following an increase in
Specified Amount.
These commissions (and other distribution expenses, such
as production incentive bonuses, agent's insurance and
pensions benefits, agency management compensation and
bonuses and expense allowances) are paid by the Company.
They do not result in any additional charges against the
Policy that are not described above under "CHARGES AND
DEDUCTIONS."
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FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
INTRODUCTION The following discussion is general and is not intended
as tax advice. Any person concerned about these tax
considerations should consult a competent tax adviser.
This discussion is based on the Company's understanding
of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of
continuation of these current laws and interpretations,
and various changes have been proposed that would alter
these laws in ways that would have significant adverse
impacts. It should be further understood that the
following discussion is not exhaustive and does not
purport to be complete or to cover all situations and
that special rules not described in this Prospectus may
be applicable in certain situations. Moreover, no attempt
has been made to consider any applicable state or other
tax laws.
- --------------------------------------------------------------------------------
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code") includes a definition of a life
insurance contract for federal tax purposes. The
Secretary of the Treasury (the "Treasury") is authorized
to prescribe regulations interpreting and implementing
section 7702 and has issued proposed regulations on
certain aspects of section 7702. If a Policy were
determined not to be a life insurance contract for
purposes of section 7702, such Policy would not provide
most of the tax advantages normally provided by a life
insurance policy.
35
<PAGE>
With respect to a Policy issued exclusively on the basis
of a standard premium class, while there is some
uncertainty due to the limited guidance on section 7702,
the Company believes that in light of the proposed
regulations such a Policy should meet the section 7702
definition of a life insurance contract. However, with
respect to a Policy issued in whole or in part on a
substandard basis (i.e., a premium class involving higher
than standard mortality risk), it is not clear whether or
not such a Policy would satisfy section 7702,
particularly if the Policyowner pays the full amount of
premiums permitted under the Policy. If it is
subsequently determined that a Policy does not satisfy
section 7702, the Company will take whatever steps are
appropriate and necessary to attempt to cause such a
Policy to comply with section 7702, including possibly
refunding any premiums paid that exceed the limitations
allowable under section 7702 (together with interest or
other earnings on any such premiums refunded as required
by law). For these reasons, the Company reserves the
right to modify the Policy as necessary to attempt to
qualify it as a life insurance contract under section
7702.
Section 817(h) of the Code authorizes the Treasury to set
standards by regulation or otherwise for the investments
of the Account to be "adequately diversified" in order
for the Policy to be treated as a life insurance contract
for federal tax purposes. The Variable Account, through
each Fund, intends to comply with the diversification
requirements prescribed in Regulations section 1.817-5,
which affect how each Fund's assets may be invested.
Although the investment adviser of EquiTrust Variable
Insurance Series Fund is an affiliate of the Company, the
Company does not have control over the Fund or its
investments. Nonetheless, the Company believes that each
Investment Option in which the Variable Account owns
shares will be operated in compliance with the
requirements prescribed by the Treasury.
In certain circumstances, owners of variable life
insurance contracts may be considered the owners, for
federal income tax purposes, of the assets of the
separate account used to support their contracts. In
those circumstances, income and gains from the separate
account assets would be includable in the variable
contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be
considered the owner of separate account assets if the
contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment
control over the assets. The Treasury Department also
announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do
not provide guidance concerning the circumstances in
which investor control of the investments of a segregated
asset account may cause the investor (I.E., the
Policyowner), rather than the insurance company, to be
treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by
way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular
subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but
different in certain respects from, those described by
the IRS in rulings in which it was determined that policy
owners were not owners of separate account assets. For
example, a Policyowner has additional flexibility in
allocating premium payments and policy values. These
differences could result in a Policyowner being treated
as the owner of a pro rata portion of the assets of the
Variable Account. In addition, the Company does not know
what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has
stated it expects to issue. The Company therefore
reserves the right to modify the Policy as necessary to
attempt to prevent a Policyowner from being considered
the owner of a pro rata share of the assets of the
Variable Account.
The following discussion assumes that the Policy will
qualify as a life insurance contract for federal income
tax purposes.
- --------------------------------------------------------------------------------
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the proceeds and
cash value increases of a Policy should be treated in a
manner consistent with a fixed-benefit life insurance
36
<PAGE>
policy for federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the
gross income of the Beneficiary under section 101(a)(l)
of the Code.
A change in a Policy's Specified Amount, the payment of
an unscheduled premium, a Policy loan, a partial
withdrawal, a surrender, a lapse with outstanding
indebtedness, a change in death benefit options, the
exchange of a Policy for a fixed-benefit policy (see "THE
POLICY--Special Transfer Privilege") and the assignment
of a Policy or the exercise of the right to change
Policyowners (see "GENERAL PROVISIONS-- Changing the
Policyowner or Beneficiary") may have tax consequences
depending upon the circumstances. In addition, federal
estate and state and local estate, inheritance, and other
tax consequences of ownership or receipt of Policy
proceeds depend upon the circumstances of each
Policyowner or Beneficiary. A competent tax adviser
should be consulted for further information.
Pursuant to the recently enacted Health Insurance
Portability and Accountability Act of 1996, the Company
believes that for federal income tax purposes, an
accelerated death benefit payment received under an
accelerated death benefit endorsement should be fully
excludable from the gross income of the beneficiary, as
long as the beneficiary is the insured under the Policy.
However, the Policyowner should consult a qualified tax
adviser about the consequences of adding this Endorsement
to a Policy or requesting an accelerated death benefit
payment under this Endorsement.
The Company further believes that an exchange of a
fixed-benefit policy issued by the Company for a Policy
as provided under "THE POLICY--Exchange Privilege"
generally should be treated as a non-taxable exchange of
life insurance policies within the meaning of section
1035 of the Code. However, in certain circumstances, the
exchanging owner may receive a cash distribution that
might have to be recognized as income to the extent there
was gain in the fixed-benefit policy. Moreover, to the
extent a fixed-benefit policy with an outstanding loan is
exchanged for an unencumbered Policy, the exchanging
owner could recognize income at the time of the exchange
up to the amount of such loan (including any due and
unpaid interest on such loan). An exchanging owner should
consult a tax adviser as to whether an exchange of a
fixed-benefit policy for the Policy will have tax
consequences to such owner.
The Policies may be used in various arrangements,
including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of
each individual arrangement. Therefore, if it is
contemplated that a Policy may be used in any arrangement
the value of which depends in part on its tax
consequences, a qualified tax adviser should be consulted
regarding the tax attributes of the particular
arrangement.
Generally, the Policyowner will not be deemed to be in
constructive receipt of the cash value, including
increments thereof, under the Policy until there is a
distribution. The tax consequences of distributions from,
and loans taken from or secured by, a Policy depend on
whether the Policy is classified as a "modified endowment
contract."
Whether a Policy is or is not a modified endowment
contract, upon a complete surrender or lapse of a Policy,
or when benefits are paid at such Policy's maturity date,
if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to
tax.
MODIFIED ENDOWMENT CONTRACTS. A Policy may be treated as
a modified endowment contract depending upon the amount
of premiums paid in relation to the death benefit
provided under such Policy. The premium limitation rules
for determining whether a Policy is a modified endowment
contract are extremely complex. In general, however, a
Policy will be a modified endowment contract if the
accumulated premiums paid at any time during the first
seven policy years exceeds the sum of the net level
premiums which would have been paid on or before such
time if the Policy
37
<PAGE>
provided for paid-up future benefits after the payment of
seven level annual premiums. In addition, if a Policy is
"materially changed," it may cause such Policy to be
treated as a modified endowment contract. The material
change rules for determining whether a Policy is a
modified endowment contract are also extremely complex.
In general, however, the determination whether a Policy
will be a modified endowment contract after a material
change generally depends upon the relationship among the
death benefit at the time of such change, the cash value
at the time of such change and the additional premiums
paid in the seven policy years starting with the date on
which the material change occurs.
Due to the Policy's flexibility, classification of a
Policy as a modified endowment contract will depend upon
the circumstances of each Policy. Accordingly, a
prospective Policyowner should contact a competent tax
adviser before purchasing a Policy to determine the
circumstances under which the Policy would be a modified
endowment contract. In addition, a Policyowner should
contact a competent tax adviser before paying any
unscheduled premiums or changing the planned premium
schedule or making any other change to, including an
exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified
endowment contract.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Policies classified as modified
endowment contracts are subject to the following tax
rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a
Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the cash
value immediately before the distribution over the
investment in the Policy (described below) at such time.
Second, loans taken from, or secured by, such a Policy
are treated as distributions from such a Policy and taxed
accordingly. In this regard, the Internal Revenue Service
could take the position that capitalized interest on such
loans are to be treated as a taxable distribution. Third,
a 10 percent additional tax is imposed on the portion of
any distribution from, or loan taken from or secured by,
such a Policy that is included in income except where the
distribution or loan is made on or after the Policyowner
attains age 59 1/2, is attributable to the Policyowner's
becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or
life expectancy) of the Policyowner or the joint lives
(or joint life expectancies) of the Policyowner and the
Policyowner's Beneficiary.
If a Policy becomes a modified endowment contract after
it is issued, distributions made during the policy year
in which it becomes a modified endowment contract,
distributions in any subsequent policy year and
distributions within two years before the Policy becomes
a modified endowment contract will be subject to the tax
treatment described above. This means that a distribution
from a Policy that is not a modified endowment contract
could later become taxable as a distribution from a
modified endowment contract.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS. Distributions from a Policy that is
not classified as a modified endowment contract are
generally treated as first recovering the investment in
the policy (described below) and then, only after the
return of all such investment in the policy, as
distributing taxable income. An exception to this general
rule occurs in the case of a partial withdrawal, a
decrease in the Specified Amount, or any other change
that reduces benefits under the Policy in the first 15
years after the Policy is issued and that results in a
cash distribution to the Policyowner in order for the
Policy to continue complying with the section 7702
definitional limits. In that case, such distribution will
be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed
in section 7702.
Loans from, or secured by, a Policy that is not a
modified endowment contract are not treated as
distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
38
<PAGE>
Finally, neither distributions (including distributions
upon surrender or lapse) nor loans from, or secured by, a
Policy that is not a modified endowment contract are
subject to the 10 percent additional tax.
POLICY LOAN INTEREST. Interest paid on any loan under a
Policy may not be deductible. Therefore, a Policyowner
should consult a competent tax adviser before deducting
any Policy loan interest.
INVESTMENT IN THE POLICY. Investment in the policy means
(i) the aggregate amount of any premiums or other
consideration paid for a Policy, minus (ii) the aggregate
amount received under the Policy which is excluded from
the gross income of the Policyowner (except that the
amount of any loan from, or secured by, a Policy that is
a modified endowment contract, to the extent such amount
is excluded from gross income, will be disregarded), plus
(iii) the amount of any loan from, or secured by, a
Policy that is a modified endowment contract to the
extent that such amount is included in the gross income
of the Policyowner.
MULTIPLE POLICIES. All modified endowment contracts that
are issued by the Company (or its affiliates) to the same
Policyowner during any calendar year are treated as one
modified endowment contract for purposes of determining
the amount includable in gross income under section
72(e).
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TAXATION OF
THE COMPANY At the present time, the Company makes no charge to the
Variable Account, or to the Policy for any Federal, state
or local taxes (other than state premium taxes) that it
incurs that may be attributable to such Account or to the
Policies. The Company, however, reserves the right in the
future to make a charge for any such tax or other
economic burden resulting from the application of the tax
laws that it determines to be properly attributable to
the Variable Account or to the Policies.
- --------------------------------------------------------------------------------
EMPLOYMENT-RELATED BENEFIT PLANS
The Supreme Court held in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an
employer's deferred compensation plan could not, under
Title VII of the Civil Rights Act of 1964, vary between
men and women on the basis of sex. In addition,
legislative, regulatory or decisional authority of some
states may prohibit use of sex-distinct mortality tables
under certain circumstances. The Policy described in this
Prospectus contains guaranteed cost of insurance rates
and guaranteed purchase rates for certain payment options
that distinguish between men and women. Accordingly,
employers and employee organizations should consider, in
consultation with legal counsel, the impact of NORRIS,
and Title VII generally, on any employment-related
insurance or benefit program for which a Policy may be
purchased.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds the assets of the Variable Account. The
assets are kept physically segregated and held separate
and apart from the General Account. The Company maintains
records of all purchases and redemptions of shares by
each Investment Option for each corresponding Subaccount.
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 the officers and employees of the Company.
- --------------------------------------------------------------------------------
VOTING RIGHTS 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 are calculated separately for each Subaccount
and are determined by dividing a Policy's Accumulated
Value in a Subaccount by the net asset value per share of
the
39
<PAGE>
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 materials, reports and other materials
relating to the appropriate Investment Option.
The Company will vote Fund shares attributable to
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 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.
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.
DISREGARD OF VOTING INSTRUCTIONS. 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.
- --------------------------------------------------------------------------------
STATE REGULATION AND OWNERSHIP OF THE COMPANY
The Company, a stock life insurance company organized
under the laws of Iowa, is subject to regulation by the
Iowa Insurance Department. An annual statement is filed
with the Iowa Insurance Department on or before March lst
of each year covering the operations and reporting on the
financial condition of the Company as of December 31st of
the preceding year. Periodically, the Iowa Insurance
Department examines the liabilities and reserves of the
Company and the Variable Account and certifies their
adequacy, and a full examination of operations is
conducted periodically by the National Association of
Insurance Commissioners.
In addition, the Company is subject to the insurance laws
and regulations of other states within which it is
licensed or may become licensed to operate. Generally,
the insurance department of any other state applies the
laws of the state of domicile in determining permissible
investments.
40
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS OF NAME AND POSITION PRINCIPAL OCCUPATION
FARM BUREAU LIFE INSURANCE WITH THE COMPANY* LAST FIVE YEARS**
------------------------------ --------------------------------------------------
<S> <C> <C>
COMPANY Kenneth R. Ashby, Director Farmer; President, Utah Farm Bureau Federation and
affiliated companies and Ashby's Valley View
Farms; Vice President and Director, Utah Farm
Bureau Insurance Co.; Director, Millard County
Water Conservancy District, American Farm Bureau
Federation and affiliated companies, Multi States
Farmers Service Co., FBL Financial Group, Inc. and
Universal Assurors Life Insurance Company
Al Christopherson, Director Farmer; President, Minnesota Farm Bureau
Federation; Director, FBL Financial Group, Inc.,
Universal Assurors Life Insurance Company, Farm
Bureau Mutual Insurance Company and FBL Insurance
Brokerage, Inc.
Ernest A. Glienke, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., Utah Farm
Bureau Insurance Company and FBL Financial
Services, Inc.
Philip A. Hemesath, Director Farmer
Craig D. Hill, Director Farmer; President, CAPA Hill, Inc.; Director, Farm
Bureau Mutual Insurance Company, FBL Insurance
Brokerage, Inc., Utah Farm Bureau Insurance
Company and FBL Financial Services, Inc.
Daniel L. Johnson, Director Farmer; Farm Bureau Mutual Insurance Company, FBL
Insurance Brokerage, Inc. and FBL Financial
Services, Inc.
Richard G. Kjerstad, Director Farmer; President and Director, South Dakota Farm
Bureau Federation and South Dakota Farm Bureau
Mutual Insurance Company; Director, FBL Financial
Group, Inc. and Universal Assurors Life Insurance
Company
Lindsey D. Larsen, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., Utah Farm
Bureau Insurance Company and FBL Financial
Services, Inc.
David R. Machacek, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., and FBL
Financial Services, Inc.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
41
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
------------------------------ --------------------------------------------------
<S> <C> <C>
Donald O. Narigon, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc., and FBL
Financial Services, Inc.
Bryce P. Neidig, Director Farmer; President, Nebraska Farm Bureau
Federation, Nebraska Farm Bureau Services, Inc.,
Farm Bureau Insurance Company of Nebraska,
Nebraska Farm Bureau Insurance Agency, Inc.;
Director, American Agriculture Insurance Company,
American Agriculture Insurance Agency, Inc.,
American Farm Bureau Service Company, American
Farm Bureau Federation, American Agricultural
Communications Systems, Inc., Western Agricultural
Insurance Co., Western Agricultural Management
Corp., FBL Financial Group, Inc., Blue Cross/Blue
Shield of Nebraska and Universal Assurors Life
Insurance Company
Charles E. Norris, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
Keith R. Olsen, Director Farmer
Bennett M. Osmonson, Director Farmer
Howard D. Poulson, Director Farmer; President, Wisconsin Farm Bureau
Federation, Rural Mutual Insurance Company and
Midwest Livestock Producers; Director, FBL
Financial Group, Inc. and Universal Assurors Life
Insurance Company
Sally A. Puttmann, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
Beverly L. Schnepel, Director Farmer; Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc.
F. Gary Steiner, Director Farmer; Director, Wisconsin Farm Bureau Insurance
Company and Bank of Alma (Alma, WI)
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
42
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
------------------------------ --------------------------------------------------
<S> <C> <C>
Edward M. Wiederstein, Farmer; Chairman and Director, FBL Financial
President and Director Group, Inc.; President and Director, Iowa Farm
Bureau Federation, FBL Insurance Brokerage, Inc.,
Farm Bureau Mutual Insurance Company, Utah Farm
Bureau Insurance Company, FBL Financial Services,
Inc., Universal Assurors Life Insurance Company
and Farm Bureau Agricultural Business Corporation;
Director, Multi-Pig Corporation, Western
Agricultural Insurance Company, Western Ag
Insurance Agency, Inc., Western Farm Bureau Life
Insurance Company and American Ag Insurance
Company
Craig A. Lang, Vice President Farmer; Director, Growmark, Inc., Western Farm
and Director Bureau Life Insurance Company, Utah Farm Bureau
Insurance Company, Vice President and Director,
Farm Bureau Mutual Insurance Company, FBL
Insurance Brokerage, Inc. and FBL Financial
Services, Inc., Vice President, Universal Assurors
Life Insurance Company
Richard D. Harris, Senior Vice Senior Vice President and Secretary- Treasurer,
President and Farm Bureau Mutual Insurance Company, FBL
Secretary-Treasurer Insurance Brokerage, Inc., Universal Assurors Life
Insurance Company, Utah Farm Bureau Insurance
Company, Western Farm Bureau Life Insurance
Company, FBL Financial Services, Inc. and FBL
Financial Group, Inc.; Senior Vice President and
Assistant Secretary-Treasurer, South Dakota Farm
Bureau Mutual Insurance Company
Stephen M. Morain, Senior Vice Senior Vice President and General Counsel, FBL
President, and General Financial Group, Inc.
Counsel
Thomas R. Gibson, Chief Chief Executive Officer, FBL Financial Group, Inc.
Executive Officer
William J. Oddy, Executive Chief Operating Officer, FBL Financial Group, Inc.
Vice President, and General
Manager
Timothy J. Hoffman, Vice Vice President, Chief Property/Casualty Officer,
President FBL Financial Group, Inc.
James W. Noyce, Chief Chief Financial Officer, FBL Financial Group, Inc.
Financial Officer
Barbara J. Moore, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
43
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
------------------------------ --------------------------------------------------
<S> <C> <C>
JoAnn W. Rumelhart, Vice Vice President-Life Operations, FBL Financial
President-Life Operations Group, Inc.
John M. Paule, Vice President- Vice President-Corporate Administration, FBL
Corporate Administration Financial Group, Inc.
Lynn E. Wilson, Vice Vice President-Life Sales, FBL Financial Group,
President- Inc.
Life Sales
F. Walter Tomenga, Vice Vice President-Corporate Affairs and Marketing
President-Corporate Affairs Services, FBL Financial Group, Inc.
and Marketing Services
Robert L. Tatge, Vice Vice President-Property/Casualty Operations, FBL
President Financial Group, Inc.
Lou Ann Sandburg, Vice Vice President-Investments and Assistant
President- Treasurer, FBL Financial Group, Inc.
Investments and Assistant
Treasurer
Thomas E. Burlingame, Vice Vice President-Associate General Counsel, FBL
President-Associate General Financial Group, Inc.
Counsel
Kathryn Coleson Horner, Accounting Vice President, FBL Financial Group,
Accounting Vice President Inc.
Dennis M. Marker, Investment Investment Vice President, Administration, FBL
Vice President, Financial Group, Inc.
Administration
Paul Grinvalds, Variable Variable Operations Vice President, Appointed
Operations Vice President Actuary, FBL Financial Group, Inc.
James P. Brannen, Tax and Tax and Investment Accounting Vice President, FBL
Investment Accounting Vice Financial Group, Inc.
President
Ronald J. Palmer, Agency Agency Services Vice President, FBL Financial
Services Vice President Group, Inc.
Christopher G. Daniels, Life Life Product Development and Pricing Vice
Product Development and President, FBL Financial Group, Inc.
Pricing Vice President
James M. Mincks, Human Human Resources Vice President, FBL Financial
Resources Vice President Group, Inc.
Don Seibel, GAAP Accounting GAAP Accounting Vice President, FBL Financial
Vice President Group, Inc.
Scott Shuck, Marketing Marketing Services Vice President, FBL Financial
Services Vice President Group, Inc.
Jim Streck, Traditional Traditional Operations Vice President, FBL
Operations Vice President Financial Group, Inc.
Blake D. Weber, Sales Services Sales Services Vice President, FBL Financial
Vice President Group, Inc.
Kermit J. Larson, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Larry W. Riley, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
44
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY* LAST FIVE YEARS**
------------------------------ --------------------------------------------------
<S> <C> <C>
John F. Mottet, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Richard J. January, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Cyrus S. Winters, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Michael J. Tousley, Senior Senior Agency Vice President, Farm Bureau Life
Agency Vice President Insurance Company
Ronnie G. Lee, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
Art Sieler, Agency Vice Agency Vice President, Farm Bureau Life Insurance
President Company
</TABLE>
- --------------
* The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West
Des Moines, Iowa 50266.
** The principal occupation shown reflects the principal employment of each
individual during the past five years.
Corporate positions may, in some instances, have changed during the period.
45
<PAGE>
- --------------------------------------------------------------------------------
LEGAL MATTERS Sutherland, Asbill & Brennan LLP of Washington, D.C. has
provided advice on certain legal matters relating to
federal securities laws applicable to the issuance of the
flexible premium variable life insurance policy described
in this Prospectus. All matters of Iowa law pertaining to
the Policy, including the validity of the Policy and the
Company's right to issue the Policy under Iowa Insurance
Law, have been passed upon by Stephen M. Morain, Senior
Vice President and General Counsel of the Company.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS The Company, like other insurance companies, is involved
in lawsuits. Currently, there are no class action
lawsuits naming the Company as a defendant or involving
the Variable Account. In some lawsuits involving other
insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the
outcome of any litigation cannot be predicted with
certainty, the Company believes that at the present time,
there are no pending or threatened lawsuits that are
reasonably likely to have a material adverse impact on
the Variable Account or the Company.
- --------------------------------------------------------------------------------
EXPERTS The financial statements of the Company at December 31,
1997 and 1996 and for each of the three years in the
period ended December 31, 1997, appearing herein, have
been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon appearing elsewhere
herein and are included in reliance upon such report
given upon the authority of such firm as experts in
accounting and auditing.
Actuarial matters included in this Prospectus have been
examined by Christopher G. Daniels, FSA, MSAA, Life
Product Development and Pricing Vice President, as stated
in the opinion filed as an exhibit to the registration
statement.
- --------------------------------------------------------------------------------
YEAR 2000 Like other investment funds, financial and business
organizations and individuals around the world, the
Variable Account could be adversely affected if the
computer systems used by the Company and other service
providers do not properly process and calculate
date-related information and data from and after January
1, 2000. In 1997, the Company completed a comprehensive
assessment of the Year 2000 issue and developed a plan to
address the issue in a timely manner. The Company has and
will utilize both internal and external resources to
reprogram, or replace, and test the software for Year
2000 modifications. The company anticipates completing
the Year 2000 project no later than December 31, 1998,
and prior to any anticipated impact on its operating
systems.
The date on which the Company believes it will complete
the Year 2000 modifications is based on management's best
estimates, which were derived utilizing numerous
assumptions of future events. The Company also recognizes
there are outside influences and dependencies relative to
its Year 2000 effort, over which it has little or no
control. However, the Company is putting effort into
ensuring these considerations will have minimal impact.
These would include the continued availability of certain
resources, third-party modification plans and many other
factors. However, there can be no guarantee that these
estimates will be achieved and actual results could
differ from those anticipated.
- --------------------------------------------------------------------------------
OTHER INFORMATION A registration statement has been filed with the
Securities and Exchange Commission under the Securities
Act of 1933, as amended, with respect to the Policy
offered hereby. This Prospectus does not contain all the
information set forth in the registration statement and
the amendments and exhibits to the registration
statement, to all of which reference is made for further
information concerning the Variable Account, the Company
and the Policy offered hereby. Statements contained in
this Prospectus as to the contents of the Policy and
other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such
instruments as filed.
46
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The consolidated balance sheets of the Company at
December 31, 1997 and 1996 and the related consolidated
statements of income, changes in stockholder's equity and
cash flows for each of the three years in the period
ended December 31, 1997 appearing herein, have been
audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon appearing elsewhere
herein. The unaudited consolidated balance sheet of the
Company at June 30, 1998, the related unaudited
consolidated statement of changes in stockholder's equity
for the six months then ended, and the related unaudited
consolidated statements of income and cash flows for the
six months ended June 30, 1998 and 1997 also appear
herein.
It is anticipated that the Variable Account will commence
operations in 1998; accordingly, no financial statements
currently exist for the Variable Account.
47
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Farm Bureau Life Insurance Company
We have audited the accompanying consolidated balance sheets of Farm Bureau Life
Insurance Company as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in stockholder's equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Farm
Bureau Life Insurance Company at December 31, 1997 and 1996, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 16, 1998
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, YEAR ENDED DECEMBER 31,
------------- -----------------------------
1998 1997 1996
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held for investment, at amortized cost
(market: 1998--$502,531;
1997--$541,332; 1996--$574,338) $ 484,903 $ 522,411 $ 562,283
Available for sale, at market (amortized cost:
1998--$1,246,833;
1997--$1,218,469; 1996--$1,096,179) 1,318,812 1,286,169 1,128,587
Equity securities, at market (cost:
1998--$48,420; 1997--$54,861; 1996--$69,915) 37,774 51,268 79,786
Mortgage loans on real estate 238,108 253,093 235,331
Investment real estate, less allowances for
depreciation of $3,343 in 1998, $2,507 in 1997
and $1,741 in 1996 40,699 38,774 26,384
Policy loans 90,193 90,052 88,940
Other long-term investments 6,450 9,989 22,157
Short-term investments 57,661 23,853 62,025
------------- ------------- -------------
Total investments 2,274,600 2,275,609 2,205,493
Cash and cash equivalents 2,119 1,678 1,802
Securities and indebtedness of related parties 65,156 63,394 39,244
Accrued investment income 24,455 25,340 24,298
Accounts and notes receivable 616 703 1,526
Amounts receivable from affiliates 1,170 6,686 7,095
Reinsurance recoverable 3,662 3,934 5,552
Deferred policy acquisition costs 166,938 157,096 145,614
Property and equipment, less allowances for
depreciation of $4,015 in 1998, $18,330 in 1997
and $17,313 in 1996 7,703 32,518 36,182
Current income taxes recoverable 9,841 10,349 --
Goodwill, less accumulated amortization of $3,136
in 1998, $2,792 in 1997 and $2,172 in 1996 10,296 10,640 9,726
Other assets 9,223 7,443 5,388
Assets held in separate accounts 182,328 138,409 79,043
------------- ------------- -------------
Total assets $ 2,758,107 $ 2,733,799 $ 2,560,963
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, YEAR ENDED DECEMBER 31,
------------- -----------------------------
1998 1997 1996
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Interest sensitive products $ 1,152,489 $ 1,172,881 $ 1,132,491
Traditional life insurance and accident and
health products 582,556 576,405 555,664
Unearned revenue reserve 24,122 23,341 22,182
Other policy claims and benefits 6,700 7,091 7,313
------------- ------------- -------------
1,765,867 1,779,718 1,717,650
Other policyholders' funds:
Supplementary contracts without life
contingencies 135,858 129,389 120,649
Advance premiums and other deposits 66,745 66,626 66,572
Accrued dividends 10,733 12,107 12,796
------------- ------------- -------------
213,336 208,122 200,017
Long-term debt 74 77 81
Amounts payable to affiliates 20 -- 1,700
Current income taxes payable -- -- 56
Deferred income taxes 45,686 45,123 43,810
Other liabilities 41,780 29,639 27,602
Liabilities related to separate accounts 182,328 138,409 79,043
------------- ------------- -------------
Total liabilities 2,249,091 2,201,088 2,069,959
Commitments and contingencies
Stockholder's equity:
Preferred stock, 7 1/2% cumulative, par value
$50.00 per share-- authorized 6,000 shares -- -- --
Common stock, par value $50.00 per
share--authorized 994,000 shares, issued and
outstanding 50,000 shares 2,500 2,500 2,500
Additional paid-in capital 55,285 55,285 55,285
Accumulated other comprehensive income--Net
unrealized investment gains 41,677 38,719 26,327
Retained earnings 409,554 436,207 406,892
------------- ------------- -------------
Total stockholder's equity 509,016 532,711 491,004
------------- ------------- -------------
Total liabilities and stockholder's equity $ 2,758,107 $ 2,733,799 $ 2,560,963
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------------------------
1998 1997 1997 1996 1995
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Interest sensitive product charges $ 20,464 $ 17,876 $ 37,802 $ 33,755 $ 33,343
Traditional life insurance and
accident and health premiums 33,040 33,682 61,675 61,611 57,907
Property-casualty premiums -- -- -- -- 18,709
Net investment income 90,217 86,446 174,763 166,422 184,348
Realized gains on investments (2,804) 21,689 38,639 54,454 5,902
Realized gain on dividend of home
office properties 8,346 -- -- -- --
Other income 1,436 2,088 4,968 11,887 28,011
------------- ------------- ------------- ------------- -------------
Total revenues 150,699 161,781 317,847 328,129 328,220
Benefits and expenses:
Interest sensitive product benefits 48,154 21,536 95,052 90,720 88,147
Traditional life insurance and
accident and health benefits 23,833 21,536 42,121 42,370 37,710
Increase in traditional life and
accident and health future policy
benefits 6,213 8,215 15,107 13,679 15,310
Distributions to participating
policyholders 11,436 12,182 22,784 23,725 23,838
Property-casualty losses and loss
adjustment expenses -- -- -- -- 13,621
Underwriting, acquisition and
insurance expenses 24,733 22,593 48,380 45,714 54,336
Interest expense 4 43 9 425 1,007
Other expenses 602 406 1,149 7,814 17,776
------------- ------------- ------------- ------------- -------------
Total benefits and expenses 114,975 113,452 224,602 224,447 251,745
------------- ------------- ------------- ------------- -------------
33,724 48,329 93,245 103,682 76,475
Income taxes (9,481) (16,175) (31,579) (34,156) (27,291)
Minority interest in earnings of
subsidiaries -- -- -- -- (12)
Equity income (loss), net of related
income taxes 554 87 1,908 4,138 1,488
------------- ------------- ------------- ------------- -------------
Net income $ 26,797 $ 32,241 $ 63,574 $ 73,664 $ 50,660
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED
ADDITIONAL INVESTMENT TOTAL
PAID-IN GAINS RETAINED STOCKHOLDER'S
COMMON STOCK CAPITAL (LOSSES) EARNINGS EQUITY
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 1,194 $ 51,732 $ (10,768) $ 313,314 $ 355,472
Comprehensive income:
Net income for 1995 -- -- -- 50,660 50,660
Change in net unrealized investment gains/
losses -- -- 45,375 -- 45,375
-------------
Total comprehensive income 96,035
Issuance of 26,119.72 shares pursuant to stock
dividend 1,306 (1,306) -- -- --
Dividend of Utah Farm Bureau Insurance Company
to parent -- -- (461) (10,650) (11,111)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1995 2,500 50,426 34,146 353,324 440,396
Comprehensive income:
Net income for 1996 -- -- -- 73,664 73,664
Change in net unrealized investment gains/
losses -- -- (7,819) -- (7,819)
-------------
Total comprehensive income 65,845
Adjustment resulting from capital transaction
of equity investee -- 4,859 -- -- 4,859
Dividend of FBL Financial Services, Inc. to
parent -- -- -- (15,096) (15,096)
Cash dividend paid to parent -- -- -- (5,000) (5,000)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1996 2,500 55,285 26,327 406,892 491,004
Comprehensive income:
Net income for 1997 -- -- -- 63,574 63,574
Change in net unrealized investment gains/
losses -- -- 12,392 -- 12,392
-------------
Total comprehensive income 75,966
Cash dividends paid to parent -- -- -- (33,000) (33,000)
Other -- -- -- (1,259) (1,259)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1997 2,500 55,285 38,719 436,207 532,711
Comprehensive income:
Net income for six months ended June 30,
1998 -- -- -- 26,797 26,797
Change in net unrealized investment gains/
losses -- -- 2,958 -- 2,958
-------------
Total comprehensive income 29,755
Cash dividends paid to parent -- -- -- (7,800) (7,800)
Dividend of home office properties -- -- -- (45,650) (45,650)
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1998 $ 2,500 $ 55,285 $ 41,677 $ 409,554 $ 509,016
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------------------------
1998 1997 1997 1996 1995
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 26,797 $ 32,241 $ 63,574 $ 73,664 $ 50,660
Adjustments to reconcile net income to net cash
provided by operating activities:
Adjustments related to interest sensitive
products:
Interest credited to account balances 41,057 40,982 82,821 80,867 80,132
Charges for mortality and administration (20,420) (18,650) (38,134) (35,050) (34,083)
Deferral of unearned revenues 1,238 1,076 2,266 1,825 1,696
Amortization of unearned revenue reserve (419) (302) (779) (530) (956)
Provision for depreciation and amortization (1,968) 2,114 3,088 5,906 10,034
Net gains and losses related to investments
held by broker-dealer and investment company
subsidiaries -- (1,223) (1,223) (3,125) (25,801)
Realized gains on investments 2,804 (21,689) (38,639) (54,454) (5,902)
Realized gain on dividend of home office
properties (8,346) -- -- -- --
Increase in traditional life, accident and
health and property-casualty benefit accruals 6,151 8,371 15,198 13,646 16,144
Policy acquisition costs deferred (12,997) (11,587) (22,334) (18,561) (18,995)
Amortization of deferred policy acquisition
costs 3,654 3,228 7,760 7,271 10,181
Provision for deferred income taxes (1,030) (6,316) (5,172) 6,310 15,026
Other 3,023 (940) (12,545) 8,635 (19,895)
------------ ------------ ------------ ------------ ------------
Net cash provided by operating activities 39,544 27,305 55,881 86,404 78,241
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities--held for investment 38,895 16,212 40,460 33,212 16,529
Fixed maturities--available for sale 149,018 133,373 250,842 222,093 208,189
Equity securities 15,576 75,549 109,641 101,937 29,766
Mortgage loans on real estate 25,658 13,525 38,725 21,977 18,646
Investment real estate 65 -- 6 4,829 927
Policy loans 11,155 10,937 21,002 20,092 19,701
Other long-term investments 64 7,225 52 10,404 11,609
Short-term investments--net -- 16,281 41,061 -- 68,799
------------ ------------ ------------ ------------ ------------
240,431 273,102 501,789 414,544 374,166
</TABLE>
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------------------------
1998 1997 1997 1996 1995
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INVESTING ACTIVITIES (CONTINUED)
Acquisition of investments:
Fixed maturities--held for investment $ -- $ -- $ -- $ (38,472) $ (120,885)
Fixed maturities--available for sale (176,711) (212,092) (363,560) (374,808) (282,657)
Equity securities (945) (28,700) (45,520) (28,824) (30,380)
Mortgage loans on real estate (10,689) (23,074) (56,571) (40,601) (17,110)
Investment real estate (2,624) (345) (10,142) (4,988) (8,034)
Policy loans (11,296) (12,059) (22,114) (20,506) (20,275)
Other long-term investments -- -- (1,936) (535) (13,632)
Short-term investments--net (33,809) -- -- (30,249) --
------------ ------------ ------------ ------------ ------------
(230,074) (276,270) (499,843) (538,983) (492,973)
Proceeds from disposal, repayments of advances and
other distributions from equity investees 2,107 4,367 16,084 36,265 31,986
Investments in and advances to equity investees (2,797) (3,623) (41,018) (10,396) (21,463)
Net cash paid for acquisitions -- -- (9,694) -- --
Net purchases of property and equipment and other (407) (3,822) (28) (7,062) (7,664)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities 3,260 6,246 (32,710) (105,632) (115,948)
FINANCING ACTIVITIES
Receipts from interest sensitive products credited
to policyholder account balances 112,682 118,753 220,437 181,148 169,207
Return of policyholder account balances on
interest sensitive products (147,242) (108,778) (210,728) (153,784) (124,802)
Proceeds from short-term borrowings -- -- -- -- 8
Repayments of short-term borrowings -- -- -- -- (6,396)
Repayments of long-term debt (3) (1) (4) (1,199) (5,915)
Dividends paid (7,800) (29,700) (33,000) (5,135) (248)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities (42,363) (19,726) (23,295) 21,030 31,854
------------ ------------ ------------ ------------ ------------
Increase (decrease) in cash and cash equivalents 441 1,333 (124) 1,802 (5,853)
Cash and cash equivalents at beginning of year 1,678 1,802 1,802 -- 5,853
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of year $ 2,119 $ 3,135 $ 1,678 $ 1,802 $ --
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 4 $ 4 $ 8 $ 415 $ 1,086
Income taxes 9,802 31,528 48,876 17,694 16,833
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Farm Bureau Life Insurance Company (the Company), a wholly-owned subsidiary of
FBL Financial Group, Inc., operates predominantly in the life insurance
industry. The Company currently markets its products, which consist primarily of
individual life insurance policies and annuity contracts, to Farm Bureau members
and other individuals and businesses in 15 midwestern and western states.
Prior to May 31, 1996, the Company owned 100% of the outstanding common stock of
FBL Financial Services, Inc., a holding company which, through its subsidiaries,
provided investment advisory, marketing and distribution, and leasing services.
On May 31, 1996, the common stock of FBL Financial Services, Inc. was
transferred to FBL Financial Group, Inc. in the form of a dividend. FBL
Financial Services, Inc. had investments of $6.1 million, property and equipment
of $26.1 million, other assets of $3.3 million, long-term debt of $11.3 million
and other liabilities of $8.8 million on the date of the dividend.
Prior to December 31, 1995, the Company owned approximately 99% of the
outstanding common stock of Utah Farm Bureau Insurance Company, a
property-casualty insurance company providing individual and small business
coverages. On December 31, 1995, the common stock of Utah Farm Bureau Insurance
Company was transferred to FBL Financial Group, Inc. in the form of a dividend.
Utah Farm Bureau Insurance Company had investments of $26.0 million, reinsurance
recoverable of $26.7 million, other assets of $7.6 million, reserves on
property-casualty policies of $30.0 million and other liabilities of $19.1
million on the date of the dividend.
CONSOLIDATION
The consolidated financial statements include the financial statements of the
Company and its direct and indirect subsidiaries. All significant intercompany
transactions have been eliminated.
INTERIM FINANCIAL INFORMATION
The consolidated financial statements as of June 30, 1998 and for the
three-month periods ended June 30, 1998 and 1997 and related notes have not been
audited. The interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six-month period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
Fixed maturity securities, comprised of bonds and redeemable preferred stocks,
that the Company has the positive intent and ability to hold to maturity are
designated as "held for investment". Held for investment securities are reported
at cost adjusted for amortization of premiums and discounts. Changes in the
market value of these securities, except for declines that are other than
temporary, are not reflected in the Company's financial statements. Fixed
maturity securities which may be sold are designated as "available for sale".
Available for sale securities are reported at market value and unrealized gains
and losses on these securities are included directly in stockholder's equity,
net of certain adjustments (see Note 2). Premiums and discounts are
amortized/accrued using methods which result in a constant yield over the
securities' expected lives. Amortization/accrual of premiums and discounts on
mortgage and asset-backed securities incorporates prepayment assumptions to
estimate the securities' expected lives.
Equity securities, comprised of common and non-redeemable preferred stocks, are
reported at market value. The change in unrealized appreciation and depreciation
of equity securities is included directly in stockholder's equity, net of any
related deferred income taxes.
MORTGAGE LOANS ON REAL ESTATE
Mortgage loans on real estate are reported at cost adjusted for amortization of
premiums and accrual of discounts. If the value of any mortgage loan is
determined to be impaired (i.e., when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement), the carrying value of the
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
mortgage loan is reduced to its fair value, which may be based upon the present
value of expected future cash flows from the loan (discounted at the loan's
effective interest rate), or the fair value of the underlying collateral. The
carrying value of impaired loans is reduced by the establishment of a valuation
allowance, changes to which are recognized as realized gains or losses on
investments. Interest income on impaired loans is recorded on a cash basis.
OTHER INVESTMENTS
Investment real estate is reported at cost less allowances for depreciation.
Policy loans are reported at unpaid principal balance. Short-term investments
are reported at cost adjusted for amortization of premiums and accrual of
discounts.
Other long-term investments include certain nontraditional investments and
securities held by a subsidiary engaged in the venture capital investment
company industry. Nontraditional investments include a debt-related instrument
and investment deposits which are reported at cost. In accordance with
accounting practices for the investment company industry, marketable securities
held by subsidiaries in this industry are valued at market value if readily
marketable or at fair value, as determined by the Board of Directors of the
subsidiary holding the security, if not readily marketable. The resulting
difference between cost and market is included in the statements of income as
net investment income. Realized gains and losses are also reported as a
component of net investment income. The Company recorded transfers from its
venture capital subsidiary, which was dissolved during 1997, at fair value on
the date of transfer, re-establishing a new cost basis for the security.
Securities and indebtedness of related parties include investments in
partnerships and corporations over which the Company may exercise significant
influence. Such investments are accounted for using the equity method. Changes
in the value of the Company's investment in equity investees attributable to
capital transactions of the investee, such as a public offering of stock, are
recorded directly to stockholder's equity. Securities and indebtedness of
related parties also includes advances and loans to the partnerships and
corporations which are principally reported at cost.
REALIZED GAINS AND LOSSES ON INVESTMENTS
The carrying values of all the Company's investments are reviewed on an ongoing
basis for credit deterioration, and if this review indicates a decline in market
value that is other than temporary, the Company's carrying value in the
investment is reduced to its estimated realizable value (the sum of the
estimated nondiscounted cash flows for securities or fair value for mortgage
loans on real estate) and a specific writedown is taken. Such reductions in
carrying value are recognized as realized losses on investments. Realized gains
and losses on sales are determined on the basis of specific identification of
investments. If the Company expects that an issuer of a security will modify its
payment pattern from contractual terms but no writedown is required, future
investment income is recognized at the rate implicit in the calculation of net
realizable value under the expected payment pattern.
MARKET VALUES
Market values of fixed maturity securities are reported based on quoted market
prices, where available. Market values of fixed maturity securities not actively
traded in a liquid market are estimated using a matrix calculation assuming a
spread (based on interest rates and a risk assessment of the bonds) over U. S.
Treasury bonds. Market values of redeemable preferred stock and equity
securities are based on the latest quoted market prices, or for those not
readily marketable, generally at values which are representative of the market
values of comparable issues.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
DEFERRED POLICY ACQUISITION COSTS
To the extent recoverable from future policy revenues and gross profits, certain
costs of acquiring new insurance business, principally commissions and other
expenses related to the production of new business, have been deferred. For
participating traditional life insurance and interest sensitive products
(principally universal life insurance policies and annuity contracts), these
costs are being amortized generally in proportion to expected gross profits
(after dividends to policyholders, if applicable) from surrender charges and
investment, mortality, and expense margins. That amortization is adjusted
retrospectively when estimates of current or future gross profits/margins
(including the impact of investment gains and losses) to be realized from a
group of products are revised. For nonparticipating traditional life and
accident and health insurance products, these costs are amortized over the
premium paying period
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the related policies, in proportion to the ratio of annual premium revenues
to total anticipated premium revenues. Such anticipated premium revenues are
estimated using the same assumptions used for computing liabilities for future
policy benefits. The deferred policy acquisition costs for property-casualty
insurance are amortized over the effective period of the related insurance
policies; deferred policy acquisition costs for these policies are charged to
expense when such costs are deemed not to be recoverable from the related
unearned premiums and any related investment income.
PROPERTY AND EQUIPMENT
Property and equipment, comprised primarily of home office properties, furniture
and equipment, are reported at cost less allowances for depreciation.
Depreciation expense is computed primarily using the straight-line method over
the estimated useful lives of the assets. Depreciation expense for the years
ended December 31, 1997, 1996 and 1995 was $2.3 million, $5.1 million and $9.3
million, respectively.
On March 30, 1998, the Company transferred its home office properties to its
parent in the form of a dividend. The fair value of the properties, which served
as the basis for the transaction, was $45.7 million and the book value was $24.7
million. The Company will lease a portion of the properties back from its parent
under a sublease arrangement. Of the $21.0 million gain on the transaction, $8.3
million was recognized in the income statement and $12.7 million was deferred
and will be amortized over the term of the operating lease.
GOODWILL
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is generally being amortized on a straight-line
basis over a period of 20 years. The carrying value of goodwill is regularly
reviewed for indicators of impairment in value, which in the view of management
are other than temporary. If facts and circumstances suggest that goodwill is
impaired, the Company assesses the fair value of the underlying business and
reduces goodwill to an amount that results in the book value of the underlying
business approximating fair value. The Company has not recorded any such
writedowns during the years ended December 31, 1997, 1996 or 1995.
FUTURE POLICY BENEFITS
The liability for future policy benefits for participating traditional life
insurance is based on net level premium reserves, including assumptions as to
interest, mortality, and other assumptions underlying the guaranteed policy cash
values. Reserve interest assumptions are level and range from 2.5% to 6.0%. The
average rate of assumed investment yields used in estimating gross margins was
8.15% in 1997, 8.34% in 1996 and 8.14% in 1995. Accrued dividends for
participating business are established for anticipated amounts earned to date
for the period through the policy's next anniversary and are provided for as a
separate liability. The declaration of future dividends for participating
business is at the discretion of the Board of Directors. Participating life
insurance business accounted for 42% of receipts from policyholders during the
year ended December 31, 1997 and represented 19% of life insurance inforce at
December 31, 1997.
The liabilities for future policy benefits for accident and health insurance are
computed using a net level or two-year preliminary term method, including
assumptions as to morbidity, mortality and interest and to include provisions
for possible unfavorable deviations. Policy benefit claims are charged to
expense in the period that the claims are incurred.
Future policy benefit reserves for interest sensitive products are computed
under a retrospective deposit method and represent policy account balances
before applicable surrender charges. Policy benefits and claims that are charged
to expense include benefit claims incurred in the period in excess of related
policy account balances.
Interest crediting rates for interest sensitive products ranged from 5.25% to
6.90% in 1997, 5.75% to 7.50% in 1996 and 5.50% to 7.50% in 1995.
The unearned revenue reserve reflects the unamortized balance of the excess of
first year administration charges over renewal period administration charges
(policy initiation fees) on interest sensitive products. These excess charges
have been deferred and are being recognized in income over the period benefited
using the same assumptions and factors used to amortize deferred policy
acquisition costs.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESERVES AND UNEARNED PREMIUMS ON PROPERTY-CASUALTY POLICIES
Unpaid property-casualty losses and loss adjustment expenses represent the
estimated liability for reported claims plus those incurred but not yet reported
and the related estimated adjustment expenses. The reserve for unpaid claims and
related adjustment expenses was determined using case-basis evaluations and
statistical analyses and represented estimates of the ultimate cost of all
unpaid losses incurred through December 31 of each year. Salvage and subrogation
recoverables were offset against reserves on property-casualty policies and were
estimated using statistical analysis.
Property-casualty insurance unearned premiums were calculated on a pro rata
basis.
GUARANTEE FUND ASSESSMENTS
From time to time assessments are levied on the Company by guaranty associations
in most states in which the Company is licensed. These assessments are to cover
losses of policyholders of insolvent or rehabilitated companies. In some states,
these assessments can be partially recovered through a reduction in future
premium taxes. During 1997, the Company adopted Statement of Position (SOP)
97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments", which requires the accrual of such assessments. Prior to 1997, the
Company recognized its obligation for guarantee fund assessments when such
assessments were received and an asset was recorded for future premium tax
offsets on assessments paid. The impact of adopting SOP 97-3 was not separately
reported as a change in accounting principle because the impact of adoption was
not material to the Company.
At December 31, 1997, the Company had an undiscounted reserve of $1.8 million to
cover estimated future assessments on known insolvencies and had an asset
totaling $2.3 million representing estimated premium tax offsets on paid and
future assessments. Expenses incurred for guaranty fund assessments, net of
related premium tax offsets, totaled $1.1 million (including $0.9 million
related to the adoption of SOP 97-3) during the year ended December 31, 1997,
and $0.1 million during each of the years ended December 31, 1996 and 1995. It
is estimated future guarantee fund assessments on known insolvencies will be
paid during the three year period ended December 31, 2000 and substantially all
the related future premium tax offsets will be realized during the six year
period ended December 31, 2003. The Company believes the reserve for guarantee
fund assessments is sufficient to provide for future assessments based upon
known insolvencies and projected premium levels.
DEFERRED INCOME TAXES
Deferred tax assets or liabilities are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate. Deferred income tax expenses or credits are based on
the changes in the asset or liability from period to period.
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying
consolidated balance sheets represent funds that are separately administered,
principally for the benefit of certain policyholders who bear the underlying
investment risk. The separate account assets and liabilities are carried at fair
value. Revenues and expenses related to the separate account assets and
liabilities, to the extent of benefits paid or provided to the separate account
policyholders, are excluded from the amounts reported in the accompanying
consolidated statements of income.
RECOGNITION OF PREMIUM REVENUES AND COSTS
Revenues for interest sensitive products consist of policy charges for the cost
of insurance, administration charges, amortization of policy initiation fees and
surrender charges assessed against policyholder account balances. Expenses
related to these products include interest credited to policyholder account
balances and benefit claims incurred in excess of policyholder account balances.
Traditional life insurance premiums are recognized as revenues over the
premium-paying period. Future policy benefits and policy acquisition costs are
recognized as expenses over the life of the policy by means of the provision for
future policy benefits and amortization of deferred policy acquisition costs.
Property-casualty insurance premiums were recognized using a daily or monthly
pro rata method over the terms of the policies.
All insurance-related revenues, benefits, losses and expenses are reported net
of reinsurance ceded.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REINSURANCE
The Company uses reinsurance to manage certain risks associated with its
insurance operations. These reinsurance arrangements provide for greater
diversification of business, allow management to control exposure to potential
risks arising from large losses and provide additional capacity for growth.
The Company's life insurance operations cede reinsurance to various reinsurers.
The cost of reinsurance is generally amortized over the contract periods of the
reinsurance agreements.
The Company's property-casualty operations assumed and ceded reinsurance,
principally as a participant in a reinsurance pooling agreement with two
affiliates. The Company's contracts were prospective and the cost of insurance
was amortized over the contract periods in proportion to the amount of insurance
protection provided.
OTHER INCOME AND OTHER EXPENSES
Other income and other expenses include revenue and expenses generated by the
Company's various non-insurance subsidiaries for investment advisory, marketing
and distribution, and leasing services. A portion of these activities are
performed on behalf of affiliates of the Company. In addition, certain revenue
generated by the insurance companies have been classified as other income.
During the years ended December 31, 1997, 1996 and 1995, revenues of the
insurance companies included as other income aggregated $3.7 million, $2.7
million and $8.4 million, respectively.
RECLASSIFICATIONS
Certain amounts in the 1996 and 1995 consolidated financial statements have been
reclassified to conform to the 1997 financial statement presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. For
example, significant estimates and assumptions are utilized in the calculation
of deferred policy acquisition costs, policyholder liabilities and accruals and
valuation allowances on investments. It is reasonably possible that actual
experience could differ from the estimates and assumptions utilized which could
have a material impact on the consolidated financial statements.
COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement No. 130, "Reporting
Comprehensive Income". Statement No. 130 establishes new rules for the reporting
and display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Company's net income or stockholder's
equity. Statement No. 130 requires unrealized gains and losses on the Company's
available-for-sale securities to be included in other comprehensive income.
Comprehensive income for the periods presented is as follows (dollars in
millions):
<TABLE>
<S> <C>
Three months ended June 30, 1998.................. $ 7.9
Three months ended June 30, 1997.................. 27.7
Six months ended June 30, 1998.................... 29.8
Six months ended June 30, 1997.................... 32.1
Year ended December 31, 1997...................... 76.0
Year ended December 31, 1996...................... 65.8
Year ended December 31, 1995...................... 96.0
</TABLE>
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS
FIXED MATURITIES AND EQUITY SECURITIES
The following tables contain amortized cost and market value information on
fixed maturities and equity securities at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
--------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED COST GAINS LOSSES MARKET VALUE
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
Corporate securities $ 5,008 $ 814 $ (8) $ 5,814
Mortgage-backed securities 517,403 19,575 (1,460) 535,518
--------------------------------------------------------
Total fixed maturities $ 522,411 $ 20,389 $ (1,468) $ 541,332
--------------------------------------------------------
--------------------------------------------------------
<CAPTION>
AVAILABLE FOR SALE
--------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED COST GAINS LOSSES MARKET VALUE
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
United States Government and agencies $ 14,406 $ 18 $ (19) $ 14,405
State, municipal and other governments 37,986 1,012 (126) 38,872
Public utilities 80,071 4,637 (390) 84,318
Corporate securities 688,362 55,095 (6,089) 737,368
Mortgage and asset-backed securities 372,482 13,418 (1,283) 384,617
Redeemable preferred stock 25,162 1,533 (106) 26,589
--------------------------------------------------------
Total fixed maturities $ 1,218,469 $ 75,713 $ (8,013) $ 1,286,169
--------------------------------------------------------
--------------------------------------------------------
Equity securities $ 54,861 $ 3,635 $ (7,228) $ 51,268
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
Corporate securities $ 5,009 $ 649 $ (9) $ 5,649
Mortgage-backed securities 557,274 16,577 (5,162) 568,689
------------------------------------------------------
Total fixed maturities $ 562,283 $ 17,226 $ (5,171) $ 574,338
------------------------------------------------------
------------------------------------------------------
</TABLE>
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES MARKET VALUE
------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
United States Government and agencies $ 44,440 $ 237 $ (281) $ 44,396
State, municipal and other governments 11,530 383 (53) 11,860
Public utilities 119,619 4,995 (836) 123,778
Corporate securities 611,021 32,078 (9,989) 633,110
Mortgage and asset-backed securities 278,308 7,391 (2,793) 282,906
Redeemable preferred stock 31,261 1,369 (93) 32,537
------------------------------------------------------
Total fixed maturities $ 1,096,179 $ 46,453 $ (14,045) $ 1,128,587
------------------------------------------------------
------------------------------------------------------
Equity securities $ 69,915 $ 28,671 $ (18,800) $ 79,786
------------------------------------------------------
------------------------------------------------------
</TABLE>
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
Amortized cost of securities held by a subsidiary engaged in the investment
company industry was $8.7 million at December 31, 1996. Gross unrealized
appreciation and depreciation on these securities totaled $5.4 million and $0.3
million, respectively. Short-term investments have been excluded from the above
schedules as amortized cost approximates market value for these securities.
The carrying value and estimated market value of the Company's portfolio of
fixed maturity securities at December 31, 1997, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
HELD FOR INVESTMENT AVAILABLE FOR SALE
-------------------------- ------------------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
----------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ -- $ -- $ 19,224 $ 19,274
Due after one year through five years -- -- 133,569 139,424
Due after five years through ten years 5,008 5,814 207,167 222,249
Due after ten years -- -- 460,865 494,016
----------------------------------------------------------
5,008 5,814 820,825 874,963
Mortgage and asset-backed securities 517,403 535,518 372,482 384,617
Redeemable preferred stocks -- -- 25,162 26,589
----------------------------------------------------------
$ 522,411 $ 541,332 $ 1,218,469 $ 1,286,169
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
The unrealized appreciation or depreciation on fixed maturity and equity
securities available for sale is reported as a separate component of
stockholder's equity, reduced by adjustments to deferred policy acquisition
costs, value of insurance in force acquired and unearned revenue reserve that
would have been required as a charge or credit to income had such amounts been
realized, and a provision for deferred income taxes. Net unrealized investment
gains as reported were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Unrealized appreciation on fixed maturity and equity securities available for sale $ 64,107 $ 42,279
Adjustments for assumed changes in amortization pattern of:
Deferred policy acquisition costs (5,251) (2,159)
Unearned revenue reserve 711 383
Provision for deferred income taxes (20,848) (14,176)
-----------------------
Net unrealized investment gains $ 38,719 $ 26,327
-----------------------
-----------------------
</TABLE>
MORTGAGE LOANS ON REAL ESTATE
The Company's mortgage loan portfolio consists principally of commercial
mortgage loans. The Company's lending policies require that the loans be
collateralized by the value of the related property, establish limits on the
amount that can be loaned to one borrower and require diversification by
geographic location and collateral type. Regions in which at least 20% of the
Company's mortgage loan portfolio is invested during the years presented
include; Pacific (26% in 1997 and 28% in 1996), which includes California,
Oregon and Washington; West South Central (22% in 1997 and 12% in 1996), which
includes Oklahoma and Texas; and Mountain (15% in 1997 and 20% in 1996), which
includes Arizona, Colorado, Idaho, New Mexico, Utah and Wyoming. Mortgage loans
on real estate have also been analyzed during the years presented by collateral
types with office buildings (44% in 1997 and 46% in 1996) and retail facilities
(36% in 1997 and 34% in 1996), representing the largest holdings.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
The Company has also provided an allowance for possible losses against its
mortgage loan portfolio. An analysis of this allowance for loan losses is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
-------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 600 $ 600 $ 600
Realized losses -- 2,527 --
Uncollectible amounts written off, net of recoveries (77) (2,527) --
-------------------------------
Balance at end of year $ 523 $ 600 $ 600
-------------------------------
-------------------------------
</TABLE>
Impaired loans (those loans in which the Company does not believe it will
collect all amounts due according to the contractual terms of the respective
loan agreements) totaled $3.1 million at December 31, 1996. There were no
impaired loans at December 31, 1997. No valuation allowance was established on
the impaired loans at December 31, 1996.
NET INVESTMENT INCOME
Components of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Held for investment $ 43,648 $ 45,744 $ 42,016
Available for sale 97,044 85,722 83,490
Equity securities 1,259 1,345 1,098
Mortgage loans on real estate 21,027 20,297 19,544
Investment real estate 4,457 4,495 4,191
Policy loans 5,692 5,653 5,567
Other long-term investments 2,921 3,698 26,249
Short-term investments 3,691 3,166 2,671
Other 4,105 3,485 5,581
--------------------------------------
183,844 173,605 190,407
Less investment expenses (9,081) (7,183) (6,059)
--------------------------------------
Net investment income $ 174,763 $ 166,422 $ 184,348
--------------------------------------
--------------------------------------
</TABLE>
Investment income from other long-term investments, which includes investments
held by subsidiaries engaged in the broker-dealer and investment company
industries, is comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Dividends, interest and other income $ 1,698 $ 613 $ 519
Net realized gain (loss) from investment transactions 6,288 (1,811) 25,810
Change in unrealized appreciation/depreciation of investments (5,065) 4,896 (80)
--------------------------------
$ 2,921 $ 3,698 $ 26,249
--------------------------------
--------------------------------
</TABLE>
During the year ended December 31, 1997, 13 securities with a total fair value
of $15.0 million were transferred to the Company from its venture capital
subsidiary, upon its dissolution. During the year ended December 31, 1995, two
securities with a total fair value of $27.6 million were transferred out of the
subsidiary. Realized gains (recognized in net investment income) of $6.3 million
and $24.6 million were recognized on the 1997 and 1995 transfers, respectively,
although neither transfer had an impact on net income (as unrealized
appreciation had been reported prior to the transfer).
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
REALIZED AND UNREALIZED GAINS AND LOSSES
Realized gains (losses) and the change in unrealized appreciation/depreciation
on investments, excluding amounts attributed to investments held by subsidiaries
engaged in the broker-dealer and investment company industries discussed above,
are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
REALIZED
Fixed maturities--available for sale $ 4,300 $ 2,199 $ 5,526
Equity securities 35,120 56,522 (763)
Mortgage loans on real estate -- (2,527) --
Investment real estate 6 619 123
Other long-term investments (300) (154) (158)
Securities and indebtedness of related parties (487) (1,438) 1,182
Notes receivable and other -- (767) (8)
------------------------------------
Realized gains on investments $ 38,639 $ 54,454 $ 5,902
------------------------------------
------------------------------------
UNREALIZED
Fixed maturities:
Held for investment $ 6,866 $ (12,225) $ 50,905
Available for sale 35,292 (25,675) 75,590
Equity securities (13,464) 4,429 9,209
------------------------------------
Change in unrealized appreciation/depreciation of investments $ 28,694 $ (33,471) $ 135,704
------------------------------------
------------------------------------
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's fixed
maturities portfolio for the years ended December 31, 1997, 1996, and 1995 is as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED REALIZED REALIZED
COST GAINS LOSSES PROCEEDS
-------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Scheduled principal repayments and calls:
Available for sale $ 154,939 $ -- $ -- $ 154,939
Held for investment 40,460 -- -- 40,460
Sales--available for sale 91,603 6,313 (2,013) 95,903
-------------------------------------------------
Total $ 287,002 $ 6,313 $ (2,013) $ 291,302
-------------------------------------------------
-------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
Scheduled principal repayments and calls:
Available for sale $ 148,299 $ -- $ -- $ 148,299
Held for investment 33,212 -- -- 33,212
Sales--available for sale 71,095 5,197 (2,498) 73,794
-------------------------------------------------
Total $ 252,606 $ 5,197 $ (2,498) $ 255,305
-------------------------------------------------
-------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Scheduled principal repayments and calls:
Available for sale $ 74,710 $ -- $ -- $ 74,710
Held for investment 16,529 -- -- 16,529
Sales--available for sale 127,738 7,186 (1,445) 133,479
-------------------------------------------------
Total $ 218,977 $ 7,186 $ (1,445) $ 224,718
-------------------------------------------------
-------------------------------------------------
</TABLE>
Realized losses totaling $0.5 million and $0.2 million were incurred during the
years ended December 31, 1996 and 1995, respectively, as a result of writedowns
for other than temporary impairment of fixed maturity securities. No such
writedowns were recorded during the year ended December 31, 1997.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT OPERATIONS (CONTINUED)
OTHER
In December 1997, the Company acquired a 35% interest (with 20% voting control)
in an unaffiliated life insurance company for $25.0 million. The excess
(approximately $5.1 million) of the carrying amount of the investment, which is
classified as securities and indebtedness of related parties on the consolidated
balance sheet, over the amount of underlying equity in net assets is
attributable to goodwill and is being amortized over a 20 year period. The
investment is being accounted for using the equity method. The insurance company
underwrites and markets life insurance and annuity products throughout the
United States.
Also in December 1997, the Company acquired all of the common stock of EquiTrust
Life Insurance Company for $9.7 million. EquiTrust Life Insurance Company is a
shell life insurance company licensed in 38 states. Goodwill totaling $1.5
million was recorded in connection with the acquisition and is being amortized
over 20 years.
In February 1996, an equity investee of the Company completed an initial public
offering which resulted in an increase of $4.9 million, net of $2.6 million in
taxes, in the Company's share of the investee's stockholders' equity. This
increase was credited directly to additional paid-in capital. Subsequent to the
public offering, the Company reclassified the investment to equity securities.
The Company has sold the majority of its holdings in this investment and
realized gains of $24.3 million during the year ended December 31, 1997 and
$50.4 million during the year ended December 31, 1996.
At December 31, 1997, affidavits of deposits covering investments with a
carrying value totaling $2,081.4 million were on deposit with state agencies to
meet regulatory requirements.
At December 31, 1997, the Company had committed to provide additional funding
for mortgage loans on real estate aggregating $6.5 million. These commitments
arose in the normal course of business at terms which are comparable to similar
investments.
The carrying value of investments which have been non-income producing for the
twelve months preceding December 31, 1997, include fixed maturities of $3.2
million and other long-term investments of $1.6 million.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States Government) exceeded ten percent of stockholder's
equity at December 31, 1997.
3. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement No. 107, "Disclosures About Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the consolidated balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 also excludes
certain financial instruments and all nonfinancial instruments from its
disclosure requirements and allows companies to forego the disclosures when
those estimates can only be made at excessive cost. Accordingly, the aggregate
fair value amounts presented herein are limited by each of these factors and do
not purport to represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.
FIXED MATURITY SECURITIES: Fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using a matrix calculation assuming a
spread (based on interest rates and a risk assessment of the bonds) over U. S.
Treasury bonds.
EQUITY SECURITIES: The fair values for equity securities are based on quoted
market prices, where available. For equity securities that are not actively
traded, estimated fair values are based on values of comparable issues.
MORTGAGE LOANS ON REAL ESTATE AND POLICY LOANS: Fair values are estimated by
discounting expected cash flows using interest rates currently being offered for
similar loans.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
OTHER LONG-TERM INVESTMENTS: The fair values for nontraditional debt
instruments and investment deposits are estimated by discounting expected cash
flows using interest rates currently being offered for similar investments. The
fair values for investments held by a subsidiary in the investment company
industry are based on quoted market prices, where available. For holdings that
are not actively traded, fair values are determined in good faith by the Board
of Directors of the subsidiary holding the security.
CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the
consolidated balance sheet for these instruments approximate their fair values.
SECURITIES AND INDEBTEDNESS OF RELATED PARTIES: Fair values for loans and
advances are estimated by discounting expected cash flows using interest rates
currently being offered for similar investments. As allowed by Statement No.
107, fair values are not assigned to investments accounted for using the equity
method.
ASSETS AND LIABILITIES OF SEPARATE ACCOUNTS: Separate account assets and
liabilities are reported at estimated fair value in the Company's consolidated
balance sheet.
FUTURE POLICY BENEFITS AND OTHER POLICYHOLDERS' FUNDS: Fair values of the
Company's liabilities under contracts not involving significant mortality or
morbidity risks (principally deferred annuities, deposit administration funds
and supplementary contracts) are stated at cash surrender value, the cost the
Company would incur to extinguish the liability. The Company is not required to
estimate the fair value of its liabilities under other contracts.
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement No.
107:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1997 1996
------------------------ ----------------------
CARRYING FAIR CARRYING
VALUE VALUE VALUE FAIR VALUE
------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities:
Held for investment $ 522,411 $ 541,332 $ 562,283 $ 574,338
Available for sale 1,286,169 1,286,169 1,128,587 1,128,587
Equity securities 51,268 51,268 79,786 79,786
Mortgage loans on real estate 253,093 265,059 235,331 245,125
Policy loans 90,052 97,712 88,940 88,940
Other long-term investments 9,989 9,587 22,157 21,671
Cash and short-term investments 25,531 25,531 63,827 63,827
Securities and indebtedness of related parties 5,451 5,829 11,658 12,292
Assets held in separate accounts 138,409 138,409 79,043 79,043
LIABILITIES
Future policy benefits $ 782,933 $ 767,030 $ 744,369 $ 730,272
Other policyholders' funds 195,330 195,330 186,535 186,535
Liabilities related to separate accounts 138,409 138,409 79,043 79,043
</TABLE>
4. REINSURANCE AND POLICY PROVISIONS
LIFE INSURANCE OPERATIONS
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance enterprises or reinsurers. Reinsurance coverages
for life insurance vary according to the age and risk classification of the
insured with retention limits ranging up to $0.5 million of coverage per
individual life. The Company does not use financial or surplus relief
reinsurance. Life insurance in force ceded totaled $663.4 million (5.1% of total
life insurance in force) at December 31, 1997 and $594.9 million (4.9% of total
life insurance in force) at December 31, 1996.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
Reinsurance contracts do not relieve the Company of its obligations to its
policyholders. To the extent that reinsuring companies are later unable to meet
obligations under reinsurance agreements, the Company's life insurance
subsidiaries would be liable for these obligations, and payment of these
obligations could result in losses to the Company. To limit the possibility of
such losses, the Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk.
No allowance for uncollectible amounts has been established against the
Company's asset for reinsurance recoverable since none of the receivables are
deemed to be uncollectible. Insurance premiums and product charges have been
reduced by $3.7 million, $3.4 million and $3.3 million and insurance benefits
have been reduced by $2.9 million, $4.0 million and $1.7 million during the
years ended December 31, 1997, 1996 and 1995, respectively, as a result of
cession agreements. The amount of reinsurance assumed is not significant.
Unpaid claims on accident and health policies (entirely disability income
products) include amounts for losses and related adjustment expense and are
estimates of the ultimate net costs of all losses, reported and unreported.
These estimates are subject to the impact of future changes in claim severity,
frequency and other factors. The activity in the liability for unpaid claims and
related adjustment expense, net of reinsurance, is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Unpaid claims liability, net of related
reinsurance, at beginning of year $ 13,812 $ 13,899 $ 10,494
Add:
Provision for claims occurring in the current
year 5,829 4,737 5,011
Increase (decrease) in estimated expense for
claims occurring in the prior years 2,236 (371) 2,357
--------------------------------
Incurred claim expense during the current year 8,065 4,366 7,368
Deduct expense payments for claims occurring
during:
Current year 1,692 1,681 2,109
Prior years 2,564 2,772 1,854
--------------------------------
4,256 4,453 3,963
--------------------------------
Unpaid claims liability, net of related
reinsurance, at end of year 17,621 13,812 13,899
Active life reserve 15,832 15,376 14,614
--------------------------------
Net accident and health reserves 33,453 29,188 28,513
Reinsurance ceded 1,721 1,483 934
--------------------------------
Gross accident and health reserves $ 35,174 $ 30,671 $ 29,447
--------------------------------
--------------------------------
</TABLE>
Reserves for unpaid claims are developed using industry mortality and morbidity
data. One year development on prior year reserves represents Company experience
being more or less favorable than that of the industry. Over time, the Company
expects its experience with respect to disability income business to be
comparable to that of the industry. A certain level of volatility in development
is inherent in these reserves since the underlying block of business is
relatively small.
PROPERTY-CASUALTY OPERATIONS
Utah Insurance is a participant with Farm Bureau Mutual Insurance Company and
South Dakota Farm Bureau Mutual Insurance Company, another affiliate, in a
reinsurance pooling agreement (the Farm Bureau Mutual pool). Under the terms of
the agreement, Utah Insurance and South Dakota Farm Bureau Mutual Insurance
Company cede to Farm Bureau Mutual Insurance Company all of their insurance
business and assume back from Farm Bureau Mutual Insurance Company an amount
equal to their participation in the pooling agreement. Also, losses, loss
adjustment expenses, and other underwriting and administrative expenses are
prorated among the companies on the basis of their participation in the pooling
agreement. For the year ended December 31, 1995, Utah Insurance's participation
in the reinsurance pool was 8%.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REINSURANCE AND POLICY PROVISIONS (CONTINUED)
Property-casualty premiums earned and losses and loss adjustment expenses
incurred, reflect the following reinsurance amounts during the year ended
December 31, 1995 (dollars in thousands):
<TABLE>
<S> <C>
PREMIUMS EARNED
Direct premiums written $ 26,244
Assumed from non-affiliates 5
Ceded to non-affiliates (615)
Assumed from Farm Bureau Mutual pool 18,851
Ceded to Farm Bureau Mutual pool (25,634)
---------
Net premiums written 18,851
Increase in reserve for unearned premiums, net of
reinsurance (150)
Increase in accrued retrospective premiums 8
---------
Total premiums earned $ 18,709
---------
---------
LOSSES AND LOSS ADJUSTMENT EXPENSES INCURRED
Direct losses and loss adjustment expenses paid $ 18,532
Net ceded to non-affiliates 91
Assumed from Farm Bureau Mutual pool 13,030
Ceded to Farm Bureau Mutual pool (18,623)
---------
Net losses and loss adjustment expenses paid 13,030
Increase in losses and loss adjustment expense
reserves, net of reinsurance 591
---------
Total losses and loss adjustment expenses incurred $ 13,621
---------
---------
</TABLE>
The difference between premiums on a written and on an earned basis is not
significant.
The activity in the reserves on property-casualty policies, net of reinsurance
and salvage and subrogation recoverables, is summarized as follows during the
year ended December 31, 1995 (dollars in thousands):
<TABLE>
<S> <C>
Reserves on property-casualty policies (gross),
beginning of year $ 28,828
Less reinsurance recoverable on unpaid losses and
loss adjustment expenses, beginning of year (16,646)
---------
Reserve for losses and loss adjustment expenses,
net of related reinsurance, beginning of year 12,182
Add:
Provision for losses and loss adjustment
expenses for claims occurring in the current
year 14,529
Decrease in estimated losses and loss adjustment
expenses for claims occurring in the prior
years (908)
---------
Incurred losses and loss adjustment expenses
during the current year 13,621
Deduct loss and loss adjustment expense payments
for claims occurring during:
Current year (7,678)
Prior years (5,351)
---------
(13,029)
---------
Reserve for losses and loss adjustment expenses,
net of related reinsurance, end of year 12,774
Reinsurance recoverables on unpaid losses and loss
adjustment expenses, end of year 17,210
Transfer to parent as part of dividend of Utah
Farm Bureau Insurance Company (29,984)
---------
Reserves on property-casualty policies (gross),
end of year $ --
---------
---------
</TABLE>
5. INCOME TAXES
The Company files a consolidated federal income tax return with FBL Financial
Group, Inc. and a majority of its subsidiaries. FBL Financial Group, Inc. and
its direct and indirect subsidiaries included in the consolidated federal income
tax return each report current income tax expense as allocated under a
consolidated tax allocation agreement.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Generally, this allocation results in profitable companies recognizing a tax
provision as if the individual company filed a separate return and loss
companies recognizing benefits to the extent their losses contribute to reduce
consolidated taxes. The companies file separate state income tax returns.
Deferred income taxes have been established based upon the temporary differences
between the financial statement and income tax bases of assets and liabilities
within each entity. The reversal of the temporary differences will result in
taxable or deductible amounts in future years when the related asset or
liability is recovered or settled.
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Taxes provided in consolidated statements of
income on:
Income before minority interest in earnings of
subsidiaries and equity income:
Current $ 36,828 $ 28,400 $ 13,278
Deferred (5,249) 5,756 14,013
--------------------------------
31,579 34,156 27,291
Equity income:
Current 951 1,674 (212)
Deferred 77 554 1,013
--------------------------------
1,028 2,228 801
Taxes provided in consolidated statement of
changes in stockholder's equity:
Change in net unrealized investment
gains/losses--deferred 6,672 (4,211) 24,435
Adjustment resulting from capital transaction of
equity investee-- deferred -- 2,617 --
--------------------------------
6,672 (1,594) 24,435
--------------------------------
$ 39,279 $ 34,790 $ 52,527
--------------------------------
--------------------------------
</TABLE>
The effective tax rate on income before income taxes, minority interest in
earnings of subsidiaries and equity income is different from the prevailing
federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before income taxes, minority interest in
earnings of subsidiaries and equity income $ 93,245 $ 103,682 $ 76,475
----------------------------------
----------------------------------
Income tax at federal statutory rate (35%) $ 32,636 $ 36,289 $ 26,766
Tax effect (decrease) of:
Tax-exempt interest income (323) (383) (574)
Tax-exempt dividend income (1,148) (1,246) (798)
State income taxes 39 242 1,337
Other items 375 (746) 560
----------------------------------
Income tax expense $ 31,579 $ 34,156 $ 27,291
----------------------------------
----------------------------------
</TABLE>
The Internal Revenue Service (IRS) has examined the federal income tax returns
of FBL Financial Group, Inc. for the tax years through 1994 and FBL Financial
Group, Inc. has reached a tentative settlement with the IRS's Appeals Division
for tax years 1988 through 1994. The settlement is subject to approval of the
Joint Committee on Taxation. Management believes that any settlement will not
have a material impact on the Company's financial statements.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1997 and 1996, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred income tax liabilities:
Fixed maturity and equity securities $ 25,247 $ 17,265
Deferred policy acquisition costs 46,944 44,307
Deferred investment gains -- 10,551
Other 14,236 13,437
-----------------------
86,427 85,560
Deferred income tax assets:
Future policy benefits (21,320) (22,304)
Accrued dividends (3,273) (2,997)
Accrued pension costs (9,092) (10,082)
Other (7,619) (6,367)
-----------------------
(41,304) (41,750)
-----------------------
Deferred income tax liability $ 45,123 $ 43,810
-----------------------
-----------------------
</TABLE>
Prior to 1984, a portion of current income of the Company was not subject to
current income taxation, but was accumulated, for tax purposes, in a memorandum
account designated as "policyholders' surplus account". The aggregate
accumulation in this account at December 31, 1997 was $11.1 million. Should the
policyholders' surplus account of the Company exceed the limitation prescribed
by federal income tax law, or should distributions be made by the Company to its
stockholder in excess of $445.3 million, such excess would be subject to federal
income taxes at rates then effective. Deferred income taxes of $3.9 million have
not been provided on amounts included in this memorandum account since the
Company contemplates no action and can foresee no events that would create such
a tax.
Deferred income taxes were also reported on equity income. These taxes arise
from the recognition of income and losses differently for purposes of filing
federal income tax returns than for financial reporting purposes.
6. CREDIT ARRANGEMENT
As an investor in the Federal Home Loan Bank (FHLB), the Company has the right
to borrow up to $54.0 million and $43.9 million from the FHLB as of March 31,
1998 and December 31, 1997, respectively. As of December 31, 1997, the Company
had no outstanding debt under this credit arrangement.
7. RETIREMENT AND COMPENSATION PLANS
The Company participates with several affiliates in various defined benefit
plans covering substantially all employees. The benefits of these plans are
based primarily on years of service and employees' compensation. The Company and
affiliates have adopted a policy of allocating the net periodic pension cost of
the plans between themselves generally on a basis of time incurred by the
respective employees for each employer. Such allocations are reviewed annually.
Pension expense aggregated $4.2 million, $5.9 million and $7.9 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
Prior to January 1, 1996, the Company provided benefits to agents of the Company
and certain of its affiliates through the Agents' Career Incentive Plan. Company
contributions to the plan were based upon the individual agent's earned
commissions and varied based upon the overall production level and the number of
years of service. Company contributions charged to expense with respect to this
plan during the year ended December 31, 1995 were $1.4 million. During 1996, in
conjunction with a restructuring of the agents' compensation program,
contributions to this plan were discontinued.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. RETIREMENT AND COMPENSATION PLANS (CONTINUED)
The Company has established deferred compensation plans for certain key current
and former employees and has certain other benefit plans which provide for
retirement and other benefits. These plans have been accrued or funded as deemed
appropriate by management of the Company.
Certain of the assets related to these plans are on deposit with the Company and
amounts relating to these plans are included in the financial statements herein.
In addition, certain amounts included in the policy liabilities for interest
sensitive products relate to deposit administration funds maintained by the
Company on behalf of affiliates offering substantially the same benefit programs
as the Company.
In addition to benefits offered under the aforementioned benefit plans, the
Company and several other affiliates sponsor a plan that provides group term
life insurance benefits to retired full-time employees who have worked ten years
and attained age 55 while in service with the Company. Postretirement benefit
expense is allocated in a manner consistent with pension expense discussed
above. Postretirement pension expense aggregated $0.1 million for each of the
years ended December 31, 1997, 1996 and 1995, respectively.
8. STATUTORY INFORMATION
STATUTORY LIMITATIONS ON DIVIDENDS
The ability of the Company to pay dividends to the parent company is restricted
because prior approval of insurance regulatory authorities is required for
payment of dividends to the stockholder which exceed an annual limitation.
During 1998 the Company could pay dividends to the parent company of
approximately $37.8 million without prior approval of insurance regulatory
authorities.
STATUTORY ACCOUNTING POLICIES
The financial statements of the Company included herein differ from related
statutory-basis financial statements principally as follows: (a) the bond
portfolio is segregated into held-for-investment (carried at amortized cost) and
available-for-sale (carried at fair value) classifications rather than generally
being carried at amortized cost; (b) future policy benefit reserves for
participating traditional life insurance products are based on net level premium
methods and guaranteed cash value assumptions which may differ from statutory
reserves; (c) future policy benefit reserves on certain interest sensitive
products are based on full account values, rather than discounting methodologies
utilizing statutory interest rates; (d) deferred income taxes are provided for
the difference between the financial statement and income tax bases of assets
and liabilities; (e) net realized gains or losses attributed to changes in the
level of interest rates in the market are recognized as gains or losses in the
statement of income when the sale is completed rather than deferred and
amortized over the remaining life of the fixed maturity security or mortgage
loan; (f) declines in the estimated realizable value of investments are charged
to the statement of income when such declines are judged to be other than
temporary rather than through the establishment of a formula-determined
statutory investment reserve (carried as a liability), changes in which are
charged directly to surplus; (g) agents' balances and certain other assets
designated as "non-admitted assets" for statutory purposes are reported as
assets rather than being charged to surplus; (h) revenues for interest sensitive
products consist of policy charges for the cost of insurance, policy
administration charges, amortization of policy initiation fees and surrender
charges assessed rather than premiums received; (i) pension income or expense is
recognized in accordance with Statement No. 87, "Employers' Accounting for
Pensions" rather than in accordance with rules and regulations permitted by the
Employee Retirement Income Security Act of 1974; (j) the financial statements of
subsidiaries are consolidated with those of the Company; and (k) assets and
liabilities are restated to fair values when a change in ownership occurs that
is accounted for as a purchase, with provisions for goodwill and other
intangible assets, rather than continuing to be presented at historical cost.
Total statutory capital and surplus of the Company was $291.3 million at
December 31, 1997 and $280.6 million at December 31, 1996. Net income for the
Company determined in accordance with statutory accounting practices was $73.5
million in 1997, $75.0 million in 1996 and $47.4 million in 1995.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STATUTORY INFORMATION (CONTINUED)
The Company's insurance subsidiaries reported the following statutory amounts to
regulatory agencies, after appropriate elimination of intercompany accounts:
<TABLE>
<CAPTION>
CAPITAL AND NET INCOME
SURPLUS YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------- ----------------------
1997 1996 1997 1996 1995
--------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Life insurance companies $13,111 $3,352 $ 56 $ 151 $ 92
Property-casualty insurance subsidiary -- -- -- -- 1,454
--------------------------------------
Total $13,111 $3,352 $ 56 $ 151 $1,546
--------------------------------------
--------------------------------------
</TABLE>
The National Association of Insurance Commissioners (NAIC) is in the process of
codifying statutory accounting practices (Codification). Codification will
likely change, to some extent, prescribed statutory accounting practices and may
result in changes to the accounting practices that the Company's insurance
subsidiaries use to prepare their statutory-basis financial statements.
Codification, which is expected to be approved by the NAIC in 1998, will require
adoption by the various state insurance departments before it becomes the
prescribed statutory basis of accounting for insurance companies domesticated
within those states. Accordingly, before Codification becomes effective the
state of domicile must adopt Codification as the prescribed basis of accounting
on which domestic insurers must report their statutory-basis results. At this
time it is unclear whether the state of Iowa will adopt Codification.
9. MANAGEMENT AND OTHER AGREEMENTS
The Company shares certain office facilities and services with the Iowa Farm
Bureau Federation and its affiliated companies. These expenses are allocated by
the Company on the basis of cost and time studies that are updated annually and
consist primarily of salaries and related expenses, travel, and occupancy costs.
In addition, prior to January 1, 1996, the Company participated in a management
agreement with Farm Bureau Management Corporation, a wholly-owned subsidiary of
the Iowa Farm Bureau Federation. Under this agreement, Farm Bureau Management
Corporation provided general business, administration and management services to
the Company. During 1996, the Company's parent assumed responsibility for
providing a majority of these services for itself as well as Farm Bureau
Management Corporation and other affiliates. During the years ended December 31,
1997, 1996 and 1995, the Company incurred expenses under these contracts of $0.8
million, $2.4 million and $3.7 million, respectively.
The Company has equipment and auto lease agreements with FBL Leasing Services,
Inc., a wholly-owned subsidiary of FBL Financial Services, Inc. The Company
incurred expenses totaling $1.7 million during 1997 and $0.7 million during the
seven month period ended December 31, 1996 (period in 1996 subsequent to the
dividend of FBL Financial Services, Inc. to FBL Financial Group, Inc.) under
these agreements.
Equitrust Investment Management Services, Inc., a wholly-owned subsidiary of FBL
Financial Services, Inc., provides investment advisory services to the Company.
The related fees are based on the level of assets under management plus certain
out-of-pocket expenses. The Company incurred expenses totaling $4.1 million
during 1997 and $1.6 million during the seven month period ended December 31,
1996 relating to these services.
Effective January 1, 1996, the Company entered into marketing agreements with
the property-casualty companies operating within its marketing territory,
including Farm Bureau Mutual Insurance Company and other affiliates. Under the
marketing agreements, the property-casualty companies assumed responsibility for
development and management of the Company's agency force for a fee equal to a
percentage of commissions on first year life insurance premiums and annuity
deposits. During the years ended December 31, 1997 and 1996, the Company paid
$3.3 million and $2.8 million, respectively, to the property-casualty companies
under these arrangements.
The Company is licensed by the Iowa Farm Bureau Federation to use the "Farm
Bureau" and "FB" designations in Iowa. In connection with this license,
royalties of $0.5 million, $0.4 million and $0.3 million were paid to the Iowa
Farm Bureau Federation for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company has
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. MANAGEMENT AND OTHER AGREEMENTS (CONTINUED)
similar arrangements with Farm Bureau organizations in other states in its
market territory. Total royalties paid to Farm Bureau organizations other than
the Iowa Farm Bureau Federation were $0.4 million in 1997 and $0.3 million in
1996 and 1995.
10. COMMITMENTS AND CONTINGENCIES
IMPACT OF YEAR 2000 (UNAUDITED)
Many of the Company's computer programs were originally written using two digits
rather than four to define a particular year. As a result, these computer
programs have time-sensitive software that may recognize a date using "00" as
the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions to operations, including, but not limited
to, a temporary inability to process transactions, send premium notices and
calculate policy reserves and accruals.
During 1997, the Company completed a comprehensive assessment of the Year 2000
issue and developed a plan to address the issue in a timely manner. The Company
is currently in the process of modifying or replacing portions of its software
to help ensure that its computer systems will function properly when using
date-sensitive information. The testing of these modifications is also currently
being performed. Furthermore, the Company has initiated formal communications
with all of its significant vendors to determine the extent to which the
Company's interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues.
The Company has and will utilize both internal and external resources to
reprogram, or replace, and test the software for Year 2000 modifications. The
Company anticipates completing the Year 2000 project no later than December 31,
1998, and prior to any anticipated impact on its operating systems. The total
incremental cost of the Year 2000 project (those costs which the Company would
not have incurred had the Year 2000 issue not existed) is estimated to be $1.4
million and is being funded through operating cash flows. Year 2000 modification
costs incurred and charged to expense during the three month period ended March
31, 1998 and the year ended December 31, 1997 totaled $0.4 million and $0.6
million, respectively. It is anticipated the project costs to be charged to
expense during the remainder of 1998 will total approximately $0.4 million.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantees that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.
OTHER
In the normal course of business, the Company may be involved in litigation
where amounts are alleged that are substantially in excess of contractual policy
benefits or certain other agreements. At March 31, 1998 and December 31, 1997,
management is not aware of any claims for which a material loss is reasonably
possible.
The Company has extended a line of credit in the amount of $15.0 million to FBL
Leasing Services, Inc., a wholly-owned subsidiary of FBL Financial Group, Inc.
Interest on this agreement is equal to the prime rate of a national bank and
payable monthly. At December 31, 1997, there was $4.8 million outstanding on the
line of credit. No amounts were outstanding at March 31, 1998 or December 31,
1996.
The Company has extended a line of credit in the amount of $0.5 million to
Western Computer Services, Inc., an affiliate. Interest on this agreement is
equal to the prime rate of a national bank and payable monthly. At March 31,
1998 and December 31, 1997, there was $0.1 million outstanding on the line of
credit. No amounts were outstanding at December 31, 1996.
The Company has guaranteed the payment of principal and interest on notes
totaling $24.5 million payable by FBL Leasing Services, Inc. to a bank. The
notes are due August 1999 and are collateralized by lease agreements primarily
with affiliates. The Company believes no losses will be recognized in connection
with this guarantee due to the credit worthiness of the lessees and the value of
the underlying collateral.
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
During the first quarter of 1998, the Company entered into a 15-year operating
lease with the Iowa Farm Bureau Federation for the lease of its home office
properties. Future minimum lease payments under this lease are as follows: 1998
- -$0.7 million; 1999 - $1.0 million; 2000 - $1.2 million; 2001 - $1.2 million;
2002 - $1.2 million; and thereafter, through 2013 - $14.8 million.
In connection with an investment in a limited real estate partnership in 1996,
the Company has agreed to pay any cash flow deficiencies of a medium-sized
shopping center owned by the partnership through January 1, 2001. At March 31,
1998, the Company assessed the probability and amount of future cash flows from
the property and determined that no accrual was necessary. The limited
partnership had a $5.4 million mortgage loan, secured by the shopping center,
with Farm Bureau Mutual Insurance Company.
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS AND ACCUMULATED VALUES
The following tables illustrate how the death benefits,
Accumulated Values and Surrender Values of a Policy may
vary over an extended period of time at certain ages,
assuming hypothetical gross rates of investment return
for the Investment Options equivalent to constant gross
annual rates of 0%, 4%, 8% and 12%. The hypothetical
rates of investment return are for purposes of
illustration only and should not be deemed a
representation of past or future rates of investment
return. Actual rates of return for a particular Policy
may be more or less than the hypothetical investment
rates of return and will depend on a number of factors
including the investment allocations made by a
Policyowner. Also, values would be different from those
shown if the gross annual investment returns averaged 0%,
4%, 8% and 12% over a period of years but fluctuated
above and below those averages for individual Policy
Years.
The amounts shown are as of the end of each Policy Year.
The tables assume that the assets in the Investment
Options are subject to an annual expense ratio of 0.77%
of the average daily net assets. This annual expense
ratio is based on the average of the expense ratios of
each of the Investment Options available under the Policy
for the last fiscal year and takes into account current
expense reimbursement arrangements. The fees and expenses
of each Investment Option vary, and in 1997 the total
fees and expenses ranged from an annual rate of 0.33% to
an annual rate of 1.06% of average daily net assets. For
information on Investment Option expenses, see the
prospectuses for the Investment Options.
The tables reflect deduction of the premium expense
charge, the monthly Policy expenses charge, the
first-year monthly administrative charge, the first-year
monthly expense charge, the daily charge for the
Company's assumption of mortality and expense risks, and
cost of insurance charges for the hypothetical Insured.
The surrender values illustrated in the tables also
reflect deduction of applicable surrender charges. The
current charges and the higher guaranteed maximum charges
the Company may charge are reflected in separate tables
on each of the following pages.
Applying the current charges and the average Investment
Option fees and expenses of 0.77% of average net assets,
the gross annual rates of investment return of 0%, 4%, 8%
and 12% would produce net annual rates of return of
-1.82%, 2.18%, 6.18% and 10.18%, respectively, on a
guaranteed basis, and -1.67%, 2.33%, 6.33% and 10.33%,
respectively, on a current basis.
The hypothetical values shown in the tables do not
reflect any charges for federal income taxes against the
Variable Account since the Company is not currently
making such charges. However, such charges may be made in
the future and, in that event, the gross annual
investment rate of return would have to exceed 0%, 4%, 8%
or 12% by an amount sufficient to cover tax charges in
order to produce the death benefits and Accumulated
Values illustrated. (See "FEDERAL TAX MATTERS--Taxation
of the Company.")
The tables illustrate the Policy values that would result
based upon the hypothetical investment rates of return if
premiums are paid as indicated, if all Net Premiums are
allocated to the Variable Account and if no Policy Loans
have been made. The tables are also based on the
assumptions that the Policyowner has not requested an
increase or decrease in Specified Amount, and that no
partial withdrawals or transfers have been made.
For comparative purposes, the second column of each table
shows the amount to which the premiums would accumulate
if an amount equal to those premiums were invested to
earn interest at 5% compounded annually.
* * *
Upon request, the Company will provide a comparable
illustration based upon the proposed insured's age, sex
and premium class, the Specified Amount or premium
requested, and the proposed frequency of premium
payments.
A-1
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING
ASSUMING 0% HYPOTHETICAL GROSS RETURN,
0% HYPOTHETICAL GROSS RETURN, NON-GUARANTEED CURRENT COST OF INSURANCE
GUARANTEED MAXIMUM COST OF INSURANCE CHARGES, CHARGES, AND NON-GUARANTEED CURRENT
AND GUARANTEED MAXIMUM EXPENSE CHARGES EXPENSE CHARGES
PREMIUMS ------------------------------------------------ -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- --------------- ----------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 581 $ 106 $ 0 $ 100,106 $ 227 $ 0 $ 100,227
2............... 1,190 367 0 100,367 563 0 100,563
3............... 1,831 612 0 100,612 886 0 100,886
4............... 2,503 * * * 1,194 218 101,194
5............... 3,208 * * * 1,488 512 101,488
6............... 3,950 * * * 1,766 930 101,766
7............... 4,728 * * * 2,028 1,375 102,028
8............... 5,545 * * * 2,273 1,795 102,273
9............... 6,403 * * * 2,502 2,191 102,502
10............... 7,303 * * * 2,715 2,563 102,715
15............... 12,530 * * * 3,482 3,482 103,482
20............... 19,200 * * * 3,611 3,611 103,611
25............... 27,713 * * * 2,976 2,976 102,976
30............... 38,578 * * * 1,329 1,329 101,329
35............... * * * * * * *
40............... * * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 38,578 * * * 1,329 1,329 101,329
Age 70............... * * * * * * *
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF -1.82% ON A GUARANTEED BASIS AND -1.67% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-2
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING
ASSUMING 4% HYPOTHETICAL GROSS RETURN,
4% HYPOTHETICAL GROSS RETURN, NON-GUARANTEED CURRENT COST OF INSURANCE
GUARANTEED MAXIMUM COST OF INSURANCE CHARGES, CHARGES, AND NON-GUARANTEED CURRENT
AND GUARANTEED MAXIMUM EXPENSE CHARGES EXPENSE CHARGES
PREMIUMS ------------------------------------------------ -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- --------------- ----------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 581 $ 118 $ 0 $ 100,118 $ 242 $ 0 $ 100,242
2............... 1,190 399 0 100,399 604 0 100,604
3............... 1,831 674 0 100,674 967 0 100,967
4............... 2,503 * * * 1,329 353 101,329
5............... 3,208 * * * 1,691 715 101,691
6............... 3,950 * * * 2,049 1,213 102,049
7............... 4,728 * * * 2,404 1,751 102,404
8............... 5,545 * * * 2,754 2,276 102,754
9............... 6,403 * * * 3,101 2,790 103,101
10............... 7,303 * * * 3,443 3,291 103,443
15............... 12,530 * * * 5,013 5,013 105,013
20............... 19,200 * * * 6,141 6,141 106,141
25............... 27,713 * * * 6,575 6,575 106,575
30............... 38,578 * * * 5,895 5,895 105,895
35............... 52,445 * * * 3,166 3,166 103,166
40............... * * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 38,578 * * * 5,895 5,895 105,895
Age 70............... 52,445 * * * 3,166 3,166 103,166
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 4% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 2.18% ON A GUARANTEED BASIS AND 2.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 4%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-3
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
8% HYPOTHETICAL GROSS RETURN, 8% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 581 $ 130 $ 0 $ 100,130 $ 257 $ 0 $ 100,257
2............... 1,190 432 0 100,432 647 0 100,647
3............... 1,831 740 0 100,740 1,053 77 101,053
4............... 2,503 1,053 77 101,053 1,476 500 101,476
5............... 3,208 1,371 395 101,371 1,916 940 101,916
6............... 3,950 1,692 856 101,692 2,373 1,537 102,373
7............... 4,728 2,014 1,361 102,014 2,846 2,193 102,846
8............... 5,545 2,337 1,859 102,337 3,336 2,858 103,336
9............... 6,403 2,662 2,351 102,662 3,845 3,534 103,845
10............... 7,303 2,988 2,836 102,988 4,374 4,222 104,374
15............... 12,530 4,581 4,581 104,581 7,279 7,279 107,279
20............... 19,200 5,844 5,844 105,844 10,530 10,530 110,530
25............... 27,713 6,274 6,274 106,274 14,032 14,032 114,032
30............... 38,578 4,908 4,908 104,908 17,513 17,513 117,513
35............... 52,445 * * * 20,079 20,079 120,079
40............... 70,143 * * * 20,259 20,259 120,259
45............... 92,730 * * * 14,180 14,180 114,180
50............... 121,558 * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 38,578 4,908 4,908 104,908 17,513 17,513 117,513
Age 70............... 52,445 * * * 20,079 20,079 120,079
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 8% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 6.18% ON A GUARANTEED BASIS AND 6.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 8%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-4
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
12% HYPOTHETICAL GROSS RETURN, 12% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT EXPENSE
CHARGES CHARGES
PREMIUMS ----------------------------------------- ----------------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............. $ 581 $ 142 $ 0 $ 100,142 $ 271 $ 0 $ 100,271
2............. 1,190 466 0 100,466 690 0 100,690
3............. 1,831 809 0 100,809 1,144 168 101,144
4............. 2,503 1,174 198 101,174 1,635 659 101,635
5............. 3,208 1,562 586 101,562 2,167 1,191 102,167
6............. 3,950 1,971 1,135 101,971 2,742 1,906 102,742
7............. 4,728 2,403 1,750 102,403 3,364 2,711 103,364
8............. 5,545 2,859 2,381 102,859 4,038 3,560 104,038
9............. 6,403 3,344 3,033 103,344 4,768 4,457 104,768
10............. 7,303 3,858 3,706 103,858 5,561 5,409 105,561
15............. 12,530 6,940 6,940 106,940 10,633 10,633 110,633
20............. 19,200 10,970 10,970 110,970 18,157 18,157 118,157
25............. 27,713 16,109 16,109 116,109 29,447 29,447 129,447
30............. 38,578 22,330 22,330 122,330 46,504 46,504 146,504
35............. 52,445 28,283 28,283 128,283 72,006 72,006 172,006
40............. 70,143 31,088 31,088 131,088 110,081 110,081 210,081
45............. 92,730 21,633 21,633 121,633 165,382 165,382 265,382
50............. 121,558 * * * 245,204 245,204 345,204
55............. 158,351 * * * 359,631 359,631 459,631
60............. 205,309 * * * 523,479 523,479 623,479
65............. 265,240 * * * 701,287 701,287 801,287
70............. 341,730 * * * 896,995 896,995 996,995
75............. 439,352 * * * 1,185,875 1,185,875 1,285,875
80............. 563,945 * * * 1,637,969 1,637,969 1,737,969
Age 65............. 38,578 22,330 22,330 122,330 46,504 46,504 146,504
Age 70............. 52,445 28,283 28,283 128,283 72,006 72,006 172,006
Age 115............. 563,945 * * * 1,637,969 1,637,969 1,737,969
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 12% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 10.18% ON A GUARANTEED BASIS AND 10.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-5
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING
ASSUMING 0% HYPOTHETICAL GROSS RETURN,
0% HYPOTHETICAL GROSS RETURN, NON-GUARANTEED CURRENT COST OF INSURANCE
GUARANTEED MAXIMUM COST OF INSURANCE CHARGES, CHARGES, AND NON-GUARANTEED CURRENT
AND GUARANTEED MAXIMUM EXPENSE CHARGES EXPENSE CHARGES
PREMIUMS ---------------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ----------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 581 $ 107 $ 0 $ 100,000 $ 228 $ 0 $ 100,000
2............... 1,190 369 0 100,000 565 0 100,000
3............... 1,831 614 0 100,000 888 0 100,000
4............... 2,503 * * * 1,198 222 100,000
5............... 3,208 * * * 1,494 518 100,000
6............... 3,950 * * * 1,775 939 100,000
7............... 4,728 * * * 2,039 1,386 100,000
8............... 5,545 * * * 2,288 1,810 100,000
9............... 6,403 * * * 2,522 2,211 100,000
10............... 7,303 * * * 2,740 2,588 100,000
15............... 12,500 * * * 3,546 3,546 100,000
20............... 19,200 * * * 3,740 3,740 100,000
25............... 27,713 * * * 3,190 3,190 100,000
30............... 38,578 * * * 1,624 1,624 100,000
35............... * * * * * * *
40............... * * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
Age 65............... 38,578 * * * 1,624 1,624 100,000
Age 70............... * * * * * * *
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF -1.82% ON A GUARANTEED BASIS AND -1.67% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-6
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING
ASSUMING 4% HYPOTHETICAL GROSS RETURN,
4% HYPOTHETICAL GROSS RETURN, NON-GUARANTEED CURRENT COST OF INSURANCE
GUARANTEED MAXIMUM COST OF INSURANCE CHARGES, CHARGES, AND NON-GUARANTEED CURRENT
AND GUARANTEED MAXIMUM EXPENSE CHARGES EXPENSE CHARGES
PREMIUMS ------------------------------------------------ -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- --------------- ----------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 581 $ 119 $ 0 $ 100,000 $ 242 $ 0 $ 100,000
2............... 1,190 400 0 100,000 605 0 100,000
3............... 1,831 676 0 100,000 969 0 100,000
4............... 2,503 * * * 1,334 358 100,000
5............... 3,208 * * * 1,698 722 100,000
6............... 3,950 * * * 2,059 1,223 100,000
7............... 4,728 * * * 2,418 1,765 100,000
8............... 5,545 * * * 2,774 2,296 100,000
9............... 6,403 * * * 3,126 2,815 100,000
10............... 7,303 * * * 3,477 2,325 100,000
15............... 12,530 * * * 5,110 5,110 100,000
20............... 19,200 * * * 6,367 6,367 100,000
25............... 27,713 * * * 7,023 7,023 100,000
30............... 38,578 * * * 6,683 6,683 100,000
35............... 52,445 * * * 4,404 4,404 100,000
40............... 70,143 * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 38,578 * * * 6,683 6,683 100,000
Age 70............... 52,445 * * * 4,404 4,404 100,000
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 4% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 2.18% ON A GUARANTEED BASIS AND 2.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 4%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-7
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
8% HYPOTHETICAL GROSS RETURN, 8% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 581 $ 131 $ 0 $ 100,000 $ 257 $ 0 $ 100,000
2............... 1,190 433 0 100,000 648 0 100,000
3............... 1,831 743 0 100,000 1,056 80 100,000
4............... 2,503 1,058 82 100,000 1,481 505 100,000
5............... 3,208 1,380 404 100,000 1,924 948 100,000
6............... 3,950 1,705 869 100,000 2,385 1,549 100,000
7............... 4,728 2,033 1,380 100,000 2,863 2,210 100,000
8............... 5,545 2,364 1,886 100,000 3,360 2,882 100,000
9............... 6,403 2,698 2,387 100,000 3,878 3,567 100,000
10............... 7,303 3,036 2,884 100,000 4,418 4,266 100,000
15............... 12,530 4,731 4,731 100,000 7,426 7,426 100,000
20............... 19,200 6,217 6,217 100,000 10,930 10,930 100,000
25............... 27,713 7,073 7,073 100,000 14,975 14,975 100,000
30............... 38,578 6,434 6,434 100,000 19,552 19,552 100,000
35............... 52,445 1,834 1,834 100,000 24,290 24,290 100,000
40............... 70,143 * * * 28,619 28,619 100,000
45............... 92,730 * * * 32,407 30,407 100,000
50............... 121,558 * * * 25,872 25,872 100,000
55............... * * * * 4,724 4,724 100,000
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 38,578 6,434 6,434 100,000 19,552 19,552 100,000
Age 70............... 52,445 1,834 1,834 100,000 24,290 24,290 100,000
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 8% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 6.18% ON A GUARANTEED BASIS AND 6.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 8%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-8
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $553
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING
ASSUMING 12% HYPOTHETICAL GROSS RETURN,
12% HYPOTHETICAL GROSS RETURN, NON-GUARANTEED CURRENT COST OF INSURANCE
GUARANTEED MAXIMUM COST OF INSURANCE CHARGES, CHARGES, AND NON-GUARANTEED CURRENT EXPENSE
AND GUARANTEED MAXIMUM EXPENSE CHARGES CHARGES
PREMIUMS ---------------------------------------------- ----------------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1........ $ 581 $ 143 $ 0 $ 100,000 $ 272 $ 0 $ 100,000
2........ 1,190 467 0 100,000 691 0 100,000
3........ 1,831 813 0 100,000 1,146 170 100,000
4........ 2,503 1,180 204 100,000 1,640 664 100,000
5........ 3,208 1,572 596 100,000 2,176 1,200 100,000
6........ 3,950 1,987 1,151 100,000 2,756 1,920 100,000
7........ 4,728 2,426 1,773 100,000 3,385 2,732 100,000
8........ 5,545 2,893 2,415 100,000 4,068 3,590 100,000
9........ 6,403 3,390 3,079 100,000 4,810 4,499 100,000
10........ 7,303 3,922 3,770 100,000 5,619 5,467 100,000
15........ 12,530 7,171 7,171 100,000 10,856 10,856 100,000
20........ 19,200 11,653 11,653 100,000 18,865 18,865 100,000
25........ 27,713 17,902 17,902 100,000 31,429 31,429 100,000
30........ 38,578 26,751 26,751 100,000 51,677 51,677 100,000
35........ 52,445 39,032 39,032 100,000 85,218 85,218 100,000
40........ 70,143 57,039 57,039 100,000 141,152 141,152 151,032
45........ 92,730 86,186 86,186 100,000 232,243 232,243 243,855
50........ 121,558 139,258 139,258 146,220 378,555 378,555 397,483
55........ 158,351 220,540 220,540 231,567 611,274 611,274 641,838
60........ 205,309 348,805 348,805 352,293 987,640 987,640 997,517
65........ 265,240 551,296 551,296 556,809 1,597,290 1,597,290 1,613,263
70........ 341,730 850,593 850,593 859,099 2,563,667 2,563,667 2,589,304
75........ 439,352 1,310,844 1,310,844 1,323,952 4,103,173 4,103,173 4,144,205
80........ 563,945 2,018,604 2,018,604 2,038,790 6,555,314 6,555,314 6,620,867
Age 65........ 38,578 26,751 26,751 100,000 51,677 51,677 100,000
Age 70........ 52,445 39,032 39,032 100,000 85,218 85,218 100,000
Age 115........ 563,945 2,018,604 2,018,604 2,038,790 6,555,314 6,555,314 6,620,867
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 12% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 10.18% ON A GUARANTEED BASIS AND 10.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-9
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
0% HYPOTHETICAL GROSS RETURN, 0% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 744 $ 227 $ 0 $ 100,227 $ 356 $ 0 $ 100,356
2............... 1,526 608 0 100,608 818 0 100,818
3............... 2,347 969 0 100,969 1,265 0 101,265
4............... 3,209 1,311 23 101,311 1,696 408 101,696
5............... 4,114 1,634 503 101,634 2,110 979 102,110
6............... 5,064 1,933 1,013 101,933 2,507 1,587 102,507
7............... 6,061 2,209 1,491 102,209 2,884 2,166 102,884
8............... 7,109 2,462 1,936 102,462 3,243 2,717 103,243
9............... 8,209 2,689 2,347 102,689 3,582 3,240 103,582
10............... 9,364 2,890 2,723 102,890 3,900 3,733 103,900
15............... 16,064 3,419 3,419 103,419 5,091 5,091 105,091
20............... 24,616 2,870 2,870 102,870 5,391 5,391 105,391
25............... 35,530 539 539 100,539 4,348 4,348 104,348
30............... 49,460 * * * 1,345 1,345 101,345
35............... * * * * * * *
40............... * * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 49,460 * * * 1,345 1,345 101,345
Age 70............... * * * * * * *
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF -1.82% ON A GUARANTEED BASIS AND -1.67% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-10
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
4% HYPOTHETICAL GROSS RETURN, 4% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 744 $ 244 $ 0 $ 100,244 $ 376 $ 0 $ 100,376
2............... 1,526 655 0 100,655 875 0 100,875
3............... 2,347 1,062 0 101,062 1,379 91 101,379
4............... 3,209 1,465 177 101,465 1,885 597 101,885
5............... 4,114 1,863 732 101,863 2,393 1,262 102,393
6............... 5,064 2,252 1,332 102,252 2,902 1,982 102,902
7............... 6,061 2,632 1,914 102,632 3,411 2,693 103,411
8............... 7,109 3,001 2,475 103,001 3,918 3,392 103,918
9............... 8,209 3,356 3,014 103,356 4,424 4,082 104,424
10............... 9,364 3,696 3,529 103,696 4,925 4,758 104,925
15............... 16,064 5,061 5,061 105,061 7,268 7,268 107,268
20............... 24,616 5,450 5,450 105,450 9,023 9,023 109,023
25............... 35,530 3,872 3,872 103,872 9,545 9,545 109,545
30............... 49,460 * * * 7,882 7,882 107,882
35............... 67,239 * * * 2,685 2,685 102,685
40............... * * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 49,460 * * * 7,882 7,882 107,882
Age 70............... 67,239 * * * 2,685 2,685 102,685
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 4% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 2.18% ON A GUARANTEED BASIS AND 2.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 4%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-11
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
8% HYPOTHETICAL GROSS RETURN, 8% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 744 $ 262 $ 0 $ 100,262 $ 396 $ 0 $ 100,396
2............... 1,526 704 0 100,704 934 0 100,934
3............... 2,347 1,161 0 101,161 1,499 211 101,499
4............... 3,209 1,632 344 101,632 2,090 802 102,090
5............... 4,114 2,119 988 102,119 2,708 1,577 102,708
6............... 5,064 2,618 1,698 102,618 3,355 2,435 103,355
7............... 6,061 3,130 2,412 103,130 4,029 3,311 104,029
8............... 7,109 3,653 3,127 103,653 4,734 4,208 104,734
9............... 8,209 4,187 3,845 104,187 5,468 5,126 105,468
10............... 9,364 4,731 4,564 104,731 6,234 6,067 106,234
15............... 16,064 7,512 7,512 107,512 10,479 10,479 110,479
20............... 24,616 10,025 10,025 110,025 15,290 15,290 115,290
25............... 35,530 11,210 11,210 111,210 20,241 20,241 120,241
30............... 49,460 9,110 9,110 109,110 24,497 24,497 124,497
35............... 67,239 * * * 26,620 26,620 126,620
40............... 89,929 * * * 23,935 23,935 123,935
45............... 118,889 * * * 11,882 11,882 111,882
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 49,460 9,110 9,110 109,110 24,497 24,497 124,497
Age 70............... 67,239 * * * 26,620 26,620 126,620
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 8% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 6.18% ON A GUARANTEED BASIS AND 6.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 8%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-12
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION A
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
12% HYPOTHETICAL GROSS RETURN, 12% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT EXPENSE
CHARGES CHARGES
PREMIUMS ----------------------------------------- ----------------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 744 $ 279 $ 0 $ 100,279 $ 416 $ 0 $ 100,416
2............... 1,526 754 0 100,754 995 0 100,995
3............... 2,347 1,265 0 101,265 1,625 337 101,625
4............... 3,029 1,814 526 101,814 2,311 1,023 102,311
5............... 4,114 2,404 1,273 102,404 3,059 1,928 103,059
6............... 5,064 3,037 2,117 103,037 3,871 2,951 103,871
7............... 6,061 3,715 2,997 103,715 4,755 4,037 104,755
8............... 7,109 4,442 3,916 104,442 5,717 5,191 105,717
9............... 8,209 5,221 4,879 105,221 6,763 6,421 106,763
10............... 9,364 6,055 5,888 106,055 7,901 7,734 107,901
15............... 16,064 11,166 11,166 111,166 15,221 15,221 115,221
20............... 24,616 18,106 18,106 118,106 26,134 26,134 126,134
25............... 35,530 26,953 26,953 126,953 42,232 42,232 142,232
30............... 49,460 37,265 37,265 137,265 65,833 65,833 165,833
35............... 67,239 47,076 47,076 147,076 100,390 100,390 200,390
40............... 89,929 51,519 51,519 151,519 150,776 150,776 250,776
45............... 118,889 39,636 39,636 139,636 223,892 223,892 323,892
50............... 155,849 * * * 331,464 331,464 431,464
55............... 203,020 * * * 491,497 491,497 591,497
60............... 263,225 * * * 733,492 733,492 833,492
65............... 340,062 * * * 1,044,009 1,044,009 1,144,009
70............... 438,129 * * * 1,457,833 1,457,833 1,557,833
75............... 563,290 * * * 2,103,237 2,103,237 2,203,237
80............... 723,030 * * * 3,138,146 3,138,146 3,238,146
Age 65............... 49,460 37,265 37,265 137,265 65,833 65,833 165,833
Age 70............... 67,239 47,076 47,076 147,076 100,390 100,390 200,390
Age 115............... 723,030 * * * 3,138,146 3,138,146 3,238,146
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 12% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 10.18% ON A GUARANTEED BASIS AND 10.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-13
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
0% HYPOTHETICAL GROSS RETURN, 0% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 744 $ 228 $ 0 $ 100,000 $ 356 $ 0 $ 100,000
2............... 1,526 610 0 100,000 820 0 100,000
3............... 2,347 973 0 100,000 1,269 0 100,000
4............... 3,209 1,319 31 100,000 1,702 414 100,000
5............... 4,114 1,645 514 100,000 2,120 989 100,000
6............... 5,064 1,949 1,029 100,000 2,520 1,600 100,000
7............... 6,061 2,231 1,513 100,000 2,903 2,185 100,000
8............... 7,109 2,491 1,965 100,000 3,267 2,741 100,000
9............... 8,209 2,726 2,384 100,000 3,613 3,271 100,000
10............... 9,364 2,936 2,769 100,000 3,940 3,773 100,000
15............... 16,064 3,533 3,533 100,000 5,195 5,195 100,000
20............... 24,616 3,086 3,086 100,000 5,611 5,611 100,000
25............... 35,530 852 852 100,000 4,746 4,746 100,000
30............... 49,460 * * * 1,920 1,920 100,000
35............... * * * * * * *
40............... * * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
Age 65............... 49,460 * * * 1,920 1,920 100,000
Age 70............... * * * * * * *
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 0% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF -1.82% ON A GUARANTEED BASIS AND -1.67% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-14
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
4% HYPOTHETICAL GROSS RETURN, 4% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 744 $ 245 $ 0 $ 100,000 $ 376 $ 0 $ 100,000
2............... 1,526 657 0 100,000 877 0 100,000
3............... 2,347 1,067 0 100,000 1,382 94 100,000
4............... 3,209 1,473 185 100,000 1,891 603 100,000
5............... 4,114 1,876 745 100,000 2,404 1,273 100,000
6............... 5,064 2,271 1,351 100,000 2,918 1,998 100,000
7............... 6,061 2,659 1,941 100,000 3,433 2,715 100,000
8............... 7,109 3,037 2,511 100,000 3,949 3,423 100,000
9............... 8,209 3,404 3,062 100,000 4,464 4,122 100,000
10............... 9,364 3,758 3,591 100,000 4,977 4,810 100,000
15............... 16,064 5,235 5,235 100,000 7,424 7,424 100,000
20............... 24,616 5,840 5,840 100,000 9,407 9,407 100,000
25............... 35,530 4,612 4,612 100,000 10,371 10,371 100,000
30............... 49,460 * * * 9,442 9,442 100,000
35............... 67,239 * * * 5,185 5,185 100,000
40............... * * * * * * *
45............... * * * * * * *
50............... * * * * * * *
55............... * * * * * * *
60............... * * * * * * *
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 49,460 * * * 9,442 9,442 100,000
Age 70............... 67,239 * * * 5,185 5,185 100,000
Age 115............... * * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 4% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 2.18% ON A GUARANTEED BASIS AND 2.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 4%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-15
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING ASSUMING
8% HYPOTHETICAL GROSS RETURN, 8% HYPOTHETICAL GROSS RETURN,
GUARANTEED MAXIMUM COST OF INSURANCE NON-GUARANTEED CURRENT COST OF INSURANCE
CHARGES, AND GUARANTEED MAXIMUM EXPENSE CHARGES, AND NON-GUARANTEED CURRENT
CHARGES EXPENSE CHARGES
PREMIUMS ----------------------------------------- -----------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
----------- ------------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1............... $ 744 $ 262 $ 0 $ 100,000 $ 396 $ 0 $ 100,000
2............... 1,526 706 0 100,000 936 0 100,000
3............... 2,347 1,166 0 100,000 1,503 215 100,000
4............... 3,209 1,642 354 100,000 2,097 809 100,000
5............... 4,114 2,134 1,003 100,000 2,721 1,590 100,000
6............... 5,064 2,641 1,721 100,000 3,373 2,453 100,000
7............... 6,061 3,162 2,444 100,000 4,056 3,338 100,000
8............... 7,109 3,698 3,172 100,000 4,771 4,245 100,000
9............... 8,209 4,248 3,906 100,000 5,519 5,177 100,000
10............... 9,364 4,812 4,645 100,000 6,302 6,135 100,000
15............... 16,064 7,777 7,777 100,000 10,715 10,715 100,000
20............... 24,616 10,370 10,370 100,000 15,964 15,964 100,000
25............... 35,530 12,875 12,875 100,000 21,964 21,964 100,000
30............... 49,460 12,634 12,634 100,000 28,543 28,543 100,000
35............... 67,239 6,389 6,389 100,000 35,461 35,461 100,000
40............... 89,929 * * * 42,205 42,205 100,000
45............... 118,889 * * * 47,783 47,783 100,000
50............... 155,849 * * * 51,074 51,074 100,000
55............... 203,020 * * * 48,862 48,862 100,000
60............... 263,225 * * * 31,665 31,665 100,000
65............... * * * * * * *
70............... * * * * * * *
75............... * * * * * * *
80............... * * * * * * *
Age 65............... 49,460 12,634 12,634 100,000 28,543 28,543 100,000
Age 70............... 67,239 6,389 6,389 100,000 35,461 35,461 100,000
Age 115............... * * * * * *
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 8% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 6.18% ON A GUARANTEED BASIS AND 6.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 8%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-16
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE AGE 35 AT LAST BIRTHDAY
DEATH BENEFIT OPTION B
INITIAL SPECIFIED AMOUNT $100,000--ANNUAL PREMIUM OF $709
NON-TOBACCO PREMIUM CLASS
<TABLE>
<CAPTION>
ASSUMING
ASSUMING 12% HYPOTHETICAL GROSS RETURN,
12% HYPOTHETICAL GROSS RETURN, NON-GUARANTEED CURRENT COST OF INSURANCE
GUARANTEED MAXIMUM COST OF INSURANCE CHARGES, CHARGES, AND NON-GUARANTEED CURRENT EXPENSE
AND GUARANTEED MAXIMUM EXPENSE CHARGES CHARGES
PREMIUMS ---------------------------------------------- ----------------------------------------------
END OF ACCUMULATED END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR END OF YEAR
POLICY AT 5% ACCUMULATED SURRENDER DEATH ACCUMULATED SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------------- ------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.......... $ 744 $ 280 $ 0 $ 100,000 $ 416 $ 0 $ 100,000
2.......... 1,526 757 0 100,000 997 0 100,000
3.......... 2,347 1,270 0 100,000 1,630 342 100,000
4.......... 3,209 1,824 536 100,000 2,320 1,032 100,000
5.......... 4,114 2,421 1,290 100,000 3,073 1,942 100,000
6.......... 5,064 3,063 2,143 100,000 3,893 2,973 100,000
7.......... 6,061 3,754 3,036 100,000 4,787 4,069 100,000
8.......... 7,109 4,498 3,972 100,000 5,763 5,237 100,000
9.......... 8,209 5,299 4,957 100,000 6,828 6,486 100,000
10.......... 9,364 6,161 5,994 100,000 7,991 7,824 100,000
15.......... 16,064 11,570 11,570 100,000 15,577 15,577 100,000
20.......... 24,616 19,375 19,375 100,000 27,319 27,319 100,000
25.......... 35,530 30,601 30,601 100,000 45,823 45,823 100,000
30.......... 49,460 47,217 47,217 100,000 76,063 76,063 100,000
35.......... 67,239 73,564 73,564 100,000 126,351 126,351 146,567
40.......... 89,929 119,623 119,623 127,997 207,621 207,621 222,154
45.......... 118,889 194,460 194,460 204,183 339,949 339,949 356,946
50.......... 155,849 310,265 310,265 325,778 551,451 551,451 579,024
55.......... 203,020 484,714 484,714 508,949 886,595 886,595 930,925
60.......... 263,225 761,269 761,269 768,882 1,429,750 1,429,750 1,444,047
65.......... 340,062 1,200,489 1,200,489 1,212,494 2,311,648 2,311,648 2,334,764
70.......... 438,129 1,849,850 1,849,850 1,868,348 3,709,698 3,709,698 3,746,795
75.......... 563,290 2,848,418 2,848,418 2,876,902 5,936,787 5,936,787 5,996,154
80.......... 723,030 4,383,986 4,383,986 4,427,826 9,483,956 9,483,956 9,578,795
Age 65.......... 49,460 47,217 47,217 100,000 76,063 76,063 100,000
Age 70.......... 67,239 73,564 73,564 100,000 126,351 126,351 146,567
Age 115.......... 723,030 4,383,986 4,383,986 4,427,826 9,483,956 9,483,956 9,578,795
</TABLE>
- ------------------------------
* In the absence of an additional premium, the Policy would lapse.
The values illustrated assume the premium is paid at the beginning of the Policy
Year. Values would be different if premiums are paid with a different frequency
or in different amounts.
The values and benefits are as of the Policy Year shown. They assume that no
Policy Loans or partial withdrawals have been made. Excessive Policy Loans or
partial withdrawals may cause this Policy to lapse because of insufficient Net
Accumulated Value.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST, OR A
PREDICTION OF FUTURE, INVESTMENT RATES OF RETURN. THE ACTUAL INVESTMENT RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF INFLATION AND THE
ALLOCATIONS MADE BY A POLICYOWNER AMONG THE SUBACCOUNTS. THE GROSS HYPOTHETICAL
ANNUAL INVESTMENT RATES OF RETURN OF 12% SHOWN ABOVE CORRESPOND TO NET ANNUAL
RATES OF RETURN OF 10.18% ON A GUARANTEED BASIS AND 10.33% ON A CURRENT BASIS,
RESPECTIVELY. THE DEATH BENEFIT AND ACCUMULATED VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE
FUND THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED FOR ANY PERIOD OF TIME.
A-17
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS OPTION A EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option A,
a Policy with a Specified Amount of $50,000 will
generally provide a death benefit of $50,000 plus
Accumulated Value. Thus, for example, a Policy with a
Accumulated Value of $5,000 will have a death benefit of
$55,000 ($50,000 + $5,000); a Accumulated Value of
$10,000 will provide a death benefit of $60,000 ($50,000
+ $10,000). The death benefit, however, must be at least
2.50 multiplied by the Accumulated Value. As a result, if
the Accumulated Value of the Policy exceeds $33,333, the
death benefit will be greater than the Specified Amount
plus Accumulated Value. Each additional dollar of
Accumulated Value above $33,333 will increase the death
benefit by $2.50. A Policy with a Specified Amount of
$50,000 and a Accumulated Value of $40,000 will provide a
death benefit of $100,000 ($40,000 x 2.50); a Accumulated
Value of $60,000 will provide a death benefit of $150,000
($60,000 x 2.50).
Similarly, any time Accumulated Value exceeds $33,333,
each dollar taken out of Accumulated Value will reduce
the death benefit by $2.50. If, for example, the
Accumulated Value is reduced from $40,000 to $35,000
because of partial withdrawals, charges, or negative
investment performance, the death benefit will be reduced
from $100,000 to $87,500. If at any time, however,
Accumulated Value multiplied by the specified amount
factor is less than the Specified Amount plus the
Accumulated Value, then the death benefit will be the
current Specified Amount plus Accumulated Value of the
Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than under 40), the specified amount factor would
be 1.85. The amount of the death benefit would be the sum
of the Accumulated Value plus $50,000 unless the
Accumulated Value exceeded $58,824 (rather than $33,333),
and each dollar then added to or taken from the
Accumulated Value would change the death benefit by $1.85
(rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume
that the Insured's Attained Age is between 0 and 40 and
that there is no outstanding Policy Debt. Under Option B,
a Policy with a $50,000 Specified Amount will generally
pay $50,000 in death benefits. However, because the death
benefit must be equal to or be greater than 2.50
multiplied by the Accumulated Value, any time the
Accumulated Value of the Policy exceeds $20,000, the
death benefit will exceed the $50,000 Specified Amount.
Each additional dollar added to Accumulated Value above
$20,000 will increase the death benefit by $2.50. A
Policy with a $50,000 Specified Amount and a Accumulated
Value of $30,000 will provide death proceeds of $75,000
($30,000 x 2.50); a Accumulated Value of $40,000 will
provide a death benefit of $100,000 ($40,000 x 2.50); a
Accumulated Value of $50,000 will provide a death benefit
of $125,000 ($50,000 x 2.50).
Similarly, so long as Accumulated Value exceeds $20,000,
each dollar taken out of Accumulated Value will reduce
the death benefit by $2.50. If, for example, the
Accumulated Value is reduced from $25,000 to $20,000
because of partial withdrawals, charges, or negative
investment performance, the death benefit will be reduced
from $62,500 to $50,000. If at any time, however, the
Accumulated Value multiplied by the specified amount
factor is less than the Specified Amount, the death
benefit will equal the current Specified Amount of the
Policy.
The specified amount factor becomes lower as the
Insured's Attained Age increases. If the Attained Age of
the Insured in the example above were, for example, 50
(rather than between 0 and 40), the specified amount
factor would be 1.85. The death proceeds would not exceed
the $50,000 Specified Amount unless the Accumulated Value
exceeded approximately $27,028 (rather than $20,000), and
each dollar then added to or taken from the Accumulated
Value would change the life insurance proceeds by $1.85
(rather than $2.50).
B-1
<PAGE>
<TABLE>
<CAPTION>
SPECIFIED AMOUNT FACTOR TABLE
- ---------------------------------------------------------
ATTAINED AGE SPECIFIED AMOUNT FACTOR
- ------------------------ -------------------------------
<S> <C>
40 or younger 2.50
41 2.43
42 2.36
43 2.29
44 2.22
45 2.15
46 2.09
47 2.03
48 1.97
49 1.91
50 1.85
51 1.78
52 1.71
53 1.64
54 1.57
55 1.50
56 1.46
57 1.42
58 1.38
59 1.34
60 1.30
61 1.28
62 1.26
63 1.24
64 1.22
65 1.20
66 1.19
67 1.18
68 1.17
69 1.16
70 1.15
71 1.13
72 1.11
73 1.09
74 1.07
75 to 90 1.05
91 1.04
92 1.03
93 1.02
94 to 114 1.01
115 1.00
</TABLE>
B-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
- --------------------------------------------------------------------------------
MAXIMUM SURRENDER CHARGES
The chart below reflects the maximum surrender charge per
$1,000 of Specified Amount for selected issue ages as
policy years increase.
Male, Non-Tobacco
<TABLE>
<CAPTION>
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 5.50 5.50 5.50 5.50 5.50 5.50 4.30 3.15 2.05 1.00 0.00
20 7.46 7.46 7.46 7.46 7.46 6.46 5.05 3.70 2.41 1.18 0.00
30 10.48 10.48 10.48 10.48 9.85 8.01 6.26 4.59 2.99 1.46 0.00
40 16.08 16.08 16.08 15.81 13.22 10.75 8.39 6.14 3.99 1.95 0.00
50 25.74 25.74 25.74 22.86 19.06 15.46 12.03 8.77 5.69 2.77 0.00
60 56.18 48.88 41.98 35.48 29.36 23.61 18.21 13.17 8.46 4.07 0.00
70 57.48 49.03 41.24 34.10 27.56 21.62 16.26 11.44 7.14 3.34 0.00
80 57.48 46.35 36.74 28.53 21.60 15.82 11.08 7.25 4.21 1.83 0.00
Male, Tobacco
<CAPTION>
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
20 12.00 12.00 12.00 10.90 9.12 7.42 5.79 4.24 2.76 1.35 0.00
30 17.48 17.48 16.34 13.95 11.66 9.49 7.41 5.42 3.53 1.72 0.00
40 27.74 26.34 22.80 19.43 16.22 13.16 10.25 7.49 4.86 2.37 0.00
50 44.66 39.17 33.75 28.62 23.76 19.18 14.86 10.79 6.96 3.37 0.00
60 57.48 49.60 42.24 35.39 29.02 23.12 17.67 12.65 8.04 3.83 0.00
70 57.48 48.27 39.97 32.50 25.84 19.94 14.74 10.20 6.26 2.88 0.00
80 57.48 45.30 35.12 26.68 19.79 14.22 9.78 6.30 3.60 1.55 0.00
Female, Non-Tobacco
<CAPTION>
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 5.30 5.30 5.30 5.30 5.30 5.15 4.03 2.95 1.92 0.94 0.00
20 5.66 5.66 5.66 5.66 5.66 5.66 4.69 3.44 2.24 1.10 0.00
30 8.04 8.04 8.04 8.04 8.04 7.37 5.76 4.22 2.75 1.34 0.00
40 11.98 11.98 11.98 11.98 11.84 9.63 7.52 5.50 3.58 1.75 0.00
50 17.96 17.96 17.96 17.96 16.44 13.34 10.40 7.60 4.93 2.40 0.00
60 43.60 40.26 34.72 29.46 24.49 19.79 15.34 11.15 7.20 3.49 0.00
70 57.48 49.61 42.25 35.38 28.99 23.06 17.59 12.56 7.96 3.78 0.00
80 57.48 47.51 38.62 30.77 23.90 17.97 12.92 8.67 5.15 2.29 0.00
Female, Tobacco
<CAPTION>
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
20 7.76 7.76 7.76 7.76 7.76 6.47 5.06 3.71 2.41 1.18 0.00
30 11.40 11.40 11.40 11.40 9.97 8.11 6.34 4.64 3.02 1.48 0.00
40 17.34 17.34 17.34 15.90 13.28 10.79 8.41 6.15 4.00 1.95 0.00
50 25.82 25.82 25.82 22.19 18.49 14.97 11.65 8.49 5.50 2.67 0.00
60 51.72 45.03 38.72 32.76 27.14 21.86 16.89 12.24 7.88 3.80 0.00
70 57.48 49.36 41.81 34.82 28.36 22.43 17.01 12.07 7.60 3.59 0.00
80 57.48 47.10 37.97 29.99 23.11 17.24 12.29 8.19 4.83 2.13 0.00
Unisex, Non-Tobacco
<CAPTION>
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 5.50 5.50 5.50 5.50 5.50 5.43 4.24 3.11 2.02 0.99 0.00
20 7.10 7.10 7.10 7.10 7.10 6.37 4.98 3.65 2.38 1.16 0.00
30 9.98 9.98 9.98 9.98 9.69 7.88 6.16 4.51 2.94 1.43 0.00
40 15.24 15.24 15.24 15.24 12.94 10.52 8.21 6.01 3.91 1.91 0.00
50 24.16 24.16 24.16 22.20 18.51 15.01 11.69 8.53 5.53 2.69 0.00
60 53.96 46.98 40.38 34.16 28.29 22.77 17.59 12.73 8.18 3.95 0.00
70 57.48 49.17 41.48 34.39 27.89 21.95 16.56 11.70 7.33 3.44 0.00
80 57.48 46.67 37.26 29.15 22.24 16.42 11.60 7.65 4.47 1.96 0.00
Unisex, Tobacco
<CAPTION>
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
20 11.14 11.14 11.14 10.61 8.88 7.23 5.64 4.13 2.69 1.32 0.00
30 16.26 16.26 15.85 13.53 11.32 9.20 7.19 5.26 3.42 1.67 0.00
40 25.60 25.32 21.92 18.68 15.59 12.66 9.86 7.20 4.68 2.28 0.00
50 40.68 37.18 32.05 27.19 22.60 18.25 14.15 10.28 6.64 3.22 0.00
60 57.48 49.70 42.42 35.62 29.28 23.38 17.91 12.86 8.20 3.92 0.00
70 57.48 48.56 40.46 33.12 26.52 20.61 15.35 10.70 6.62 3.07 0.00
80 57.48 45.95 36.14 27.88 20.98 15.30 10.69 6.98 4.05 1.76 0.00
</TABLE>
C-1
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Article XII of the Company's By-Laws provides for the indemnification by the
Company of any person who is a party or who is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Article
XII also provides for the indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its factor by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
offer, employee or agent of another corporation, partnership, joint venture,
trust or another enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification will be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonable entitled to indemnity for such expenses which such court shall deem
proper.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATIONS PURSUANT TO SECTION 26(e)(2)A
The Company represents that the aggregate charges under the Contracts are
reasonable in relation to the services rendered, the expenses to be incurred and
the risks assumed by the Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
The Prospectus consisting of 94 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representation pursuant to Section 26(e)(2)(A)
The signatures.
Written consents of the following persons:
Stephen M. Morain, Esquire.
Messrs. Sutherland, Asbill & Brennan LLP.
Ernst & Young LLP, Independent Auditors.
Christopher G. Daniels, FSA, MSAA, Life Product Development and Pricing Vice
President.
The following exhibits:
<TABLE>
<C> <C> <S>
1.A. 1. *Certified Resolution of the Board of Directors of the Company
establishing the Variable Account.
2. None.
3. *Form of Principal Underwriting Agreement.
4. None.
5. * (a) Form of Policy.
* (b) Form of Application.
6. * (a) Articles of Incorporation of the Company.
* (b) By-Laws of the Company.
7. None.
8. None.
9. * (a) Participation Agreement relating to EquiTrust Variable
Insurance Series Fund.
(b) Participation Agreement relating to
* (c) Participation Agreement relating to T. Rowe Price Equity
Series, Inc. and T. Rowe Price International Series, Inc.
10. Form of Application (see Exhibit 1.A.(5)(c) above.)
2. *Opinion and Consent of Stephen M. Morain.
3. None.
4. Not applicable.
5. Not applicable.
6. *Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Life Product
Development and Pricing Vice President.
7. *(a) Consent of Ernst & Young LLP.
*(b) Consent of Messrs. Sutherland, Asbill & Brennan LLP.
8. Memorandum describing the Company's conversion procedure (included in
Exhibit 9 hereto).
9. *Memorandum describing the Company's issuance, transfer and redemption
procedures for the Policy.
10. *Powers of Attorney.
</TABLE>
- ------------------------
* Attached as an exhibit.
[Additional exhibits to be filed by amendment.]
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Farm Bureau Life Variable Account III, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized in the City of West Des Moines, State of Iowa, on the 10th day of
August, 1998.
Farm Bureau Life Insurance Company
Farm Bureau Life Variable Account III
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------
Edward M. Wiederstein
PRESIDENT
Farm Bureau Life Insurance Company
Attest: /s/ RICHARD D. HARRIS
---------------------------------
Richard D. Harris
SENIOR VICE PRESIDENT AND
SECRETARY-TREASURER
Farm Bureau Life Insurance
Company
Pursuant to the requirements of by the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates set forth below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
/s/ EDWARD M. WIEDERSTEIN President & Director
- ----------------------------------- [Principal Executive August 10, 1998
Edward M. Wiederstein Officer]
Senior Vice President &
/s/ RICHARD D. HARRIS Secretary-Treasurer
- ----------------------------------- [Principal Financial August 10, 1998
Richard D. Harris Officer]
/s/ JAMES W. NOYCE Chief Financial Officer
- ----------------------------------- [Principal Accounting August 10, 1998
James W. Noyce Officer]
- ----------------------------------- Vice President and August 10, 1998
Craig A. Lang* Director
- ----------------------------------- Director August 10, 1998
Kenneth R. Ashby*
- ----------------------------------- Director August 10, 1998
Al Christopherson*
- ----------------------------------- Director August 10, 1998
Ernest A. Glienke*
- ----------------------------------- Director August 10, 1998
Philip A. Hemesath*
- ----------------------------------- Director August 10, 1998
Craig D. Hill*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
- ----------------------------------- Director August 10, 1998
Daniel L. Johnson*
- ----------------------------------- Director August 10, 1998
Richard G. Kjerstad*
- ----------------------------------- Director August 10, 1998
Lindsey D. Larsen*
- ----------------------------------- Director August 10, 1998
David R. Machacek*
- ----------------------------------- Director August 10, 1998
Donald O. Narigon*
- ----------------------------------- Director August 10, 1998
Bryce P. Neidig*
- ----------------------------------- Director August 10, 1998
Charles E. Norris*
- ----------------------------------- Director August 10, 1998
Keith R. Olsen*
- ----------------------------------- Director August 10, 1998
Bennett M. Osmonson*
- ----------------------------------- Director August 10, 1998
Howard D. Poulson*
- ----------------------------------- Director August 10, 1998
Sally A. Puttmann*
- ----------------------------------- Director August 10, 1998
Beverly L. Schnepel*
- ----------------------------------- Director August 10, 1998
F. Gary Steiner*
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Farm Bureau Life Variable Account III, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized in the City of West Des Moines, State of Iowa, on the 10th day of
August, 1998
Farm Bureau Life Variable Account III
(Registrant)
Farm Bureau Life Insurance Company
(Depositor)
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------
Edward M. Wiederstein
PRESIDENT
Farm Bureau Life Insurance Company
* By /s/ STEPHEN M. MORAIN Attorney-In-Fact, pursuant to Power of Attorney.
-----------------------
Stephen M. Morain
<PAGE>
RESOLUTIONS ADOPTED BY
THE BOARD OF DIRECTORS OF
FARM BUREAU LIFE INSURANCE COMPANY
January 6, 1998
RESOLVED, that the Board of Directors of Farm Bureau Life Insurance Company (the
"Company"), hereby establishes a separate account, pursuant to the provisions of
Section 508A.1 of the Insurance Laws of the State of Iowa, designated Farm
Bureau Life Variable Account III (hereinafter the "Variable Account"), for the
following use and purposes, and subject to such conditions as hereinafter set
forth; and
FURTHER RESOLVED, that the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable life insurance
policies (the "Policies"), and shall constitute a funding medium to support
reserves under such Policies issued by the Company; and
FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account shall be credited to or charged
against the Variable Account, without regard to other income, gains or losses of
the Company; and
FURTHER RESOLVED, that the assets of the Variable Account equal to the reserves
and other liabilities under the Policies and any other variable life insurance
policies issued through the Variable Account may not be charged with liabilities
arising out of any other business the Company may conduct; and
FURTHER RESOLVED, that the Variable Account shall be divided into investment
subaccounts (the "Subaccounts"), each of which shall invest in the shares of a
mutual fund portfolio, and net premiums under the Policies shall be allocated
among the Subaccounts in accordance with instructions received from owners of
the Policies; and
FURTHER RESOLVED, that the Executive Committee be, and hereby is, authorized
to add or remove any Subaccount of the Variable Account or add or remove any
mutual fund portfolio as may hereafter be deemed necessary or appropriate; and
FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account, without
regard to other income, gains or losses of any other Subaccount of the Variable
Account; and
1
<PAGE>
FURTHER RESOLVED, that the Executive Committee be, and it hereby is,
authorized to invest such amount or amounts of the Company's cash in the
Variable Account or in any Subaccount thereof or in any mutual fund portfolio
as may be deemed necessary or appropriate to facilitate the commencement of
the Variable Account's and/ or the mutual fund portfolio's operations and/or
to meet any minimum capital requirements under the Investment Company Act of
1940, as amended (the "1940 Act"); and
FURTHER RESOLVED, that the Chief Executive Officer, Chief Operating Officer, and
Chief Financial Officer (hereafter, the "empowered officers") and each of them,
with full power to act without the others, be, and they hereby are, severally
authorized to transfer cash from time to time from the Company's general account
to the Variable Account, or from the Variable Account to the general account, as
deemed necessary or appropriate and consistent with the terms of the Policies;
and
FURTHER RESOLVED, that the Board of Directors of the Company reserves the right
to change the designation of the Variable Account hereafter to such other
designation as it may deem necessary or appropriate; and
FURTHER RESOLVED, that the empowered officers and each of them, with full
power to act without the others, with such assistance from the Company's
independent certified public accountants, legal counsel and independent
consultants or others as they may require, be, and they hereby are, severally
authorized and directed to take all action necessary to: (a) register the
Variable Account as a unit investment trust under the 1940 Act; (b) register
the Policies under the Securities Act of 1933 (the "1933 Act"); and (c) take
all other actions that are necessary in connection with the offering of the
Policies for sale and the operation of the Variable Account in order to
comply with the 1940 Act, the 1933 Act, the Securities Exchange Act of 1934
and other applicable Federal laws, including the filing of any registration
statements, any undertakings, no-action requests, consents, applications for
exemptions from the 1940 Act or other applicable federal laws, and any
amendments to the foregoing as the empowered officers of the Company shall
deem necessary or appropriate; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized to prepare, execute and
cause to be filed with the Securities and Exchange Commission on behalf of the
Variable Account, and by the Company as sponsor and depositor, a Notification of
Registration on Form N-8A, a registration statement on Form N-8B-2, and a
registration statement on Form S-6 registering the Variable Account under the
1940 Act and registering the Policies under the 1933 Act, and any and all
amendments to the foregoing on behalf of the Variable Account and the Company
and on behalf of and as attorneys-in-fact for the empowered officers and/ or any
other officer of the Company; and
FURTHER RESOLVED, that Stephen M. Morain, Senior Vice President and General
Counsel (and any successor to such position), is duly appointed as agent for
service under any such registration statement, duly authorized to receive
communications and notices from the Securities and Exchange Commission with
respect thereto; and
2
<PAGE>
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized on behalf of the Variable
Account and on behalf of the Company to take any and all such action that each
of them may deem necessary or advisable in order to offer and sell the Policies,
including any registrations, filings and qualifications both of the Company, its
officers, agents and employees, and of the Policies, under the insurance and
securities laws of any of the states of the United States of America or other
jurisdictions, and in connection therewith to prepare, execute, deliver and file
all such applications, requests, undertakings, reports, covenants, resolutions,
applications for exemptions, consents to service of process and other papers and
instruments as may be required under such laws, and to take any and all further
action which such officers or legal counsel of the Company may deem necessary or
desirable (including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications for as long
as the officers or legal counsel deem it to be in the best interests of the
Variable Account and the Company; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and they hereby are, severally authorized in the
names and on behalf of the Variable Account and the Company: (a) to execute and
file irrevocable written consents on the part of the Variable Account and of the
Company to be used in such states wherein such consents to service of process
may be required under the insurance or securities laws therein in connection
with the registration or qualification of the Policies; and (b) to appoint the
appropriate state official, or such other person as may be allowed by insurance
or securities laws, agent of the Variable Account and of the Company for the
purpose of receiving and accepting process; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and hereby are, severally authorized to establish
procedures under which the Company will provide voting rights for owners of the
Policies with respect to securities owned by the Variable Account; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute such
agreement or agreements as deemed necessary and appropriate (a) with a qualified
entity under which such entity will be appointed principal underwriter and
distributor for the Policies, (b) with one or more qualified entities to provide
administrative services in connection with the establishment and maintenance
3
<PAGE>
of the Variable Account and the administration of the Policies, and (c) with the
designated mutual fund portfolios and/ or the principal underwriter and
distributor of such mutual fund portfolios for the purchase and redemption of
portfolio shares; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute and
deliver such agreements and other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.
FURTHER RESOLVED, that the Company hereby adopts and establishes the following
Standards of Suitability for its officers, employees, and agents with respect to
the suitability of the Policies for applicants:
1. No recommendation shall be made to an applicant to purchase a Policy,
and no Policy shall be issued, in the absence of reasonable grounds to
believe that the purchase of the Policy is suitable for the applicant
on the basis of information furnished after reasonable inquiry of the
applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and any other information
known to the Company or to the agent making the recommendation;
2. A good faith, reasonable inquiry shall be made as to the facts and
circumstances concerning a prospective Policy owner's insurance and
financial needs and no recommendation shall be made that the
prospective Policy owner purchase a Policy when such a purchase is not
reasonable consistent with the information that is known or reasonably
should be known to the Company or its agents. In making such
recommendation, factors which may be considered are: age, earnings,
marital status, number and age of dependents, the value of savings or
other assets, and current life insurance program.
Additionally, the Company's agents, as registered representatives, will be
subject to supervision by a registered broker-dealer with respect to suitability
and other sales practices under the NASD Conduct Rules of NASD Regulation, Inc;
and
FURTHER RESOLVED, that the Company hereby adopts and establishes the following
Standards of Conduct for itself and its officers, directors, and employees
(each, an "Employee) with respect to the purchase or sale of investments of the
Variable Account:
No Employee shall:
1. Employ any device, scheme or artifice to defraud the Variable Account
or the owners of the Policies;
2. Make any untrue statement of a material fact with respect to the
investments of the Variable Account or omit to state a material fact
necessary in order to make
4
<PAGE>
the statements made, in light of the circumstances in which they were
made, not misleading;
3. Engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Variable Account or the
owners of the Policies;
4. Engage in any manipulative practice with respect to the Variable
Account or the owners of the Policies;
5. Sell to, or purchase from the Variable Account any securities or other
property, except as permitted under applicable laws, rules,
regulations, order, or other interpretation of any government, agency,
or self-regulatory organization.
6. Purchase or allow to be purchased for the Variable Account any
securities of which the Company or an affiliated company is the
issuer, except as permitted under applicable laws, rules, regulations,
order, or other interpretation of any government, agency, or
self-regulatory organization.
7. Accept any compensation other than regular salary or wages from the
Company or an affiliated company for the sale or purchase of
investment securities to or from the Variable Account except as
permitted under applicable laws, rules, regulations, orders, or other
interpretations of any government, agency or self-regulatory
organization;
8. Engage in any joint transaction, participation or common undertaking
whereby the Company or an affiliated company participates with the
Variable Account in any transaction in which the Company or an
affiliated company obtains an advantage in the price or quality of
the item purchased, the service received or in the cost of such
service, and the Variable Account or the owners of the Policies are
disadvantaged in any of these respects by the same transaction; or
9. Borrow money or securities from the Variable Account other than under
a Policy loan provision.
FURTHER RESOLVED, that the Company shall require any third party providing
administrative services to the Variable Account to adopt Standards of Conduct
encompassing the standards set forth above.
5
<PAGE>
UNDERWRITING AGREEMENT
UNDERWRITING AGREEMENT made this ___ day of ____________ ____, by and
between Farm Bureau Life Insurance Company ("Farm Bureau"), an Iowa
corporation, on its own behalf and on behalf of Farm Bureau Life Variable
Account III ("Account") and EquiTrust Marketing Services, Inc. ("EquiTrust
Marketing"), a Delaware corporation.
WITNESSETH:
WHEREAS, Farm Bureau has established and maintains the Account, a
segregated investment account, pursuant to the laws of the State of Iowa for
the purpose of selling flexible premium variable life insurance policies (the
"Policies"), to commence after the effectiveness of the registration
statement for the Policies as filed with Securities and Exchange Commission
(the "SEC") on Form S-6 pursuant to the Securities Act of 1933, as amended
(the "1933 Act"); and
WHEREAS, the Account is registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the "1940 Act:"); and
WHEREAS, EquiTrust Marketing is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and is a member of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the parties desire to have EquiTrust Marketing act as principal
underwriter for the Account and assume such supervisory responsibility as is
required by federal and state securities law and applicable requirements of
the NASD for the securities activities of any "person associated" (as that
term is defined in Section 3(a)(18) of the 1934 Act) with EquiTrust
Marketing, including Farm Bureau personnel, and engaged directly or
indirectly in Farm Bureau's variable life insurance operations (the
"associated persons"); and
WHEREAS, Farm Bureau and the Account desire to have the Policies sold
and distributed through EquiTrust Marketing, and EquiTrust Marketing is
willing to sell and distribute such Policies, under the terms stated herein.
NOW THEREFORE, the parties hereto agree as follows:
1. DISTRIBUTOR AND PRINCIPAL UNDERWRITER
Farm Bureau grants to EquiTrust Marketing the right to be, and EquiTrust
Marketing agrees to serve as, distributor and principal underwriter of the
Policies during the term of this Agreement. EquiTrust Marketing agrees to
use its best efforts to solicit applications for the Policies, and to
undertake to provide sales services relative to the Policies and otherwise
to perform all duties and functions which are necessary and proper for the
distribution of the Policies.
<PAGE>
2. PREMIUM PAYMENTS
All premium payments or other monies payable for the Policies shall be
paid or remitted in full by or on behalf of contractowners directly to Farm
Bureau or its designated servicing agent together with such applications,
forms and other documentation as may be required by Farm Bureau. Checks or
money orders in payment of premiums or other monies payable shall be drawn to
the order of "Farm Bureau Life Insurance Company." Farm Bureau will retain
all such payments except to the extent such payments are allocated to the
Account.
3. SALES IN ACCORDANCE WITH CURRENT PROSPECTUS
EquiTrust Marketing agrees to offer the Policies for sale in accordance
with the current prospectus therefor. EquiTrust Marketing is not authorized
to give any information or to make any representations concerning the
Policies other than those contained in the current prospectus therefor filed
with the SEC or in such sales literature as may be developed and authorized
by Farm Bureau.
4. PROSPECTUSES AND PROMOTIONAL MATERIALS
On behalf of the Account, Farm Bureau shall furnish EquiTrust
Marketing with copies of all prospectuses, financial statements, and other
documents which EquiTrust Marketing reasonably requests for use in
connection with the distribution of the Policies. Farm Bureau shall have
responsibility for preparing, filing and printing all required prospectuses
and/ or registration statements in connection with the Policies and the
payment of all related expenses. EquiTrust Marketing and Farm Bureau shall
cooperate fully in the design, draft, and review of sales promotion materials
and the preparation of individual sales proposals related to the sale of the
Policies. EquiTrust Marketing shall not use any such materials not provided
or approved by Farm Bureau.
5. COMPLIANCE WITH APPLICABLE LAWS
EquiTrust Marketing represents that it is duly registered as a
broker-dealer under the 1934 Act and is a member in good standing of the NASD
and, to the extent necessary to offer the Policies, shall be duly registered
or otherwise qualified under the securities laws of any state or other
jurisdiction. EquiTrust Marketing shall be responsible for carrying out its
sales and underwriting obligation hereunder in continued compliance with the
NASD Rules of Fair Practice and federal and state securities laws and
regulations. Without limiting the generality of the foregoing, EquiTrust
Marketing agrees that it shall be fully responsible for:
(a) ensuring that no person shall offer or sell the Policies on its behalf
until such person is duly registered as a representative of EquiTrust
Marketing, duly licensed and appointed by Farm Bureau under applicable state
insurance law, and appropriately licensed, registered or otherwise qualified
to offer and sell such Policies under the federal securities laws and any
applicable securities laws of each state or other jurisdiction in which such
Policies may be
<PAGE>
lawfully sold, in which Farm Bureau is licensed to sell the Policies and
in which such persons shall offer or sell the Policies; and
(b) training, supervision, and control of all such persons for purposes of
complying on a continuous basis with the NASD Rules of Fair Practice and
with federal and state securities laws requirements applicable in connection
with the offering and sale of the Policies. In this connection EquiTrust
Marketing shall:
(i) conduct such training (including the preparation and utilization of
training materials) as in the opinion of EquiTrust Marketing is
necessary to accomplish the purposes of this Agreement;
(ii) establish and implement reasonable written procedures for supervision
of sales practices of associated persons or brokers selling the
Policies;
(iii) establish branch offices and offices of supervisory jurisdiction, as
necessary or appropriate; and
(iv) take reasonable steps to ensure that the various sales representatives
associated with it shall not make recommendations to an applicant to
purchase a Policy in the absence of reasonable grounds to believe
that the purchase of the Policy is suitable for such applicant.
While not limited to the following, a determination of suitability
shall be based on information furnished to a sales representative
after reasonable inquiry of such applicant concerning the applicant's
insurance and investment objectives, financial situation and needs,
and the likelihood of whether the applicant will persist with the
Policy for such a period of time that Farm Bureau's acquisition
costs are amortized over a reasonable period of time.
6. SALES AGREEMENTS
EquiTrust Marketing is hereby authorized to enter into separate written
agreements, on such terms and conditions as EquiTrust Marketing may determine
not inconsistent with this Agreement, with broker-dealers which agree to
participate in the distribution of the Policies and to use their best
efforts to solicit applications for the Policies. All such sales agreements
shall provide that each independent broker-dealer will assume full
responsibility for continued compliance by itself and its representatives
with applicable federal and state securities laws. Such broker-dealers and
their agents or representatives soliciting applications for the Policies
shall be duly and appropriately licensed, registered or otherwise qualified
for the sale of such Policies under the federal securities laws, the state
insurance laws and any applicable state securities laws of each state or
other jurisdiction in which such Policies may be lawfully sold and in which
Farm Bureau is licensed to sell the Policies. Each such organization shall
be both registered as a broker-dealer under the 1934 Act and a member of the
NASD.
Applications for the Policies solicited by such organizations through
their representatives shall be forwarded to Farm Bureau. All payments for
the Policies shall be made by check payable to "Farm Bureau Life Insurance
Company" and remitted promptly by such organizations to Farm Bureau as agent
for EquiTrust Marketing. All broker-dealers who agree to participate in the
distribution of the Policies shall act as independent contractors and nothing
<PAGE>
herein contained shall constitute such broker-dealers or their agents or
employees as employees of Farm Bureau in connection with the sale of the
Policies.
7. INSURANCE LICENSES
Farm Bureau shall apply for the proper insurance licenses in the
appropriate states or jurisdictions for the designated persons associated
with EquiTrust Marketing or with other independent broker-dealers which have
entered into agreements with EquiTrust Marketing for the sale of the
Policies, provided that Farm Bureau reserves the right to refuse to appoint
any proposed registered representatives as an agent or broker, and to
terminate an agent or broker once appointed.
8. MAINTENANCE OF BOOKS, RECORDS AND ACCOUNTS
Farm Bureau and EquiTrust Marketing shall cause to be maintained and
preserved, for the periods prescribed, such accounts, books and other
documents as are required of them by the 1940 Act, the 1934 Act and any other
applicable laws and regulations. The books, accounts and records of Farm
Bureau, the Account, and EquiTrust Marketing as to all transactions
hereunder shall be maintained so as to disclose clearly and accurately the
nature and details of the transactions.
As agent for and on behalf of EquiTrust Marketing, Farm Bureau shall
maintain such books and records of EquiTrust Marketing pertaining to the sale
of the Policies and required by the 1934 Act as may be mutually agreed upon
from time to time by Farm Bureau and EquiTrust Marketing; provided that such
books and records shall be the property of EquiTrust Marketing and shall at
all times be subject to such reasonable periodic, special or other
examination by the SEC and all other regulatory bodies having jurisdiction.
In addition, Farm Bureau will maintain records of all sales commissions paid
to associated persons of EquiTrust Marketing in connection with the sale of
the Policy. Farm Bureau, as agent for EquiTrust Marketing, shall be
responsible for sending all required confirmations on customer transactions
in compliance with applicable regulations, as modified by an exemption or
other relief obtained by Farm Bureau and EquiTrust Marketing.
EquiTrust Marketing shall have the responsibility for maintaining the
records of associated persons of EquiTrust Marketing who are licensed,
registered, and otherwise qualified to sell the Policies, and for furnishing
periodic reports thereto to Farm Bureau. EquiTrust Marketing shall cause
Farm Bureau to be furnished with such other reports as Farm Bureau may
reasonable request for the purpose of meeting its reporting and recordkeeping
requirements under the insurance laws of the State of Iowa and any other
applicable states or jurisdictions.
9. COSTS AND EXPENSES BORNE BY EQUITRUST MARKETING
EquiTrust Marketing shall bear the costs and expenses of: (a) services,
materials, and supplies required to be supplied by EquiTrust Marketing
pursuant to the terms of this Agreement; (b) registration, licensing or other
qualification of associated persons of EquiTrust Marketing under federal and
state securities laws and with the NASD; and (c) training and supervision of
associated persons.
<PAGE>
10. COMPENSATION
As compensation for EquiTrust Marketing's assumption of the costs and
expenses set forth in Section 9 hereof, the sales services rendered by
EquiTrust Marketing and the associated persons of EquiTrust Marketing, and
the continuing obligations spelled out herein, Farm Bureau shall pay
EquiTrust Marketing an annual fee, payable monthly, at a rate equal to $100
multiplied by the number of associated persons of EquiTrust Marketing, and
shall, on behalf of and as agent for EquiTrust Marketing, pay associated
persons of EquiTrust Marketing all commissions or other fees which are due
for the sale of the Policies. No associated person shall have an interest
in any fees payable to EquiTrust Marketing pursuant to this Agreement.
For Policies sold under dealer sales agreements that EquiTrust
Marketing enters into with other broker-dealers pursuant to Section 6 hereof,
Farm Bureau shall pay to the parties specified in any such agreements such
compensation as is due under the terms of such sales agreements.
11. INDEMNIFICATION
Farm Bureau agrees to indemnify EquiTrust Marketing for any losses
incurred as a result of any action taken or omitted by EquiTrust Marketing or
any of its officers, agents, or employees in performing their
responsibilities under this Agreement in good faith and without willful
misfeasance, gross negligence, or reckless disregard of such obligations.
12. INVESTIGATIONS AND PROCEEDINGS
EquiTrust Marketing and Farm Bureau agree to cooperate fully in any
insurance regulatory investigation or proceeding or judicial proceeding
arising in connection with the Policies distributed under this Agreement.
EquiTrust Marketing and Farm Bureau further agree to cooperate fully in any
securities regulatory inspection, inquiry, investigation or proceeding or any
judicial proceeding with respect to Farm Bureau, EquiTrust Marketing, their
affiliates, or the associated persons to the extent that such inspection,
inquiry, investigation or proceeding is in connection with the Policies
distributed under this Agreement. Without limiting the foregoing:
(a) EquiTrust Marketing will be notified promptly of any customer
complaint or notice of any regulatory inspection, inquiry,
investigation or proceeding or judicial proceeding received by Farm
Bureau with respect to EquiTrust Marketing or any associated person
or which may affect Farm Bureau's issuance of any Policy marketed
under this Agreement; and
(b) EquiTrust Marketing will promptly notify Farm Bureau of any customer
complaint or notice of any regulatory inspection, inquiry,
investigation or proceeding received by EquiTrust Marketing or its
affiliates with respect to EquiTrust Marketing or any associated
person in connection with any Policy distributed under this
Agreement or any activity in connection with any such Policy.
<PAGE>
In the case of a customer complaint, EquiTrust Marketing and Farm Bureau
will cooperate in investigating such complaint and arrive at a mutually
satisfactory response.
13. TERMINATION
This Agreement may be terminated by either party hereto upon 60 days'
written notice to the other party without the payment of any penalty. This
Agreement may be terminated upon written notice of one party to the other
party hereto in the event of bankruptcy or insolvency of such party to which
notice is given. This Agreement may be terminated at any time upon the
mutual written consent of the parties hereto. This Agreement shall terminate
automatically if it shall be assigned.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder shall cease except (a) the obligation to settle
accounts hereunder, including commissions on premiums subsequently received
for Policies in effect at the time of termination or issued pursuant to
applications received by Farm Bureau prior to termination, and (b) the
agreements contained in 12 hereof.
1. EXCLUSIVITY
The services of EquiTrust Marketing hereunder are not to be deemed
exclusive and EquiTrust Marketing shall be free to render similar services to
others so long as its services hereunder are not impaired or interfered with
hereby.
15. REGULATION
This Agreement shall be subject to the provisions of the 1940 Act and
the 1934 Act and the rules, regulations, and rulings thereunder and of the
NASD, from time to time in effect, including such exemptions from the 1940
Act as the SEC may grant and the terms hereof shall be interpreted and
construed in accordance therewith.
EquiTrust Marketing shall submit to all regulatory and administrative
bodies having jurisdiction over the operations of Farm Bureau or the Account,
present or future, and will provide any information, reports or other
material which any such body by reason of this Agreement may request or
require pursuant to applicable laws or regulations. Without limiting the
generality of the foregoing, EquiTrust Marketing shall furnish the Iowa
Department of Insurance with any information or reports which the Department
may request in order to ascertain whether the variable Annuity operations of
Farm Bureau are being conducted in a manner consistent with the Department's
variable annuity insurance regulations and any other applicable law or
regulations.
16. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
<PAGE>
17. APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Iowa.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day
and year first above written.
Attest:
FARM BUREAU LIFE INSURANCE COMPANY
[signature]
Edward M. Wiederstein
President
Attest:
EQUITRUST MARKETING SERVICES, INC.
[signature]
Lynn E. Wilson
President
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
DEATH PROCEEDS PAYABLE AT THE INSURED'S DEATH PRIOR TO THE MATURITY DATE.
FLEXIBLE PREMIUMS PAYABLE FOR THE INSURED'S LIFE OR UNTIL THE MATURITY DATE. THE
AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY VARY UNDER
THE CONDITIONS DESCRIBED IN THE DEATH BENEFIT PROVISIONS. THE CASH VALUE IN THE
VARIABLE ACCOUNT IS BASED ON THE INVESTMENT EXPERIENCE OF THAT ACCOUNT AND MAY
INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. THE
VARIABLE FEATURES OF THIS POLICY ARE DESCRIBED ON PAGES 13 THROUGH 15.
Farm Bureau Life Insurance Company will pay the benefits of this policy subject
to all of its terms.
RIGHT TO EXAMINE POLICY
The owner may cancel this policy by delivering or mailing a written notice or
sending a telegram or fax to the agent through whom it was purchased or the Farm
Bureau Life Insurance Company, 5400 University Avenue, West Des Moines, Iowa
50266-5997 and by returning the policy or contract before midnight of the
twentieth day after the date you receive the policy. Notice given by mail and
return of the policy or contract by mail are effective on being postmarked,
properly addressed and postage prepaid. Farm Bureau Life will refund within
seven days after it receives notice of cancellation and the returned policy an
amount equal to the greater of the premiums paid or the sum of:
a) the accumulated value of the policy on the date the policy is received at
our home office;
b) any premium expense charges which were deducted from premiums;
c) monthly deductions made on the policy date and any monthly deduction day;
and
d) amounts equal to daily charges against the variable account.
Signed for and on behalf of Farm Bureau Life Insurance Company at its home
office at 5400 University Avenue, West Des Moines, Iowa 50266-5997, effective as
of the date of issue of this policy.
/s/ Edward M. Wiederstein /s/ Richard D. Harris
President Secretary
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266-5997
[LOGO]
<PAGE>
This policy is a legal contract between the owner and Farm Bureau Life Insurance
Company.
READ YOUR POLICY CAREFULLY
INDEX OF MAJOR POLICY PROVISIONS
POLICY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3
Insured; Insuring Age; Sex; Policy Number; Policy Date; Owner(s); Date of Issue;
Death Benefit Option; Maturity Date; Specified Amount at Issue; Schedule of
Forms and Premiums; Schedule of Current Charges; Schedule of Current Surrender
Charges.
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES PER $1000. . . . . Page 6
SPECIFIED AMOUNT FACTORS . . . . . . . . . . . . . . . . . . . . . . . Page 7
SECTION 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . Page 8
1.1 You or Your; 1.2 Age; 1.3 Net Accumulated Value; 1.4 Age; 1.5 Attained Age;
1.6 Business Day; 1.7 Declared Interest Option; 1.8 Eligible for Waiver of
Surrender Charge; 1.9 Fund; 1.10 General Account; 1.11 Home Office; 1.12 Monthly
Deduction Day; 1.13 Net Premium; 1.14 Partial Withdrawal Fee; 1.15 Policy
Anniversary; 1.16 Policy Date; 1.17 Policy Year; 1.18 Premium Expense Charge
1.19 Qualified Physician; 1.20 Qualified Nursing Care Center; 1.21 SEC; 1.22
Surrender Charge; 1.23 Surrender Value; 1.24 Net Surrender Value; 1.25 Valuation
Period; 1.26 Variable Account; 1.27 We, Our, Us or the Company.
SECTION 2 - THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . Page 9
2.1 Death Proceeds 2.2 Death Benefit Options; 2.3 Contract; 2.4 Modification;
2.5 Incontestable Clause; 2.6 Misstatement of Age or Sex; 2.7 Suicide; 2.8
Return of Policy and Policy Settlement; 2.9 Maturity Proceeds; 2.10 Termination;
2-11 Non-Participation.
SECTION 3 - OWNERSHIP AND BENEFICIARIES. . . . . . . . . . . . . . . . Page 11
3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or Beneficiary; 3.4
Assignment.
SECTION 4 - PREMIUMS AND REINSTATEMENT . . . . . . . . . . . . . . . . Page 11
4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Grace Period; 4.4 Reinstatement;
4.5 Unscheduled Premiums; 4.6 Premium Limitations; 4.7 Premium Application; 4.8
Allocation of Premium.
SECTION 5 - POLICY CHANGE. . . . . . . . . . . . . . . . . . . . . . . Page 12
5.1 Change of Specified Amount; 5.2 Specified Amount Decrease; 5.3 Specified
Amount Increase; 5.4 Change of Death Benefit Option; 5.5 Life Insurance
Qualification.
SECTION 6 - VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . Page 13
6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios; 6.4 Transfers; 6.5
Special Transfer Privilege.
SECTION 7 - ACCUMULATED VALUE BENEFITS . . . . . . . . . . . . . . . . Page 15
7.1 Accumulated Value Determination; 7.2 Net Accumulated Value Determination;
7.3 Surrender Value; 7.4 Net Surrender Value; 7.5 Variable Accumulated Value;
7.6 Account Units; 7.7 Unit Value; 7.8 Declared Interest Option Accumulated
Value; 7.9 Declared Interest Option Interest; 7.10 Monthly Deduction; 7.11 Cost
of Insurance; 7.12 Cost of Insurance Rate; 7.13 Basis of Values; 7.14 Surrender;
7.15 Waiver of Surrender Charge; 7.16 Partial Withdrawal; 7.17 Use of Payment
Option; 7.18 Delay of Payment; 7.19 Continuance of Insurance; 7.20 Annual
Report.
SECTION 8 - POLICY LOANS . . . . . . . . . . . . . . . . . . . . . . . Page 19
8.1 Cash Loan; 8.2 Loan Value; 8.3 Loan Interest; 8.4 Loan Allocation; 8.5 Loan
Repayment.
SECTION 9 - PAYMENT OF PROCEEDS . . . . . . . . . . . . . . . . . . . Page 20
9.1 Choice of Options; 9.2 Payment Options; 9.3 Interest and Mortality; 9.4
Requirements; 9.5 Effective Date; 9.6 Death of Payee; 9.7 Withdrawal of
Proceeds; 9.8 Claims of Creditors.
PAYMENT OPTION TABLES . . . . . . . . . . . . . . . . . . . . . . . . Page 22
Any additional benefits and endorsements which apply to this policy are listed
on page 3 and are described in the forms which follow page 22 of this policy.
<PAGE>
POLICY DATA
Insured [John Doe]
Insuring Age [35]
Sex [Male]
Policy Number [23456789]
Policy Date [07-01-1998]
Owner(s) [John Doe]
Date of Issue [07-01-1998]
Death Benefit Option [Option A]
Maturity Date [07-01-2078]
Specified Amount at Issue [$1,000,000.00]
Reserve Interest Rate [4.00]
Summary of Current Specified Amount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Description Specified Amount Effective Date Premium Class
[AT ISSUE $1,000,000.00 07-01-1998 NON-TOBACCO]
(will show if rated)
Schedule of Forms and Premiums
<CAPTION>
<S> <C> <C> <C> <C>
Current
Original Target
Form No. Description Amount or No. of Units Effective Date Premium
[434-114(06-98) Non-Par Flexible $100,000,000.00 07-01-1998 $XXX.XX]
Premium Variable Life
[434-085(06-98) Living Benefit
</TABLE>
3
<PAGE>
POLICY DATA
Schedule of Current Charges
Premium Expense Charge [7% of each premium up to Target Premium]
[2% of each premium over Target Premium]
Policy Expense Charge [$5.00 per month]
First Year Administrative Charge [$5.00 per month, plus
(applies to the first 12 monthly $0.05 per $1,000 of specified amount]
deductions following issue and
the first 12 months following
any increase in specified amount)
Partial Withdrawal Fee [$25 per withdrawal]
Transfer Charge [$25 per transfer]
Mortality and Expense Risk [0.0024548% of the variable cash value per
Charge day (equivalent to 0.90% per year)]
Monthly Deduction Day [20th of each month]
Policy Loan Interest Rate Adjustable Loan Rate (as described
in Section 8.3 of your policy)
SCHEDULE OF INVESTMENT OPTIONS
General Account The general assets of Farm Bureau Life Insurance
Company
Separate Account(s) [Farm Bureau Life Variable Account III]
Subaccounts Fund
EquiTrust - Value Growth EquiTrust Variable Insurance Series Fund
EquiTrust - High Grade Bond EquiTrust Variable Insurance Series Fund
EquiTrust - High Yield Bond EquiTrust Variable Insurance Series Fund
EquiTrust - Money Market EquiTrust Variable Insurance Series Fund
EquiTrust - Blue Chip EquiTrust Variable Insurance Series Fund
T.Rowe - Intl Stock T.Rowe Price International Series, Inc.
T.Rowe - MidCap Growth T.Rowe Price Equity Series, Inc.
T.Rowe - New America Growth T.Rowe Price Equity Series, Inc.
T.Rowe - Equity Income T.Rowe Price Equity Series, Inc.
T.Rowe - Pers Strategy Bal T.Rowe Price Equity Series, Inc.
Net premiums will be allocated to the subaccounts or the declared interest
option in accordance with the net premium allocation percentages shown in the
application or in the most recent written instructions of the owner. For a full
description of the Separate Account and the designated subaccounts, please refer
to the current prospectus.
Form Number 434-114(07-98)
Policy Number 12345678
4
<PAGE>
POLICY DATA
Schedule of Current Surrender Charges
SURRENDER DATE SURRENDER CHARGE
[January 1, 1998-December 31, 1998 $XXXXX
January 1, 1999-December 31, 1999 $XXXXX
January 1, 2000-December 31, 2000 $XXXXX
January 1, 2001-December 21, 2001 $XXXXX
January 1, 2002-December 21, 2002 $XXXXX
January 1, 2003-December 21, 2003 $XXXXX
January 1, 2004-December 21, 2004 $XXXXX
January 1, 2005-December 21, 2005 $XXXXX
January 1, 2006 December 21, 2006 $XXXXX
January 1, 2007-December 21, 2007 $XXXXX
January 1, 2008-December 21, 2008 $00.00]
Form Number 434-114(07-98)
Policy Number 12345678
5
<PAGE>
POLICY DATA
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES
PER $1,000 FOR TOBACCO AND NON-TOBACCO RATE CLASSES
Tobacco Non-Tobacco
------- -----------
Attained Male Female Male Female
Age Rate Rate Rate Rate
0 0.08584 0.07000
1 0.08584 0.07000
2 0.08251 0.06667
3 0.08084 0.06500
4 0.07751 0.06417
5 0.07334 0.06250
6 0.06917 0.06084
7 0.06500 0.05917
8 0.06250 0.05834
9 0.06167 0.05750
10 0.06250 0.05667
11 0.06750 0.05834
12 0.07667 0.06084
13 0.08917 0.06417
14 0.10334 0.06834
15 0.11335 0.07167
16 0.12335 0.07501
17 0.13085 0.07751
18 0.18420 0.09251 0.13585 0.08001
19 0.19004 0.09501 0.13919 0.08251
20 0.19337 0.09751 0.14002 0.08417
21 0.19337 0.09918 0.13835 0.08584
22 0.19004 0.10168 0.13585 0.08667
23 0.18670 0.10418 0.13252 0.08834
24 0.18170 0.10668 0.12918 0.09001
25 0.17586 0.10918 0.12502 0.09168
26 0.17253 0.11335 0.12252 0.09418
27 0.17086 0.11668 0.12085 0.09584
28 0.17086 0.12085 0.12001 0.09834
29 0.17336 0.12585 0.12001 0.10168
30 0.17753 0.13168 0.12085 0.10418
31 0.18337 0.13669 0.12335 0.10751
32 0.19087 0.14252 0.12668 0.11085
33 0.20087 0.15002 0.13168 0.11501
34 0.21255 0.15836 0.13752 0.12001
35 0.22672 0.16753 0.14419 0.12585
36 0.24339 0.18170 0.15169 0.13418
37 0.26424 0.19837 0.16169 0.14419
38 0.28758 0.21755 0.17253 0.15502
39 0.31427 0.23839 0.18420 0.16669
40 0.34512 0.26340 0.19837 0.18087
41 0.37848 0.29008 0.21338 0.19587
42 0.41517 0.31677 0.22922 0.21088
43 0.45521 0.34345 0.24673 0.22588
44 0.49942 0.37014 0.26590 0.24089
45 0.54613 0.39849 0.28758 0.25757
46 0.59452 0.42768 0.31093 0.27508
47 0.64709 0.45771 0.33595 0.29425
48 0.70383 0.49024 0.36347 0.31427
49 0.76559 0.52611 0.39349 0.33678
50 0.83403 0.56449 0.42768 0.36180
51 0.91166 0.60537 0.46688 0.38932
52 0.99933 0.65209 0.51193 0.42101
53 1.09871 0.70383 0.56365 0.45604
54 1.20729 0.75641 0.62122 0.49191
55 1.32342 0.81066 0.68547 0.53028
56 1.44626 0.86408 0.75557 0.56866
57 1.57581 0.91417 0.82985 0.60620
58 1.71209 0.96343 0.91250 0.64375
59 1.85845 1.01603 1.00518 0.68630
60 2.02158 1.07866 1.10873 0.73638
61 2.20569 1.15717 1.22400 0.79814
62 2.41331 1.25825 1.35684 0.87493
63 2.64531 1.38107 1.50727 0.96927
64 2.89921 1.51813 1.67447 1.07532
65 3.16834 1.66276 1.85761 1.18975
66 3.45020 1.80994 2.05588 1.30838
67 3.74229 1.95214 2.26847 1.42954
68 4.04883 2.09605 2.49957 1.55491
69 4.38161 2.25256 2.75591 1.69453
70 4.74911 2.43759 3.04592 1.85845
71 5.16235 2.67212 3.37720 2.05839
72 5.62985 2.95957 3.75992 2.30363
73 6.14841 3.30170 4.19334 2.59756
74 6.71732 3.69191 4.67004 2.93610
75 7.32578 4.11856 5.18003 3.31428
76 7.94851 4.57248 5.71919 3.72382
77 8.57456 5.04701 6.28340 4.16309
78 9.20818 5.54895 6.87612 4.63892
79 9.87149 6.09610 7.51607 5.16656
80 10.58674 6.70972 8.22375 5.76724
81 11.37459 7.40696 9.01810 6.45895
82 12.24906 8.20087 9.91569 7.25729
83 13.19603 9.11907 10.91280 8.15937
84 14.18421 10.11631 11.99040 9.15556
85 15.18033 11.17773 13.12418 10.23537
86 16.16034 12.29517 14.29994 11.39164
87 17.16810 13.45788 15.49991 12.62319
88 18.22020 14.67216 16.71910 13.93142
89 19.26842 15.93752 17.97489 15.32721
90 20.32834 17.34402 19.28574 16.82248
91 21.43307 18.86254 20.68243 18.45266
92 22.71710 20.55222 22.21791 20.28063
93 24.36888 22.54368 24.04369 22.43826
94 26.62992 25.22305 26.50346 25.22305
95 30.20740 29.24956 30.20740 29.24956
96 36.35803 35.72205 36.35803 35.72205
97 47.21180 46.86829 47.21180 46.86829
98 66.20701 66.09429 66.20701 66.09249
99-114 90.90909 90.90909 90.90909 90.90909
6
<PAGE>
POLICY DATA
SPECIFIED AMOUNT FACTORS
Attained Attained Attained
Age At Date Age At Date Age At Date
of Death Factor of Death Factor of Death Factor
0-40 2.50 59 1.34 78 1.05
41 2.43 60 1.30 79 1.05
42 2.36 61 1.28 80 1.05
43 2.29 62 1.26 81 1.05
44 2.22 63 1.24 82 1.05
45 2.15 64 1.22 83 1.05
46 2.09 65 1.20 84 1.05
47 2.03 66 1.19 85 1.05
48 1.97 67 1.18 86 1.05
49 1.91 68 1.17 87 1.05
50 1.85 69 1.16 88 1.05
51 1.78 70 1.15 89 1.05
52 1.71 71 1.13 90 1.05
53 1.64 72 1.11 91 1.04
54 1.57 73 1.09 92 1.03
55 1.50 74 1.07 93 1.02
56 1.46 75 1.05 94 1.01
57 1.42 76 1.05 95-114 1.01
58 1.38 77 1.05 115 1.00
7
<PAGE>
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured.
1.2 ACCUMULATED VALUE
means the policy's accumulated value which is calculated as:
a) the variable accumulated value, which is defined in section 7.5; plus
b) the declared interest option accumulated value which is defined in
section 7.8.
1.3 NET ACCUMULATED VALUE
means the policy's net accumulated value which is calculated as:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
1.4 AGE
means age at the last birthday.
1.5 ATTAINED AGE means your age at issue plus the number of policy years
since the policy date.
1.6 BUSINESS DAY
means a day when the New York Stock Exchange is open for trading, except for the
day after Thanksgiving, any other designated Company holidays, and any day the
home office is closed because of a weather-related or comparable type of
emergency. Assets are valued at the close of the business day.
1.7 DECLARED INTEREST OPTION
means an option pursuant to which accumulated value accrues interest at a
guaranteed minimum rate. The declared interest option is supported by the
general account.
1.8 ELIGIBLE FOR WAIVER OF SURRENDER CHARGE
means the insured:
a) is diagnosed by a Qualified Physician as having a terminal illness. A
terminal illness is any disease or medical condition which the Qualified
Physician expects will result in death within one year; or
b) stays in a Qualified Nursing Care Center for 90 days.
1.9 FUND
means the investment options shown on the policy data page. The corresponding
funds are registered with the SEC under the Investment Company Act of 1940 as
open-end diversified management investment companies or unit investment trusts.
1.10 GENERAL ACCOUNT
means all our assets other than those allocated to the variable account or any
other separate account. We have complete ownership and control of the assets of
the general account.
1.11 HOME OFFICE
means Farm Bureau Life Insurance Company at 5400 University Avenue, West Des
Moines, Iowa, 50266-5997.
1.12 MONTHLY DEDUCTION DAY
means the same date in each month as the policy date. The charges for this
policy are deducted on the business day on or next following the monthly
deduction day.
1.13 NET PREMIUM
means the amount of premium remaining after the premium expense charge has been
deducted. This amount will be allocated among the subaccounts of the variable
account and the declared interest option according to the allocations shown on
the policy data page or the most recent instructions received from the owner.
1.14 PARTIAL WITHDRAWAL FEE
means a fee of $25 that is applied at the time of any partial withdrawal.
1.15 POLICY ANNIVERSARY
means the same date in each year as the policy date.
1.16 POLICY DATE
means the policy date shown on the policy data page. This date is used to
determine policy years and any policy anniversaries.
1.17 POLICY YEAR
means the 12-month period that begins on the policy date or on a policy
anniversary.
1.18 PREMIUM EXPENSE CHARGE
means the premium expense charge shown on the policy data page. This amount may
go up or down, but is guaranteed to never exceed 7 percent.
8
<PAGE>
1.19 QUALIFIED PHYSICIAN:
means a licensed, medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the insured, or a member of
the immediate family of either you or the insured.
1.20 QUALIFIED NURSING CARE CENTER:
means a long term care center that is licensed to operate according to the laws
of their location. The following are qualified nursing care centers:
a) Skilled Nursing Center - means a center:
i) That provides skilled nursing care supervised by a licensed
physician;
ii) That provides 24-hour nursing care by, or supervised by, an
R.N.; and
iii) That keeps daily medical record of each patient.
b) Intermediate Care Center - means a center:
i) That provides 24-hour nursing care by, or supervised by an R.N.
or an L.P.N.; and
II) That keeps a daily medical record of each patient.
c) Hospital - means a center:
i) That operates for the care and treatment of sick or injured
persons as inpatients;
ii) That provides 24-hour nursing care by, or supervised by, an R.N.;
iii) That is supervised by a staff of licensed physicians; and
iv) That has medical, diagnostic, and major surgery capabilities or
access to such capabilities.
Qualified Nursing Care Center does not include:
a) Drug or alcohol treatment centers;
b) Home for the aged or mentally ill, community living centers, or places that
primarily provide domiciliary, residency or retirement care;
c) Places owned or operated by a member of the annuitant's immediate family.
1.21 SEC
means the Securities and Exchange Commission, a U.S. government agency.
1.22 SURRENDER CHARGE
means a fee that is applied at the time of a surrender. The surrender charge
will be the amount shown on the policy data page.
A specified amount increase has its own surrender charge period which begins on
the date of the increase. If a specified amount increase is made, the surrender
charges will be a composite of all charges which apply for each year.
1.23 SURRENDER VALUE
means the policy's surrender value which is calculated as:
a) the accumulated value; minus
b) the surrender charge.
1.24 NET SURRENDER VALUE
means the policy's net surrender value which is calculated as:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
1.25 VALUATION PERIOD
means the period between the close of business on a business day and the close
of business on the next business day.
1.26 VARIABLE ACCOUNT
means the Separate Account shown on the policy data page. It is a unit
investment trust registered with the SEC under the Investment Company Act of
1940.
1.27 WE, OUR, US OR THE COMPANY
means the Farm Bureau Life Insurance Company.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DEATH PROCEEDS
We will pay the death proceeds to the beneficiary:
a) within seven days after receipt by us of due proof of your death;
b) if the policy is in force on the date of your death; and
c) subject to the terms and conditions of this policy.
The death proceeds will be the sum of:
a) the death benefit; and
b) any premiums paid after the date of death; and
c) any unearned policy loan interest on the date of death;
less:
a) any policy loan; and
9
<PAGE>
b) any policy loan interest due;
plus any interest credited on this amount from the date of death to the date
of payment, the rate to be set by us but not less than 3% per year or any
rate required by law.
2.2 DEATH BENEFIT OPTIONS
The death benefit option in effect for this policy is shown on the policy
data page and is one of the following:
Option A -- The death benefit will be the greater of a) or b) where:
a) is the sum of the specified amount shown on the policy data page and the
accumulated value; and
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your attained age.
Option B -- The death benefit will be the greater of a) or b) where:
a) is the specified amount shown on the policy data page; and
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your attained age.
All values are determined as of the end of the business day on or next following
the date of death.
2.3 CONTRACT
This policy is a legal contract. We issue this policy in consideration of the
first premium and the statements in the application. The entire contract
consists of:
a) this basic policy;
b) any endorsements or additional benefit riders;
c) the attached copy of your application; and
d) any amendments, supplemental applications or other attached papers.
We rely on statements made in the application for the policy. These statements
in the absence of fraud are deemed representations and not warranties. No
statement will void this policy or be used in defense of a claim unless:
a) it is contained in the application; and
b) such application is attached to this policy.
2.4 MODIFICATION
No one can change any part of this policy except the owner and one of our
officers. Both must agree to a change, and it must be in writing. No agent may
change this policy or waive any of its provisions.
2.5 INCONTESTABLE CLAUSE
We will not contest payment of the death benefit for any reason other than fraud
after this policy has been in force during your lifetime for two years from the
date of issue shown on the policy data page.
Any requested increase in the specified amount will be incontestable only after
such increase has been in force during your lifetime for two years from the
effective date of such increase.
2.6 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the premium actually paid would have bought
at the correct age or sex.
2.7 SUICIDE
If, within one year of the policy date, you die by suicide, whether sane or
insane, our liability is limited to the premium paid plus any unearned loan
interest at the date of death, less any policy loan, any loan interest due and
any partial withdrawals.
Any increase in death benefits resulting from a requested increase in specified
amount will not be paid if the insured dies by suicide, while sane or insane,
within one year of the date of such increase. Instead, we will return to the
owner an amount equal to the cost of insurance for such increase in specified
amount.
2.8 RETURN OF POLICY AND POLICY SETTLEMENT
We reserve the right to have this policy sent to us for any:
a) modification; b) death settlement; c) surrender; d) assignment; e) change
of owner or beneficiary; f) election; or g) exercise of any policy privilege.
We will send a payment contract to replace this policy if any payment option is
chosen. All sums to be paid by us under this policy are considered paid when
tendered by us at our home office.
2.9 MATURITY PROCEEDS
If you are living on the maturity date and this policy is in force, we will pay
the proceeds to the owner. Such proceeds will be:
a) the accumulated value; less
b) any policy loan.
The maturity date will be your attained age 115.
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All values are determined as of the end of the business day on or next following
the maturity date.
2.10 TERMINATION
This policy ends when any one of the following events occurs:
a) the owner requests that the policy be canceled;
b) you die;
c) the policy matures;
d) the policy is surrendered; or
e) the grace period ends without payment of the premium.
2.11 NON-PARTICIPATION
This policy does not share in the Company's surplus or profits.
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SECTION 3 - OWNERSHIP AND BENEFICIARIES
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3.1 OWNERSHIP
The original owner of this policy is shown on the policy data page. Ownership of
the policy may change according to the provisions indicated in the original
application or by a subsequent endorsement to the policy.
3.2 BENEFICIARY
Beneficiaries are as named in the application, unless changed by the owner. The
interests of any beneficiary in a class who dies before you will pass to any
survivors of the class, unless the policy provides otherwise. Secondary
beneficiaries will have the right to receive the proceeds only if no primary
beneficiary survives. If no beneficiary survives you, we will pay the proceeds
to the owner or the owner's estate.
In finding and identifying beneficiaries we may rely on sworn statements, other
facts, or evidence we deem satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to the amount paid.
3.3 CHANGE OF OWNER OR BENEFICIARY
While you live, a change of owner or beneficiary can be made at any time,
subject to the following rules:
a) the change must be in writing on a form acceptable to us;
b) it must be signed by the owner;
c) the form must be sent to our home office and recorded by us; and
d) the change will take effect on the date signed, but it will not apply to
any payment or action by us before we receive the form.
3.4 ASSIGNMENT
No assignment of this policy will bind us unless:
a) it is in writing on a form acceptable to us;
b) signed by the owner; and
c) received by us at our home office.
We will not be responsible for the validity of an assignment.
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SECTION 4 - PREMIUMS AND REINSTATEMENT
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4.1 PREMIUM PAYMENT
Premium payments are flexible as to both timing and amount. Each premium is to
be paid at our home office.
4.2 PAYMENT FREQUENCY
The first premium is due on or prior to the policy date. We will send periodic
reminder notices to the owner upon request. The minimum amount for which such
notice will be sent will be $100. A reminder notice may be sent for different
periods, which may be 12, 6, 3 or 1 month intervals. The reminder notice period
may be changed upon request.
4.3 GRACE PERIOD
A grace period of 61 days will be allowed for payment of a premium that, when
reduced by the premium expense charge, is at least equal to three times the
monthly deduction charge due on such date. The grace period applies:
a) During the first three policy years, if the net accumulated value is not
large enough on any monthly deduction day to cover the monthly deduction
due; and
b) During the first three policy years, if you have taken out a policy loan
and during this period, the net surrender value is not large enough to
cover the monthly deduction due; and
c) During subsequent years, if the net surrender value is not large enough on
any monthly deduction day to cover the monthly deduction due.
The grace period begins on the date we send the owner of record written notice
of the required
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payment. Such premium shall be due on such monthly deduction day and if not
received by us within the grace period, all coverage under this policy will
terminate without value at the end of the 61-day period. If a claim by
death during the grace period becomes payable under the policy, any due and
unpaid monthly deductions will be deducted from the proceeds.
4.4 REINSTATEMENT
Prior to the maturity date, a lapsed policy which has not been surrendered for
its accumulated value may be reinstated at any time within 5 years of the
monthly deduction day immediately preceding the grace period which expired
without payment of the required premium, subject to the following rules:
a) You and the owner must send a written request to us.
b) You must provide proof of your good health and insurability satisfactory to
us.
c) A premium sufficient to keep the policy in force for three months must be
paid.
d) The owner must pay a charge equal to the cost of insurance for the coverage
provided during the 61-day grace period which was in effect prior to the
termination of this policy.
e) The effective date of the reinstated policy will be the monthly deduction
day on or next following the date we approve reinstatement.
4.5 UNSCHEDULED PREMIUMS
Unscheduled premium payments of at least $100 may be made at any time prior to
the maturity date. The Company may, in its discretion, waive the $100 minimum
requirements. The Company reserves the right to limit the number and amount of
unscheduled premium payments.
4.6 PREMIUM LIMITATIONS
The company reserves the right to limit the number and amount of premium
payments in order to maintain this policy's qualifications under federal tax
law. We will refund any portion of a premium payment that would cause the policy
to lose such qualification.
4.7 PREMIUM APPLICATION
While any policy loan is outstanding, unless the owner requests otherwise,
premium payments will be applied as a payment to reduce the outstanding balance
of the loan, When such loan has been repaid, the balance of any premium payment
remaining after payment of the loan, plus any subsequent payments, will be
allocated as described in the following provision.
4.8 ALLOCATION OF PREMIUM
The owner will determine the percentage of net premium that will be allocated to
each subaccount of the variable account and to the declared interest option. The
owner may choose to allocate all the net premium, a percentage or nothing to a
particular subaccount or to the declared interest option. Any allocation must be
for at least 10% of the net premium. A fractional percent may not be chosen.
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
owner 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 options a
signed notice by the owner that the policy has been received, or (ii) 25 days
after the delivery date, we will transfer part or all of the accumulated
value in the declared interest option to the Subaccounts in accordance with
the owner's allocation instructions. Net premiums received on or after (i) or
(ii) above will be allocated in accordance with the net premium allocation
percentages shown in the application or the most recent written instructions
of the owner.
The owner may change the allocation for future net premiums at any time, subject
to the following rules:
a) the policy must be in force;
b) there must be a net accumulated value;
c) the change must be in writing on a form acceptable to us;
d) the form must be signed by the owner; and
e) the change will take effect on the business day on or next following the
date we receive the signed form at our home office.
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SECTION 5 - POLICY CHANGE
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5.1 CHANGE OF SPECIFIED AMOUNT
The owner may change the specified amount at any time after the policy has been
in effect for one policy year, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) It must be signed by the owner.
c) The change will take effect on the monthly deduction day coinciding with or
next following the date the request is approved by us.
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d) We will issue a new the policy data page for any change in specified
amount.
5.2 SPECIFIED AMOUNT DECREASE
Any decrease in specified amount will reduce such amount in the following order:
a) the specified amount provided by the most recent increase will be reduced;
then
b) the next most recent increases will be reduced in succession; and
c) the initial specified amount will be reduced last.
A specified amount decrease will not reduce the surrender charge.
The total specified amount which remains in force after a requested decrease may
not be less than the minimum specified amount in effect for the policy on the
date of decrease, as published by us.
5.3 SPECIFIED AMOUNT INCREASE
In addition to the rules for change in specified amount, an increase in
specified amount is subject to the following:
a) proof of insurability acceptable to us; and
b) payment of the first month's cost of insurance or sufficient accumulated
value for deduction of such cost of insurance.
5.4 CHANGE OF DEATH BENEFIT OPTION
The owner may request to change the death benefit option. The change will take
effect on the monthly deduction day coinciding with or next following the date
we approve the request.
If Option A is changed to Option B, the current specified amount will not
change.
If Option B is changed 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.
5.5 LIFE INSURANCE QUALIFICATION
If following a requested change of specified amount or a change of death benefit
option, this policy would no longer qualify as life insurance under federal tax
law, we will limit the change to an amount that would maintain such
qualification. 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.
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SECTION 6 - VARIABLE ACCOUNT
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6.1 VARIABLE ACCOUNT
We own the assets of the variable account. We will value the assets of the
variable account each business day. The assets of such account will be kept
separate from the assets of our general account and any other separate accounts.
Income, and realized and unrealized gains or losses from assets in the variable
account will be credited to or charged against such account without regard to
our other income, gains or losses.
That portion of the assets of the variable account which equals the reserves and
other policy liabilities of the policies which are supported by the variable
account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our general account any assets of the
variable account which are in excess of such reserves and other policy
liabilities.
While the variable account is registered with the SEC and thereby subject to SEC
rules and regulations, it is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies incorporated in Iowa. The
investment policy of the variable account will not be changed without the
approval of the Insurance Commissioner of the State of Iowa. The approval
process is on file with the insurance commissioner of the state in which this
policy was delivered.
We also reserve the right to transfer assets of the variable account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"variable account," as used in this policy, shall then mean the variable account
to which the assets were transferred.
When permitted by law, we also reserve the right to:
a) deregister the variable account under the Investment Company Act of 1940;
b) manage the variable account under the direction of a committee;
c) restrict or eliminate any voting rights of
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owners, or other persons who have voting rights as to the variable account;
and
d) combine the variable account with other separate accounts.
6.2 SUBACCOUNTS
The variable account is divided into subaccounts. The subaccounts are listed on
the policy data page. Subject to obtaining any approvals or consents required by
applicable law, we reserve the right to eliminate or combine any subaccounts and
the right to transfer the assets of one or more subaccounts to any other
subaccount. We also reserve the right to add new subaccounts and make such
subaccounts available to any class or series of policies as we deem appropriate.
Each new subaccount would invest in a new investment option of the Fund, or in
shares of another investment company. The owner will determine the percentage of
net premium that will be allocated to each subaccount in accordance with the
allocation of premium provision.
6.3 FUND INVESTMENT OPTIONS
The fund has several investment options each of which corresponds to one of the
subaccounts of the variable account. The investment options are listed on the
policy data page. Net premiums allocated to a subaccount will automatically be
invested in the fund investment option associated with that subaccount. The
owner will share only in the income, gains or losses of the investment option(s)
to which net premiums have been allocated through the subaccounts.
We have the right, subject to compliance with any applicable laws, to make:
a) additions to;
b) deletions from; or
c) substitutions for
the shares of a fund investment option that are held by the variable account
or that the account may purchase.
We also reserve the right to dispose of the shares of a investment option of the
fund listed on the policy data page and to substitute shares of another
investment option of such fund or another mutual fund investment option, if:
a) the shares of the investment option are no longer available for investment;
or
b) if in our judgment further investment in the investment option should
become inappropriate in view of the purposes of the variable account.
In the event of any substitution or change, we may, by appropriate endorsement,
make such changes in this and other policies as may be necessary or appropriate
to reflect the substitution or change.
6.4 TRANSFERS
The owner may transfer all or part of the accumulated value among the
subaccounts of the variable account and between the subaccounts and the declared
interest option, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) The form must be signed by the owner.
c) The transfer will take effect as of the end of the valuation period during
which we receive the signed form at our Home Office.
d) The owner may transfer amounts among the subaccounts of the variable
account an unlimited number of times in a policy year.
e) The owner may transfer amounts between the declared interest option and the
variable account only once in a policy year.
f) The first transfer in each policy year will be made without a transfer
charge. Thereafter, each time amounts are transferred a transfer charge
will be imposed. This transfer charge is shown on the policy data page.
g) The accumulated value on the date of the transfer will not be affected by
the transfer except to the extent of the transfer charge. Unless paid in
cash, the transfer charge will be deducted on a pro rata basis from the
declared interest option and/or the subaccounts to which the transfer is
made.
h) The owner must transfer at least:
(1) a total of $100; or
(2) the total accumulated value in the subaccount or the total accumulated
value in the declared interest option less any policy loan, if the
total amount transferred is less than $100.
The following additional rules apply to transfers from the declared interest
option:
a) The accumulated value in the declared interest option after a transfer from
such option must at
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least equal the amount of all policy loans.
b) No more than 50% of the net accumulated value in the declared interest
option may be transferred unless the balance in the declared interest
option after the transfer, would be less than $1,000. If the balance in
the declared interest option would fall below $1,000, the full net
accumulated value in the declared interest option may be transferred.
6.5 SPECIAL TRANSFER PRIVILEGE
The owner may transfer, at any time, all of the amounts in the subaccounts to
the declared interest option. This policy will then become one in which the
benefits do not vary with the investment performance of the variable account.
The owner must tell us this special transfer privilege is being exercised. We
will then waive the transfer charge. The owner may exercise this special
transfer privilege once per policy year.
If the owner exercises this special transfer privilege, we will automatically
credit all future premium payments to the declared interest option until the
owner requests a change in the allocation. At the time of the transfer, there is
no effect on the policy's death benefit, accumulated value, specified amount, or
net amount at risk, or on your premium class or attained age.
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SECTION 7 - ACCUMULATED VALUE
BENEFITS
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7.1 ACCUMULATED VALUE DETERMINATION
The accumulated value in the policy is equal to:
a) the variable accumulated value; plus
b) the declared interest option accumulated value.
7.2 NET ACCUMULATED VALUE DETERMINATION
The net accumulated value of this policy will be:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
7.3 SURRENDER VALUE
The surrender value of this policy will be:
a) the accumulated value; minus
b) the surrender charge.
7.4 NET SURRENDER VALUE
The net surrender value of this policy will be:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
7.5 VARIABLE ACCUMULATED VALUE
On the business day on or next following the day we receive notice that the
owner has received and accepted the policy, the variable accumulated value is
the total amount of net premium, if any, credited to the subaccounts of the
variable account, minus the monthly deduction applicable to those subaccounts if
the net premium is allocated on a monthly deduction day. After such date, the
policy's variable accumulated value is equal to the sum of the policy's
accumulated value in each subaccount. The accumulated value in a subaccount is
equal to a) multiplied by b) where:
a) is the current number of account units; and
b) is the current unit value.
The variable accumulated value will vary from business day to business day
reflecting changes in a) and b) above.
7.6 ACCOUNT UNITS
When transactions are made which affect the variable accumulated value, dollar
amounts are converted to account units. The number of account units for a
transaction is found by dividing the dollar amount of the transaction by the
current unit value.
The number of account units for a subaccount
increases when:
a) net premiums are credited to that subaccount; or
b) transfers from the declared interest option or other subaccounts are
credited to that subaccount.
The number of account units for a subaccount
decreases when:
a) the owner takes out a policy loan from that subaccount;
b) the owner makes a surrender or partial withdrawal from that subaccount;
c) we take a portion of the monthly deduction from that subaccount; or
d) transfers are made from that subaccount to the declared interest option or
other subaccounts.
7.7 UNIT VALUE
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The unit value for each subaccount was set initially at $10.00 when the
subaccounts first purchased fund shares. The unit value for each subsequent
valuation period is calculated by dividing a) by b), where:
a) is:
(1) the net asset 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 net
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;
minus
(5) the mortality and expense risk charge shown on the policy data page.
This charge may go up or down but will never exceed 0.0028618% of the
daily net assets in that subaccount for each day in the valuation
period. The maximum charge corresponds to a charge of 1.05% per year
of the average daily net assets of the subaccount for mortality and
expense risks.
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. We
will value the net assets in each subaccount at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
7.8 DECLARED INTEREST OPTION ACCUMULATED VALUE
The declared interest option accumulated value as of the policy date is the net
premium credited to the declared interest option as of that date minus the
monthly deduction applicable to the declared interest option for the first
policy month.
After the policy date, the declared interest option accumulated value is
computed as a) + b) + c) + d) - e) -f), where:
a) is the declared interest option value on the preceding monthly deduction
day plus any interest from the preceding monthly deduction day to the date
of calculation;
b) is the total of net premiums credited to the declared interest option since
the preceding monthly deduction day, plus interest from the date premiums
are credited to the date of calculation;
c) is the total of the transfers from the variable account to the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of calculation;
d) is the total amount transferred from the variable account to the declared
interest option to secure policy loans since the preceding monthly
deduction day, plus interest from the date of transfer to the date of
calculation;
e) is the total of the transfers to the variable account from the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of the calculation; and
f) is the total of surrenders or partial withdrawals from the declared
interest option since the preceding monthly deduction day, plus interest
from the date of surrender to the date of calculation.
If the date of calculation is a monthly deduction day, we also reduce the
declared interest option accumulated value by the applicable monthly deduction
for the policy month following the monthly deduction day.
7.9 DECLARED INTEREST OPTION INTEREST
The minimum interest rate applied to the declared interest option accumulated
value is an effective rate of 4.00% per year. Interest in excess of the minimum
rate may be applied. The amount of the excess interest and the manner in which
it is determined will be set by us.
The interest credited on the portion of the declared interest option accumulated
value which equals any policy loan will be equal to the greater of 4.00% or:
a) the current effective loan interest rate; minus
b) no more than 3.00%.
Interest will be credited to the declared interest
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option accumulated value on each monthly deduction day.
7.10 MONTHLY DEDUCTION
The monthly deduction is a charge made each monthly deduction day from the
declared interest option accumulated value and the variable accumulated value on
a proportionate basis as of the close of business on the monthly deduction day.
For the purpose of determining the proportion of the deduction, the declared
interest option accumulated value is reduced by the amount of any policy loans.
We make the deduction from each subaccount of the variable account based on each
subaccount's proportional percentage of the variable accumulated value.
The monthly deduction for a policy month will be computed as a) plus b) plus c)
plus d) plus e), where:
a) is the cost of insurance as described in the cost of insurance provision;
b) is the charge for all additional benefit riders attached to this policy;
c) is the monthly policy expense charge shown on the policy data page. This
amount may go up or down, but is guaranteed never to exceed $7; and
d) is the first year monthly per $1,000 charge shown on the policy data page.
This charge may go up or down, but is guaranteed not to exceed $0.07 per
$1,000.
This charge will be deducted for 12 months following issue of this
policy and during the 12 months following the effective date of an
increase in the specified amount. Should this policy lapse and later be
reinstated, to the extent that the monthly per $1,000 charge was not
deducted for a total of twelve policy months prior to lapse, the charges
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.
e) is the first year monthly policy expense charge shown on the policy data
page. This amount may go up or down, but is guaranteed never to exceed $7
per month.
7.11 COST OF INSURANCE
If the owner chooses death benefit option B, the cost of insurance is computed
as a) multiplied by the result of b) minus c). If death benefit option A is
chosen, the cost of insurance is computed as a) multiplied by b). In either
case:
a) is the cost of insurance rate as described in the cost of insurance rate
provisions, divided by 1000;
b) is the specified amount as described in the death benefit provisions as of
the close of business on the monthly deduction day, divided by 1.0032737;
and
c) is the accumulated value as of the close of business on the monthly
deduction day.
The cost of insurance is determined separately for the initial specified amount
and any increases made later. If the premium class for the initial specified
amount is different from that of any increases, the accumulated value will first
be considered a part of the initial specified amount. If the accumulated value
as of the close of business on the monthly deduction day 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.
7.12 COST OF INSURANCE RATE
The cost of insurance rate is subject to the following rules:
a) The rate for the initial specified amount is based on your sex, premium
class and attained age. For any increase in the specified amount, age will
be determined from your age as of your last birthdate on the effective date
of the increase.
b) The monthly rates will be determined by us based on our expectation as to
future mortality experience.
c) If we change the rates, we will change them for everyone in your premium
class.
d) The monthly guaranteed rates shown on the policy data page are based on the
1980 Commissioners' Standard Ordinary Smoker and Nonsmoker Mortality Table.
The monthly rate will never be more than the rates shown on the policy data
page.
7.13 BASIS OF VALUES
All reserves for the policy are based on the Commissioners' 1980 Standard
Ordinary Smoker and Non-Smoker Mortality Table with interest at the rate shown
on the policy data page.
All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered. We have filed a detailed
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statement of the way these values are determined with the insurance department
in that state. It shows the figures and methods used.
7.14 SURRENDER
While you live and prior to the maturity date, the owner may surrender the
policy subject to the following rules:
a) The request must be in writing to us.
b) The amount of any such surrender may be paid in cash or we will apply
part or all of it under a payment option.
c) We have the right to defer payment of a surrender from the declared
interest option for up to 6 months.
d) A surrender charge may apply. If the surrender charge is not paid in
cash, such charge will be deducted from the amount surrendered.
e) Upon surrender, all insurance in force will terminate.
7.15 WAIVER OF SURRENDER CHARGE
The owner may make a surrender of this policy without incurring a surrender
charge if the insured becomes eligible for waiver of the surrender charge.
The waiver of the surrender charge is subject to the following rules:
a) We must receive a written request on our form signed by the owner.
b) The policy must be in force or not providing benefits under any payment
option.
c) Proof must be provided that the conditions of eligibility requirements for
waiver of the surrender charge have been met, including an attending
physician's statement and any other proof we may require. We reserve
the right to seek a second medical opinion or have an examination
performed at our expense by a physician we choose.
e) The insured must become eligible for waiver of surrender charge after
the first policy year ends.
7.16 PARTIAL WITHDRAWAL
While you live and prior to the maturity date, the owner may obtain a partial
withdrawal of the net surrender value, subject to the following rules:
a) The amount of any partial withdrawal must be at least $500 and may not
exceed the lesser of:
(1) the net surrender value less $500; or
(2) 90% of the net surrender value.
b) The death benefit will be reduced as a result of any partial withdrawal.
c) At the time of the partial withdrawal, if the death benefit option in
effect is:
(1) Option A: there will be no effect on the specified amount.
(2) Option B: the specified amount will be reduced by the amount of
accumulated value surrendered.
d) 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 withdrawal, as published by the Company.
e) The accumulated value will be reduced by the amount of any partial
withdrawal and any partial withdrawal fee. The owner may tell us how to
allocate a partial withdrawal among the subaccounts and the declared
interest option. If the owner does not so instruct, we will allocate
the partial withdrawal 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 of the declared interest option
reduced by any outstanding policy loans bears to the total accumulated
value reduced by any outstanding policy loans on the date we receive
the request.
7.17 USE OF PAYMENT OPTION
If all of the accumulated value is applied under payment option 2, 3, 4 or 5,
the surrender charge will be reduced as follows:
a) if option 3 or 5 is used, the surrender charge will be zero; or
b) if option 2 or 4 is used, the surrender charge will be applied, however,
the surrender charge will be determined by adding the fixed number of years
for which payment will be made to the Surrender Date shown on the Policy
Data Page.
7.18 DELAY OF PAYMENT
Proceeds from surrenders, partial withdrawals, and policy loans will usually
be mailed to the owner within seven days after the owner's signed request is
received in our home office. We will usually mail any death claim proceeds
within seven days after we receive due proof of death. We will usually mail
the maturity proceeds within seven days after the maturity date. We have the
right to delay any payment whenever:
18
<PAGE>
a) the New York Stock Exchange is closed other than on customary weekend and a
holiday closing;
b) trading on the New York Stock Exchange is restricted as determined by
the SEC;
c) the SEC, by order, permits postponement for the protection of policyowners;
d) as a result of an emergency, as determined by the SEC, it is not reasonably
possible to dispose of securities; or
e) it is not reasonably possible to determine the value of the net assets of
the variable account.
We have the right to defer payment which is derived from any amount paid to
us by check or draft until we are satisfied the check or draft has been paid
by the bank on which it is drawn.
We also have the right to delay making a surrender, partial withdrawal, or
policy loan from the declared interest option for up to six months from the
date we receive the owner's request.
7.19 CONTINUANCE OF INSURANCE
The insurance under this policy will continue until the earlier of:
a) the end of any grace period during which a required premium payment is
not made;
b) the date the owner surrenders this policy for its entire net accumulated
value;
c) the date of your death; or
d) the date the policy matures.
This provision will not continue the policy beyond the maturity date or continue
any rider beyond its termination date as specified in the rider.
7.20 ANNUAL REPORT
At least once each year we will send a report, without charge, to the owner
which shows:
a) all premiums paid and charges made since the last report;
b) the current accumulated value including the value in each subaccount and
the declared interest option;
c) any partial withdrawals since the last report;
d) any policy loans; and
c) the current death benefit.
An illustrative report will be sent to the owner upon request. A fee may be
charged for this report.
- --------------------------------------------------------------------------------
SECTION 8 - POLICY LOANS
- --------------------------------------------------------------------------------
8.1 CASH LOAN
The owner may obtain a cash loan at any time on the sole security of this
policy, if:
a) the policy is in force;
b) there is a net surrender value.
We have the right to delay making a policy loan from the declared interest
option for up to six months from the date we receive the owner's request.
8.2 LOAN VALUE
The total of all loans may not exceed 90% of the net surrender value as of the
date of the most recent loan. For any loan that is made we will deduct interest
in advance on the requested loan to the next policy anniversary.
8.3 LOAN INTEREST
The loan interest rate is an annual rate. We may change this rate at the
beginning of each policy year. The annual loan interest is to be paid in advance
on each policy anniversary. Interest not paid when due will be added to the loan
and will bear interest at the same rate. Any change in the interest rate will
apply to any existing or new policy loans on this policy.
The maximum annual loan interest rate will be the higher of:
a) The Published Monthly Average of the Composite Yield on Seasoned Corporate
Bonds as published by Moody's Investors Service, Inc. or any successor
thereto, for the calendar month ending two months before the date on which
the rate is determined; or
b) 5.50%; but it will never exceed the usury rate, if applicable.
If the Monthly Average is no longer published, we will use a substantially
similar average which will be substituted by the insurance supervisory official
of the state in which this policy was delivered.
We will not make a change of less than 0.5% in this policy's loan interest rate.
We will inform you of the loan interest rate at the time a loan is made. Notice
of any loan interest rate change on existing loans will be made in advance of
the policy anniversary on which the change becomes effective.
19
<PAGE>
8.4 LOAN ALLOCATION
When the owner takes out a policy loan, an amount equal to the loan will be
segregated within the declared interest option as security for the loan. Amounts
held as security for the loan will first be allocated to the accumulated value
in the declared interest option. If the accumulated value in the declared
interest option less any existing policy loan is not sufficient to cover the
amount of the policy loan, the balance necessary will be transferred from the
subaccounts on a proportional basis. This transfer is not treated as a transfer
for the purpose of the transfer charge or the limit of one transfer in a policy
year.
A transfer will also be made from the subaccounts on a proportional basis for
any due and unpaid loan interest if the accumulated value in the declared
interest option is not sufficient to cover such interest.
8.5 LOAN REPAYMENT
All or part of any policy loan may be repaid at any time while the policy is
still in force. Loan amounts repaid will be allocated to the declared interest
option. The portion of the accumulated value in the declared interest option
securing the repaid portion of the loan will no longer be segregated within the
declared interest option as security for the loan, but will remain in the
declared interest option until transferred to the subaccounts by the owner.
Any outstanding policy loans will be deducted from the proceeds at death,
maturity or surrender.
- --------------------------------------------------------------------------------
SECTION 9 - PAYMENT OF PROCEEDS
- --------------------------------------------------------------------------------
9.1 CHOICE OF OPTIONS
The owner may choose to have the proceeds of this policy paid under a payment
option. After your death, the beneficiary may choose an option if the owner had
not done so before your death. If no payment option is chosen, we will pay the
proceeds of this policy in one sum. We may also fulfill our obligation under
this policy by paying the proceeds in one sum if:
a) the proceeds are less than $2,000;
b) periodic payments become less than $20; or
c) the payee is an assignee, estate, trustee,
partnership, corporation, or association.
9.2 PAYMENT OPTIONS
The choice of payment options are:
1) INTEREST INCOME -- The proceeds will be left with us to earn interest.
The interest will be paid every 1, 3, 6 or 12 months as the payee
chooses. The rate of interest will be determined by us. The payee may
withdraw all or part of the proceeds at any time.
2) INCOME FOR FIXED TERM -- The proceeds will be paid out in equal
installments for a fixed term of years.
3) LIFE INCOME WITH TERM CERTAIN -- The proceeds will be paid out in
equal installments for as long as the payee lives, but for not less
than a term certain. The owner or payee may choose one of the terms
certain shown in the payment option tables.
4) INCOME FOR FIXED AMOUNT -- The proceeds will be paid out in equal
installments of a specified amount. The payments will continue until
all proceeds plus interest have been paid out.
5) JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME -- The proceeds
will be paid out in equal monthly installments for as long as two
joint payees live. When one payee dies, installments of two-thirds of
the first installment will be paid to the surviving payee. Payments
will stop when the surviving payee dies.
The proceeds may be paid in any other manner requested and agreed to by us, or
under any other payment options made available by the Company.
9.3 INTEREST AND MORTALITY
Proceeds applied under a payment option no longer earn interest at the rate
applied to the declared interest option or participate in the investment
experience of the variable account. The minimum interest rate used in computing
any payment option is 3% per year. Higher interest rates may be used on the
effective date of the payment contract. We may at any time declare additional
interest on these funds. The amount of additional interest and how it is
determined will be set by us.
The mortality table which is used for options 3) and 5) is the "1983 Table a"
individual annuity mortality table.
20
<PAGE>
9.4 REQUIREMENTS
For the owner to choose or change a payment option:
a) this contract must be in force;
b) the request must be in writing to us at our
home office; and
c) any prior option must be canceled.
After your death, and before this contract is settled, for a beneficiary to
choose or change a payment option:
a) a prior option by the owner cannot be in effect,
b) the request must be in writing to us at our
home office; and
c) any prior option must be canceled.
9.5 EFFECTIVE DATE
If a payment option has been chosen by the owner, it is effective on the date
the proceeds of this policy are due. If a beneficiary chooses a payment option,
it is effective on the date of election. The first payment under options 2, 3,
4, or 5 is due on the effective date. The first payment under payment option 1
is due at the end of the period chosen.
9.6 DEATH OF PAYEE
If a payee dies, any remaining payments will be paid to a contingent payee. If
no payee survives, we will pay the commuted value of any remaining payments to
the last payee's estate.
9.7 WITHDRAWAL OF PROCEEDS
The payee may not withdraw the funds under a payment option unless agreed to in
the payment contract. We have the right to defer a withdrawal for up to 6
months. We may also refuse to allow partial withdrawals of less than $250.
9.8 CLAIMS OF CREDITORS
Payments under any payment option will be exempt from the claims of creditors
to the maximum extent allowed by law.
21
<PAGE>
Payment Option Tables
(Per $1,000 of proceeds)
- --------------------------------------------------------------------------------
Option 2 - Income for Fixed Term
Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
Number of
Years Annual Monthly
- --------- ----------- ------------
5 211.99 17.91
10 113.82 9.61
15 81.33 6.87
20 65.26 5.51
25 55.76 4.71
30 49.53 4.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Guaranteed Settlement Option 5
Joint and Two-thirds to Survivor Monthly Life Income
Monthly Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
Female Age
Male
Age 55 60 62 65 70
- ------ -----------------------------------------------------------------------
60 4.44 4.71 4.82 5.01 5.34
62 4.53 4.81 4.93 5.13 5.50
65 4.65 4.97 5.11 5.33 5.75
70 4.88 5.24 5.41 5.68 6.20
75 5.11 5.52 5.71 6.04 6.68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GURANTEED SETTLEMENT OPTION 3
LIFE INCOME WITH TERM CERTAIN
MONTHLY INSTALLMENTS PER $1,000 PROCEEDS
- --------------------------------------------------------------------------------
MALE FEMALE
- --------------------------------------------------------------------------------
YEARS CERTAIN YEARS CERTAIN
Age 0 5 10 15 20 0 5 10 15 20
- --- ------------------------------------ -------------------------------------
55 $4.70 4.68 4.62 4.53 4.39 4.25 4.25 4.22 4.18 4.11
56 4.80 4.78 4.72 4.61 4.45 4.34 4.33 4.30 4.25 4.17
57 4.91 4.89 4.82 4.69 4.51 4.42 4.41 4.38 4.32 4.23
58 5.03 5.00 4.92 4.78 4.58 4.52 4.50 4.47 4.40 4.30
59 5.15 5.12 5.03 4.87 4.64 4.61 4.60 4.56 4.48 4.37
60 5.28 5.25 5.14 4.96 4.71 4.72 4.70 4.66 4.57 4.44
- --- ------------------------------------ -------------------------------------
61 5.42 5.39 5.26 5.06 4.78 4.83 4.81 4.76 4.66 4.51
62 5.57 5.53 5.39 5.16 4.84 4.95 4.93 4.86 4.75 4.58
63 5.74 5.69 5.52 5.26 4.90 5.07 5.05 4.98 4.85 4.65
64 5.91 5.85 5.66 5.36 4.96 5.21 5.18 5.10 4.95 4.72
65 6.10 6.03 5.81 5.46 5.02 5.35 5.32 5.22 5.05 4.79
- --- ------------------------------------ -------------------------------------
66 6.29 6.21 5.96 5.56 5.08 5.51 5.47 5.36 5.16 4.86
67 6.50 6.41 6.11 5.66 5.13 5.67 5.63 5.50 5.26 4.93
68 6.73 6.62 6.28 5.76 5.18 5.85 5.80 5.65 5.37 5.00
69 6.97 6.84 6.44 5.86 5.23 6.04 5.98 5.80 5.49 5.06
70 7.23 7.07 6.61 5.96 5.27 6.25 6.18 5.96 5.60 5.12
- --- ------------------------------------ -------------------------------------
71 7.51 7.32 6.78 6.05 5.31 6.47 6.39 6.14 5.71 5.18
72 7.80 7.58 6.96 6.14 5.34 6.71 6.62 6.31 5.83 5.23
73 8.12 7.85 7.14 6.23 5.37 6.97 6.86 6.50 5.94 5.28
74 8.45 8.14 7.32 6.31 5.40 7.26 7.12 6.69 6.04 5.32
75 8.82 8.44 7.49 6.38 5.42 7.56 7.39 6.89 6.14 5.35
- --------------------------------------------------------------------------------
22
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
If you have any questions concerning this policy or if anyone
suggests that you change or replace this policy, please contact
your Farm Bureau Life agent or our home office. (515-225-5400)
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE [LOGO]
WEST DES MOINES, IOWA 50266-5997 FARM BUREAU
FINANCIAL SERVICES
- --------------------------------------------------------------------------------
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
WAIVER OF CHARGES RIDER
This rider is part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 EFFECTIVE DATE
means the date shown for this rider on the policy data page of the policy.
1.3 TOTAL DISABILITY
means continuous total disability caused by injury or sickness which:
a) starts after the effective date of this rider and while this rider is in
force;
b) starts before the policy anniversary on which you are age 65 while this
rider is in force; and
c) prevents you from engaging in the substantial and material duties of an
occupation:
i) For the first 24 months of such total disability, occupation means
your occupation at the time such total disability began.
ii) After 24 months of such total disability, occupation means any gainful
occupation for which you are reasonably fitted by education, training
or experience.
To be considered disabled you must be under the care of a physician and
receiving appropriate treatment. You will not be considered totally disabled
for any period during which you are engaged in any occupation for wage or
profit or for any period that you are not under the care of a physician.
1.4 WAITING PERIOD
means the number of days at the beginning of a period of total disability before
benefit payments begin.
1.5 COMPLICATIONS OF PREGNANCY
mean conditions whose diagnoses are distinct from normal pregnancy but are
adversely affected by pregnancy or are caused by pregnancy. These include,
but are not limited to acute nephritis, cardiac decompensation, toxemia,
eclampsia, non-elective abortion, caesarean section and ectopic pregnancy
which is terminated.
Complications of pregnancy do not include false labor, occasional spotting, rest
prescribed by a doctor, morning sickness, pre-eclampsia, or similar conditions
which make a pregnancy difficult but do not constitute a medically distinct
pregnancy complication. Elective induced abortion is also not a complication of
pregnancy.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DISABILITY BENEFIT
We will waive the payment of monthly deductions under the policy during your
continuous total disability:
a) if the policy and this rider are in force on the date you become totally
disabled with all monthly deductions are paid;
b) upon receipt by us of due proof of your total disability;
c) after a 90 day period; and
d) subject to the terms and conditions of the policy and this rider.
2.2 AMOUNTS TO BE WAIVED
The waiting period begins on the date that you become totally disabled.
Monthly deductions falling due after the waiting period will be waived during
the insured's continuous total disability. After the waiting period is
satisfied, monthly deductions that were due and paid during the waiting
period will be refunded. Monthly deductions are waived until total disability
ends. If a monthly deduction is in default, benefits will be allowed if:
a) your total disability began before the due date or during the grace period
of the monthly deduction in default;
b) notice of claim was given within one year after such due date; and
<PAGE>
c) the first monthly deduction in default is paid with interest not to exceed
6% per year if your total disability began during the grace period of such
monthly deduction.
2.3 CLAIM PROCEDURES
Before any monthly deduction is waived, written notice of claim and proof of
total disability must be received by us:
a) while you live;
b) while your total disability continues; and
c) no later than one year after this rider terminates.
Waiver of any monthly deduction will be subject to the following rules:
a) We may require a medical examination by a physician of our choice, at our
expense.
b) If you fail to give us notice and proof of your total disability on time,
your rights to benefits will not be impaired if you prove you complied as
soon as reasonably possible.
2.4 PROOF OF CONTINUING DISABILITY
You must furnish proof, as often as we request, that your total disability
continues. We may require a medical examination by a physician of our choice,
at our expense, as part of such proof.
2.5 RISKS NOT ASSUMED
No monthly deduction will be waived if your disability results from:
a) suicide or any attempt at suicide, whether sane or insane, or any
intentionally self-inflicted injury;
b) war or any act of war, whether declared or undeclared;
c) committing or trying to commit a felonious act;
d) service while a member of any armed forces; or
e) pregnancy or childbirth except complications of pregnancy.
2.6 TERMINATION
All rights and benefits under this rider will terminate on the earliest of:
a) the policy anniversary on which you are age 65 (but this will not affect a
claim which began before such date);
b) the owner requests that the policy or this rider be cancelled;
c) the grace period specified in the policy ends without payment of the
monthly deductions, except as provided in the amounts to be waived
provision;
d) the continuation of the policy in force under a cash value option; or
e) conversion, expiry, maturity or termination of the policy.
2.7 POLICY PROVISIONS APPLY
The incontestable clause and cash value benefits provision of the policy, if
any, will not apply to this rider. All other provisions of the policy not in
conflict with this rider will apply to this rider. In the event of a conflict
between the provisions of the policy and this rider, the provisions of this
rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
3.1 MONTHLY DEDUCTIONS
The table of percentages of monthly deductions for this rider as shown herein
are to be deducted on the same dates, in the same manner, and under the same
conditions as monthly deductions for the policy to which this rider is attached.
Monthly deductions for this rider are due until this rider terminates. The
monthly deductions for this rider are based on your attained age at the
beginning of each policy year. Any monthly deductions deducted after
termination, as provided in this rider, will not continue this rider in force
and will be refunded. The table on the following page shows the monthly
deduction as a percentage of the cost of insurance and charges for all
additional benefit riders attached to this policy
3.2 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
a) You must provide proof of your good health and insurability satisfactory to
us.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
/s/ Edward M. Wiederstein
President
<PAGE>
TABLE OF PERCENTAGES OF
MONTHLY DEDUCTIONS FOR WAIVER OF CHARGES
FOR STANDARD RATE CLASS
(APPLIES ONLY IF WAIVER OF CHARGES RIDER IS ATTACHED TO THE POLICY.
FOR SUBSTANDARD CLASSES TAKE RATING ON POLICY DATA PAGE TIMES THE PREMIUM
OBTAINED BY USING PERCENTAGES BELOW.)
<TABLE>
<CAPTION>
Male Male Female Female Male Male Female Female
Non- Non- Non- Non-
Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco
Age Rate Rate Rate Rate Age Rate Rate Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18 4.6% 6.1% 9.3% 12.6% 42 6.5% 8.9% 11.3% 15.4%
19 4.6 6.1 9.3 12.6 43 6.9 9.3 11.5 15.6
20 4.6 6.1 9.3 12.6 44 7.2 9.7 11.8 16.1
21 4.6 6.1 9.3 12.6 45 7.5 10.1 12.2 16.6
22 4.6 6.1 9.3 12.6 46 7.8 10.5 12.6 17.0
23 4.6 6.1 9.3 12.6 47 8.1 10.9 12.9 17.6
24 4.6 6.1 9.3 12.6 48 8.4 11.3 13.3 18.1
25 4.6 6.1 9.3 12.6 49 8.7 11.8 13.7 18.6
26 4.8 6.5 9.3 12.6 50 9.1 12.2 14.1 19.2
27 4.8 6.5 9.3 12.8 51 9.4 12.7 14.6 19.8
28 4.8 6.5 9.5 13.0 52 9.8 13.2 15.0 20.4
29 4.8 6.5 9.5 13.0 53 10.2 13.8 15.5 21.0
30 4.8 6.5 9.8 13.2 54 10.6 14.3 15.9 21.6
31 5.0 6.7 9.8 13.2 55 11.0 14.9 16.4 22.2
32 5.0 6.7 9.8 13.2 56 11.5 15.5 16.9 22.9
33 5.2 6.9 10.2 13.7 57 11.9 16.1 17.4 23.6
34 5.2 7.2 10.2 13.7 58 12.4 16.7 17.9 24.3
35 5.4 7.4 10.2 13.7 59 12.9 17.4 18.5 25.0
36 5.4 7.4 10.2 13.9 60 13.4 18.1 19.0 25.8
37 5.6 7.6 10.2 13.9 61 14.0 18.8 19.6 26.6
38 5.6 7.6 10.4 14.1 62 14.5 19.6 20.2 27.4
39 6.1 8.0 10.6 14.3 63 15.1 20.4 20.8 28.2
40 6.1 8.0 10.8 14.5 64 15.7 21.2 21.4 29.0
41 6.1 8.5 11.1 14.7
</TABLE>
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
LIVING BENEFIT RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 POLICY BENEFIT
means the amount of death benefits we would pay to your beneficiaries upon your
death if this endorsement were not a part of the policy. It includes:
a) the death benefit of the policy;
b) any insurance provided by paid-up additions;
c) the amount of any one-year term insurance purchased with dividends; and
d) the face amount of any term insurance riders which cover you and are
attached to the policy.
It does not include the amount of any accidental death benefit rider that may be
attached to the policy or any death benefit from any rider that covers another
person or another family member.
1.3 LIVING BENEFIT
means the portion of the policy benefit we will pay the owner under this
endorsement if we receive proof that the insured is eligible for such benefit.
1.4 TERMINALLY ILL
means having a life expectancy of 12 months or less as certified by a physician.
1.5 PHYSICIAN
means a licensed medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the owner, or a member of
the immediate family of either you or the owner.
- --------------------------------------------------------------------------------
SECTION 2 - GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.1 LIVING BENEFIT PAYMENT
We will pay a living benefit in a lump sum to the owner if you are terminally
ill. We may make payments other than as a lump sum in any manner requested by
the owner and agreed to by us, except an option involving life contingencies.
2.2 AMOUNT OF LIVING BENEFIT
The maximum amount you may request for a living benefit is the lessor of:
a) the policy benefit; or
b) $250,000.
The $250,000 maximum will be applied in sum to all the policies under which you
are insured with us.
The amount requested for the living benefit will be adjusted as follows:
a) A 12 month discount will be applied which reflects the early payment of
amounts held under your policy. The discount will be based on the policy's
loan interest rate. If a loan interest rate provision is not included in
your policy, the discount will be based on an annual interest rate of 7.40%
in advance. The policy's loan interest rate will be multiplied by the
benefit amount to determine the amount of discount.
b) If there is an existing policy loan on your policy on the date you request
a living benefit, the living benefit payment will be reduced. The purpose
of this reduction is to repay a portion of the policy loan. The deduction
will be computed as follows:
Amount of Reduction = Existing Policy Loan X Requested Portion Of Policy Benefit
----------------------------------------------------------
Policy Benefit
The actual amount of living benefit paid to the owner will be equal to the
requested amount minus the 12 month discount and the reduction for existing
policy loans. This is the living benefit payment.
<PAGE>
If the requested amount of living benefit is less than the policy benefit, the
policy will remain in force. To remain in force, the face amount of the policy
after the living benefit has been paid must be greater than or equal to the
minimum issue limits for the plan of insurance on the date of the living benefit
request. The premiums due under the policy, all remaining values and policy
benefits will be reduced proportionately.
2.3 BENEFIT CONDITIONS
Payment of the living benefit is subject to the following rules:
a) We must receive a written request on our form signed by you and the owner.
b) The policy must be in force other than as extended term insurance.
c) The policy or an eligible term rider must not be within five years of
expiration or endowment at the time a living benefit is requested.
d) The living benefit is not available for any last
survivor life insurance policy.
e) If there is an irrevocable beneficiary or assignee, they must consent in
writing to payment of the benefit.
f) We reserve the right to require you or any beneficiary, a spouse, assignee,
or any other party in interest to consent to the payment of the living
benefit if, in our discretion, such agreement is needed to protect our
interests.
g) Your policy is not eligible for this benefit if:
i) you or the owner are required by law to use this endorsement to meet
the claims of creditors, whether in bankruptcy or otherwise; or
ii) you are required by a government agency to use this endorsement to
apply for, obtain, or keep a government benefit or entitlement.
h) You must provide proof that you meet conditions under the living benefit
provision, including an attending physician's statement and any other proof
we may require. We reserve the right to seek a second medical opinion or
have you examined at our expense by a physician we choose.
2.4 TERMINATION
All rights and benefits under this endorsement will end when any one of the
following events occurs:
a) the owner requests that the policy or this rider be cancelled;
b) the grace period ends without payment of the premium; or
c) conversion, expiry, maturity or termination of the policy.
2.5 POLICY PROVISIONS APPLY
The policy is modified to add the provisions of this rider. All provisions of
the policy not in conflict with this rider will apply to this rider. In the
event of a conflict between the provisions of the policy and this rider, the
provisions of the rider will prevail.
/s/ Edward M. Wiederstein
President
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
LIVING BENEFIT RIDER
DISCLOSURE STATEMENT
1. This Living Benefit Rider is NOT a long term care policy. The amount this
rider pays may not be enough to cover nursing home or other bills. The
owner may use the money received from this rider for any purpose.
2. Benefits payable under this rider MAY be taxable. We make no
representations concerning any potential tax consequences of this
endorsement. You should consult your personal tax adviser.
3. This rider MAY affect Medicaid eligibility. If you use the endorsement
benefit, you MAY be required to spend all of the available funds to become
eligible for Medicaid or other government assistance programs.
4. Payment of the accelerated benefit will be allowed if you are determined to
have a terminal illness. This means you have a life expectancy of 12 months
or less as certified by a physician.
5. The maximum amount you may request for an accelerated benefit is the lesser
of the policy benefit, or $250,000. The $250,000 maximum will be applied in
sum to all the policies under which you are insured with us.
6. The amount requested for the accelerated benefit will be reduced by a 12
month discount which reflects the early payment of amounts held under your
policy. The discount will be based on the policy's loan interest rate, or
7.4% for policies not having a loan provision. There will be no other
administrative charge.
7. The amount requested will also be reduced if there is an existing policy
loan on your policy on the date you request an accelerated benefit. The
purpose of this reduction is to repay a portion of the policy loan.
8. Payment of the accelerated benefit may decrease or eliminate the death
benefit your beneficiary will receive by the amount of the accelerated
benefit requested. If a portion of the policy remains in force following
payment of the accelerated benefit, the premiums due under the policy, all
remaining values and policy benefits, including any policy loans will be
reduced proportionately.
- ---------------------------------- ----------------------------
Policyowner's Signature Agent's Signature
- ---------------------------------- ----------------------------
Date Date
First copy - Home Office Second Copy - Owner/Insured
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
COST OF LIVING INCREASE RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 -DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 EFFECTIVE DATE
means the date shown for this rider on policy data page.
1.3 CONSUMER PRICE INDEX
means the Consumer Price Index For All Urban Consumers, U.S. City Average, All
Items (CPI) as published by the U.S. Department of Labor.
1.4 CPI FACTOR
The CPI Factor is calculated as follows:
(a)-(b) where:
-------
(b)
a) is the CPI 6 months prior to the increase date;
and
b) is the CPI 42 months prior to the increase date.
We reserve the right to use some other similar measurement if the U.S.
Department of Labor changes or stops publishing the CPI.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 INCREASE BENEFIT
The specified amount on your life will increase automatically every third policy
anniversary without proof of insurability. Such increase will be subject to the
following rules:
a) The policy and this rider must be in force with all needed monthly
deductions paid.
b) The increase will take place every third policy anniversary after the
policy date. Such anniversary will be the effective date of the increase.
c) The increase amount will be the lessor of:
i) the initial specified amount plus any prior increases under this rider
multiplied by the CPI Factor;
ii) 20% of the initial specified amount; or
iii) $25,000.
d) The minimum increase amount is $2,000
e) The total amount of all increases under this rider will be the lessor of:
i) four times the initial specified amount on this policy; or
ii) $200,000.
f) The cost of insurance rate for the increase will be based on your sex,
attained age and rate class at the time of increase.
g) We will send the owner a new policy data policy data page showing the new
specified amount following an increase.
h) Any increase will be subject to per $1,000 charges shown in the policy.
i) The increase will not be allowed if your mortality class is other than
standard.
2.2 REJECTION OF INCREASE
We will mail you a new policy data page on the effective date of any increase.
Acceptance is automatic. You may reject the cost of living increase by notice to
us and return of the new policy data page within 30 days of the increase date.
2.3 TERMINATION
All rights and benefits under this rider will terminate when any of the
following occur:
a) any automatic cost of living increase is rejected;
b) the later of:
<PAGE>
i) the policy anniversary on which you are age 65; or
ii) the 10th policy anniversary;
c) the owner requests that the policy or this rider be canceled;
d) the grace period specified in the policy ends without payment of the
monthly deductions; or
e) conversion, expiry, maturity or termination of the policy.
2.4 POLICY PROVISIONS APPLY
All provisions of the policy not in conflict with this rider will apply to this
rider. In the event of a conflict between the provisions of the policy and this
rider, the provisions of this rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
3.1 MONTHLY DEDUCTIONS
The monthly deduction for this rider will be deducted on the same dates, in the
same manner and under the same conditions as the monthly deductions for the
policy to which this rider is attached. Monthly deductions for this rider are
due until the rider terminates. Any monthly deductions deducted after
termination, as provided in this rider, will not continue this rider in force
and will be refunded.
The current monthly deduction rates for this rider will be determined by us. If
we change the rates, we will change them for everyone in your premium class. The
current monthly deduction rates for this rider will never be more than 6% of the
guaranteed maximum monthly insurance rates shown on the policy data page.
3.2 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
a) You must provide proof of your good health and insurability satisfactory to
us.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
/s/ Edward M. Wiederstein
President
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
GUARANTEED INSURABILITY OPTION RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 EFFECTIVE DATE
means the date shown for this rider on page 3 of the policy.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 OPTION BENEFIT
The owner may increase the specified amount of insurance on your life without
proof of insurability on each of the option dates, if the policy and this rider
are in force with all needed monthly deductions paid.
Such purchase is subject to the following rules:
a) The owner must send us a written request, on our form and pay the monthly
deductions on or before the option date.
b) The policy date of the increase will be the option date.
c) In no event will the increase in specified amount become effective unless
you are living on the option date.
d) The increase in specified amount will not exceed the basic amount of this
rider.
e) Each Option will expire if not used on or before its option date. The
expiration will not affect future options.
f) The monthly deductions for the increased amount will be based on your sex,
attained ago and rate class on the option date.
g) The increased amount will be subject to the same exceptions, exclusions and
restrictions, if any, as this policy.
h) The increased amount will not be effective unless the net cash value on the
option date is sufficient to pay monthly deductions for the policy plus the
increased amount.
i) We will send the owner a new policy data page 3 showing the new specified
amount following exercise of an option.
j) The increased amount will be subject to the first year per $1,000 charges
shown in the policy.
2.2 AMOUNT OF THIS RIDER
The amount of this rider is shown on page 3 of the policy.
2.3 OPTION DATES
Option dates will be the policy anniversaries on which your age is 22, 25, 28,
31, 34, 37 and 40. Use of the advance purchase option will cancel the next
unused option.
2.4 ADVANCE PURCHASE OPTION
If the policy and this rider are in force with all needed deductions paid, the
owner may make immediate use of the next unused option within 60 days of the
following:
a) your marriage;
b) the birth of each living child to you during your lifetime; or
c) upon your legal adoption of a child.
Use of the advance purchase option is subject to the same rules which apply to
any other option benefit plus the following:
a) The next option date will be cancelled.
b) In the event of a multiple birth, the specified amount of the new policy
may be increased to an amount equal to the amount of this rider times the
number of live children born.
c) You must send us proof of such marriage, birth or adoption.
<PAGE>
d) The increased amount under this option will not be effective unless the net
cash value on the effective date of such increase is sufficient to pay
monthly deductions for the policy plus the amount of the increase resulting
from the exercise of this option.
e) The effective date of the increase will be the monthly deduction day
coinciding with or next following the date the signed request was received
in the Home Office.
If you die without using an advance purchase option during the 60 days it is
available, a death benefit will be paid equal to the amount that would have been
paid had the owner exercised such option.
2.5 TERMINATION
All rights and benefits under this rider will terminate on the earliest of:
a) the policy anniversary on which you are age 40;
b) you die;
c) the owner requests that the policy or rider be cancelled;
d) the grace period specified in the policy ends without payment of the
monthly deductions;
e) the continuation of the policy in force under a cash value option; or
f) conversion, expiry, maturity or termination of the policy.
2.6 POLICY PROVISIONS APPLY
All provisions of the policy not in conflict with this rider will apply to this
rider. In the event of a conflict between the provisions of the policy and this
rider, the provisions of this rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
3.1 MONTHLY DEDUCTIONS
The monthly deductions for this rider as shown herein are to be deducted on the
same dates, in the same manner, and under the same conditions as the monthly
deductions for the policy to which this rider is attached. Monthly deductions
for this rider are due until this rider terminates. Any monthly deductions
deducted after termination, as provided in this rider, will not continue this
rider in force and will be refunded.
The monthly deductions for this rider are based on your attained age at the
beginning of each policy year. The table on the following page shows the monthly
deduction per $1,000 of rider amount based on your attained age at the beginning
of each policy year.
3.2 REINSTATEMENT
This rider my be reinstated along with the policy subject to the requirements of
the policy and the following:
a) You must provide proof of your good health and insurability satisfactory to
us.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
/s/ Edward M. Wiederstein
President
<PAGE>
TABLE OF GUARANTEED INSURABILITY OPTION
MONTHLY DEDUCTION RATES PER $1,000
FOR STANDARD CLASS
Attained Male Female Attained Male Female
Age Rate Rate Age Rate Rate
0 .01 .01 20 .06 .04
1 .02 .02 21 .06 .04
2 .02 .02 22 .06 .04
3 .02 .02 23 .07 .05
4 .02 .02 24 .07 .05
5 .02 .02 25 .07 .06
6 .02 .02 26 .08 .06
7 .03 .02 27 .08 .06
8 .03 .02 28 .08 .06
9 .03 .02 29 .08 .07
10 .03 .02 30 .08 .07
11 .03 .02 31 .08 .07
12 .03 .02 32 .09 .07
13 .04 .02 33 .09 .08
14 .04 .03 34 .09 .08
15 .04 .03 35 .09 .08
16 .04 .03 36 .09 .09
17 .04 .03 37 .10 .10
18 .05 .03 38 .12 .12
19 .05 .03 39 .14 .13
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
CHILDREN'S TERM LIFE INSURANCE RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 COVERED CHILD
means your child, your stepchild or your legally adopted child, who:
a) is named in the application for this rider and who is less than age 18 on
the date of such application; or
b) after the date of such application, is born to you or legally adopted by
you before such child is age 18.
1.3 EFFECTIVE DATE
means the date shown for this rider on the policy data page.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DEATH BENEFIT
We will pay the amount of this rider to the beneficiary of this rider.
a) within two months after receipt by us of due proof of a covered child's
death;
b) if a covered child dies:
i) after such covered child is 7 days old; and
ii) before such covered child's 23rd birthday;
c) if the policy and this rider are in force on the date of a covered child's
death with all needed monthly deductions paid; and
d) subject to the terms and conditions of the policy and this rider.
2.2 AMOUNT OF THIS RIDER
The amount of term insurance under this rider is shown on the policy data page.
2.3 DEATH BENEFIT CHANGES
The owner may change the amount of this rider at any time after the first policy
year subject to the following rules:
a) The change must be in writing in a form acceptable to us.
b) It must be signed by the owner.
c) The form must be sent to us and, if proof of insurability is required, such
proof must be acceptable to us.
d) We will issue a new policy data page for any change in amount of this
rider.
Any decrease will be effective on the monthly deduction day coinciding with or
next following our receipt of the request. Any reduction will be in the
following order:
a) against the most recent increase in insurance;
b) against the next most recent increases reduced in succession;
c) against the initial amount.
In no event will the current amount of this rider be more than the specified
amount of the policy. Any decrease is also subject to a minimum amount remaining
of $10,000.
Any increase will require proof of insurability. An approved increase will have
an effective date as shown on the new policy data page.
2.4 INCONTESTABLE CLAUSE
We will not contest payment of this rider for any reason other than fraud after
this rider has been in force during such covered child's lifetime for two years
from the effective date.
We will not contest payment of any increases in the amount of this rider for any
reason other than fraud after the increases have been in force during such
covered child's lifetime for two years from the effective date of each increase.
2.5 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the monthly deduction actually made would
have bought at the correct age or sex.
<PAGE>
2.6 SUICIDE
If, within one year of the effective date, a covered child dies by suicide,
whether sane or insane, our liability is limited to the monthly deductions paid
for this rider.
Any increase in death benefits resulting from an increase in the amount of this
rider will not be paid if a covered child dies from suicide, while sane or
insane, within one year of the date of such increase. Instead, we will return an
amount equal to the cost of insurance for such increase in the amount of this
rider.
2.7 TERMINATION
All rights and benefits under this rider will end when any one of the following
events occurs:
a) the owner requests that the policy or rider be cancelled or fully
converted;
b) the grace period specified in the policy ends without payment of the
monthly deductions; or
c) conversion, expiry, maturity or termination of the policy.
2.8 POLICY PROVISIONS APPLY
The cash value and policy loan provisions of the policy, if any, will not apply
to this rider. All other provisions not in conflict with this rider will apply
to this rider. In the event of a conflict between the provisions of the policy
and this rider, the provisions of this rider will prevail.
- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARY
- --------------------------------------------------------------------------------
3.1 OWNERSHIP
The owner of the policy will be the owner of this rider.
3.2 BENEFICIARY
Beneficiaries for this rider are as named in the application, unless changed by
the owner. The rider's beneficiaries may be different from the policy's
beneficiaries.
- --------------------------------------------------------------------------------
SECTION 4 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
4.1 MONTHLY DEDUCTIONS
The monthly deductions for this rider are to be paid on the same dates, in the
same manner, and under the same conditions as the monthly deductions for
the policy to which this rider is attached. Monthly deductions for this rider
are due until this rider terminates. The monthly deduction for this rider will
be $0.25 per $1,000 of coverage under this rider.
4.2 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
a) You must provide proof of good health and insurability satisfactory to us
for each covered child who would be insured under this rider upon such
reinstatement.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
- --------------------------------------------------------------------------------
SECTION 5 - CONVERSION
- --------------------------------------------------------------------------------
5.1 CONVERSION PRIVILEGE
The owner may convert coverage under this rider to a new policy on any covered
child without proof of insurability if the policy and this rider are in force
with all needed monthly deductions paid. Application for conversion must be made
during such child's conversion period and before termination of this policy and
rider.
5.2 CONVERSION PERIOD
The conversion period for each covered child expires on the earlier of:
a) such covered child's 23rd birthday; or
b) 60 days after your death.
5.3 CONVERSION REQUIREMENTS
Such conversion is subject to the following rules:
a) The owner must send us a written request, on our form.
b) The owner must pay the first premium on the new policy.
c) The policy date of the new policy will be the date of termination of the
covered child's coverage under this rider.
d) In no event will the new policy become effective, unless such covered child
is living on the policy date of the new policy.
e) The face amount of the new policy may not exceed the face amount of this
rider in effect on the date of the request.
f) The new policy must comply with our published rules in effect on the date
of issue of the new policy.
<PAGE>
g) The premium for the new policy will be our rate for such covered child's
age on the policy date of the new policy for the same premium class as this
rider.
h) The new policy will be subject to the same exceptions, exclusions and
restrictions, if any, as this rider.
i) The new policy may be any form of single-life permanent life insurance
policy then being offered by us.
j) Our consent and proof of such covered child's insurability are required to
add any other benefit riders to the new policy, including the waiver of
charges rider.
/s/ Edward M. Wiederstein
President
<PAGE>
FARM BUREAU LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997
OTHER ADULT UNIVERSAL LIFE INSURANCE RIDER
This rider is a part of the policy to which it is attached.
- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------
1.1 YOU OR YOUR
means the person whose life is insured under the policy.
1.2 COVERED ADULT
means the person whose life is insured under this rider and who is age 18 or
older.
1.3 AGE
means age at the last birthday.
1.4 ATTAINED AGE
means the covered adult's age on the effective date plus the number of policy
years since the effective date.
1.5 EFFECTIVE DATE
means the effective date of this rider shown on the policy data page.
- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------
2.1 DEATH BENEFIT
We will pay the amount of this rider to the beneficiary of this rider:
a) within two months after receipt by us of due proof of the covered adult's
death;
b) if the policy and this rider are in force on the date of the covered
adult's death with all needed monthly deductions paid; and
c) subject to the terms and conditions of the policy and this rider.
2.2 AMOUNT OF THIS RIDER
The amount of insurance under this rider is shown on the policy data page.
2.3 DEATH BENEFIT CHANGES
The owner may change the amount of this rider at any time after the first policy
year subject to the following rules:
a) The change must be in writing in a form acceptable to us.
b) It must be signed by the owner.
c) The form must be sent to us and, if proof of insurability is required, such
proof must be acceptable to us.
d) We will issue a new policy data page for any change in the amount of this
rider.
Any decrease will be effective on the monthly deduction day coinciding with or
next following our receipt of the request. Any reduction will be in the
following order:
a) against the most recent increase in insurance;
b) against the next most recent increases reduced in succession;
c) against the initial amount.
In no event will the current amount of this rider be more than the specified
amount of the policy. Any decrease is also subject to a minimum amount remaining
of $50,000.
Any increase will require proof of insurability. An approved increase will have
an effective date as shown on the new policy data page.
2.4 INCONTESTABLE CLAUSE
We will not contest payment of this rider for any reason other than fraud after
this rider has been in force during the covered adult's lifetime for two years
from the effective date of this rider.
We will not contest payment of any increases in the amount of this rider for any
reason other than fraud after the increases have been in force during the
covered adult's lifetime for two years from the effective date of each increase.
2.5 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated
<PAGE>
age or sex. In such an event, benefits will be the amount the monthly deductions
actually paid would have bought at the correct age or sex.
2.6 SUICIDE
If, within one year of the effective date, the covered adult dies by suicide,
whether sane or insane, our liability is limited to the monthly deductions paid
for this rider.
Any increase in death benefits resulting from an increase in the amount of this
rider will not be paid if a covered adult dies from suicide, while sane or
insane, within one year of the date of such increase. Instead, we will return an
amount equal to the cost of insurance for such increase in the amount of this
rider.
2.7 TERMINATION
All rights and benefits under this rider will end when any one of the following
events occurs:
a) the earlier of the policy anniversary on which you are age 115 or the
policy anniversary on which the covered adult is age 115;
b) the covered adult dies;
c) the owner requests that the policy or rider be cancelled or fully
converted;
d) the grace period specified in the policy ends without payment of the
monthly deductions; or
e) conversion, expiry, maturity or termination of the policy.
2.8 POLICY PROVISIONS APPLY
The accumulated value benefits and policy loan provisions of the policy, if any,
will not apply to this rider. All other provisions not in conflict with this
rider will apply to this rider. In the event of a conflict between the
provisions of the policy and this rider, the provisions of this rider will
prevail.
- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARY
- --------------------------------------------------------------------------------
3.1 OWNERSHIP
The owner of the policy will be the owner of this rider.
3.2 BENEFICIARY
Beneficiaries for this rider are as named in the application, unless changed by
the owner. The rider's beneficiaries may be different from the policy's
beneficiaries.
- --------------------------------------------------------------------------------
SECTION 4 - MONTHLY DEDUCTIONS AND REINSTATEMENT
- --------------------------------------------------------------------------------
4.1 MONTHLY DEDUCTIONS
The monthly deductions for this rider are to be paid on the same dates, in
the same manner, and under the same conditions as the monthly deductions for
the policy to which this rider is attached. Monthly deductions for this rider
are due until the rider terminates. The monthly deduction for this rider is
computed as the sum of a) plus b), where:
a) is the cost of insurance rate (as defined in section 4.2) multiplied by the
amount of the rider; and
b) is the monthly per $1,000 charge from the policy data page, multiplied by
the current amount or the amount of any increase in the amount of this
rider. This charge applies only during the first policy year or during the
12 months following an increase in the amount of this rider.
4.2 COST OF INSURANCE RATE
The cost of insurance rate is subject to the following rules:
a) The rate is based on the covered adult's sex, rate class and attained age.
For any increase in the specified amount, the attained age will be the
covered adult's age on the effective date of the increase.
b) The monthly rates will be determined by us based on our expectation as to
future mortality experience.
c) If we change the rates, we will change them for everyone in a rate class.
d) The monthly guaranteed rates shown in the policy are based on the 1980
Commissioner's Standard Ordinary Mortality Table, Age Last Birthday. The
monthly rate will never be more than these rates.
4.3 REINSTATEMENT
This rider may be reinstated along with the policy subject to the requirements
of the policy and the following:
<PAGE>
a) You must provide proof of good health and insurability satisfactory to us
for the covered adult who would be insured under this rider upon such
reinstatement.
b) All unpaid monthly deductions must be paid with interest. We will set the
interest rate, but it will not exceed 6% per year.
- --------------------------------------------------------------------------------
SECTION 6 - CONVERSION
- --------------------------------------------------------------------------------
6.1 CONVERSION PRIVILEGE
The owner may convert this rider to a new policy on the covered adult without
proof of insurability if the policy and this rider are in force with all needed
monthly deductions paid. Application for conversion must be made before
termination of the policy and rider and before the covered adult's 75th
birthday, or within 60 days after your death.
6.2 CONVERSION REQUIREMENTS
Such conversion is subject to the following rules:
a) The owner must send us a written request, on our form.
b) The owner must pay the first premium on the new policy.
c) The policy date of the new policy will be the date of termination of
this rider.
d) In no event will the new policy become effective, unless the covered
adult is living on the policy date of the new policy.
e) The face amount of the new policy may not exceed the face amount of
this rider in effect on the date of the request.
f) The new policy must comply with our published rules in effect on the
date of issue of the new policy.
g) The premium for the new policy will be our rate for the covered
adult's age on the policy date of the new policy for the same premium
class as this rider.
h) The new policy will be subject to the same exceptions, exclusions and
restrictions, if any, as this rider.
i) The new policy may be any form of single-life permanent life insurance
policy then being offered by us.
j) Our consent and proof of the covered adult's insurability are required
to add any other benefit riders to the new policy, including the
waiver of charges rider.
/s/ Edward M. Wiederstein
President
<PAGE>
<TABLE>
<S><C>
[LOGO] LIFE-DISABILITY
FARM BUREAU
LIFE INSURANCE COMPANY
Account No.____________________
APPLICATION FOR_____________________________________ Date of birth _______________ Insurance Age ____________
PROPOSED INSURED MONTH DAY YEAR
/ / Male / / Female State of Birth_______________Social Security No.__________Applicant's St.-Co. Code____
BILLING ADDRESS____________________________________________________________________________________________
STREET CITY-TOWN STATE ZIP
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION A COMPLETE THE APPROPRIATE SECTION FOR INSURANCE POLICIES DESIRED
I. LIFE
Policy
Number________________________________________________
(HOME OFFICE USE ONLY)
1. PLAN # AMOUNT
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
A B
Universal Life/Variable Universal Life Opt. / / / /
Yes No
Tobacco User / / / /
2. RIDERS Yes No
Spouse Rider $_______ Tobacco User / / / /
Universal Life/ AMOUNT
Variable Universal Life
F.T.R.________ C.T.R. _______ G.P.O. $__________
UNITS UNITS AMOUNT
A.D.B. $___________________ W.P. / / P.I. / /
AMOUNT
3. Is this application for an increase on or an
addition to an existing Universal Life or Yes No
Variable Universal Life policy? / / / /
Policy number____________________________
4. If Participating the Dividend Option is:
/ / Pay by Check / / Leave to Accumulate
/ / Apply to Premium / / Additional Paid-Up Ins.
/ / One Year Term (5th Opt.)
5. Premium / / Annually / / Semi-Annually / / Quarterly
Payable / / COM / / Other_________________________
6. Submitted Transfer
Premium $ of Funds $
(Do Not Include Transfer)
II. DISABILITY INCOME
Policy
Number____________________________
(HOME OFFICE USE ONLY)
1. Occ. Class ________ Basic Monthly Amt. $______________
Waiting Period__________ Benefit Period _______________
Yes No
2. Tobacco User / / / /
3. / / Series 234 FIXED
-----
Benefit Riders
WPI 541 / / LTPR 534 / / STPR 549 / / PD 552 / /
4. / / Series 236 FLEXIBLE
--------
Flexible Monthly Benefit $____________
AMOUNT
Benefit Riders
WPI 541 / / LTPR 534 / / STPR 549 / / PD 552 / /
5. / / Series 238 BOE
---
Benefit Riders
WPI 541 / / LTPR 534 / / STPR 549 / /
Complete BOE Supplement
6. What is Applicant's Annual:
Gross Earned Income? $_________________
Net Earned Income? $_________________
7. Premium / / Annually / / Semi-Annually / / Quarterly
Payable / / COM / / Other_________________________
8. Submitted Transfer
Premium $ of Funds $
(Do Not Include Transfer)
- ---------------------------------------------------------------------------------------------------------
SECTION B COMPLETE THIS SECTION FOR ALL POLICIES
1. INSURANCE IN FORCE (if none, state "None") LIFE DISABILITY INCOME
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COMPANY AMOUNT ACC. DEATH AMOUNT WAITING/BENEFIT
PERIODS
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2. Is the policy applied for replacing or likely to replace any existing plan? / / Yes / / No
If "yes" indicate the amount, company name, give termination date and complete appropriate replacement
forms.
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
432-120 (3-94)
AGENT'S CERTIFICATE Agent Credit____________________________________________________________%__________
Name (Primary) State County Agent No.
____________________________________________________________%__________
Name State County Agent No.
Was I.R. ordered / / Yes / / No
Was Exam ordered / / Yes / / No Indicate the "key" letter used for medical requirements. ________
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Will this plan If yes, have replacement / / Yes Did you give "Notice to / / Yes
replace any other? / / Yes / / No forms been submitted? / / No Applicant" form to applicant? / / No
Did you see all persons / / Yes (If no - explain)
proposed for insurance? / / No
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If proposed insured is a married female: How long married? __________________________________________________
Maiden name______________________________ Husband's name and Amount of Life Ins. in force? ___________________
______________________________________________________________________________________________________________
Estate Planning: Attach copy of your programming or give full details.
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
Business insurance: Give full reason for this insurance and nature of applicant's interest__________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
The answers to each question of this application were recorded in my presence exactly as given. I know
nothing detrimental to the risk that is not recorded in these papers. I have rechecked all answers and
calculations for correctness.
Dated at_____________________________________________________________________________________________________
City State Signature of Agent
<PAGE>
SECTION C COMPLETE THIS SECTION FOR ALL POLICIES
1. Name of Proposed Insured (Print)
_____________________________________________________________________________
2. Present Address (if different from Billing Address already listed)
_____________________________________________________________________________
3. Phone No.: Home______________________ Bus.__________________________
A.M.
Best time to reach by phone____________________ P.M.
4. Married / / Single / / Widowed / / Divorced / /
5. Height ________ ft. _________in. Weight ________ lbs.
Questions 6 through 8 refer to the Proposed Insured if age 15 or over,
otherwise to the Owner if Proposed Insured is under 15.
6. a. Occupation_________________________________________
b. Duties_____________________________________________
c. Employer___________________________________________
d. Have you any other occupation or do you contemplate
any change in occupation? Yes / / No / / (give details in
REMARKS section)
7. Business Address_______________________________________
8. Spouse's Occupation____________________________________
(if applying for coverage)
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SECTION D COMPLETE THIS SECTION IF OTHERS ARE TO BE INCLUDED
1. Names of all other persons proposed for insurance. (Include Family Members and Payor if Premium Insurance
is applied for)
DATE OF STATE AMOUNT OF
BIRTH INSURING OF LIFE INSURANCE
LAST FIRST MIDDLE SEX RELATIONSHIP MO. DAY YR. AGE BIRTH HEIGHT WEIGHT IN FORCE
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2. Was any child under age 5 listed for coverage a premature birth? Yes No
(If yes, list birth weight and give details in Section G.) / / / /
3. Are all children listed the natural or legally adopted children
of the Proposed Insured or Spouse? / / / /
4. Has each child eligible for coverage been included? / / / /
5. Is the Proposed Insured's residence the permanent residence
of all children listed? / / / /
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SECTION E OWNER AND BENEFICIARY (IF REQUIRED)
I. OWNER: (If other than Proposed Insured):
1. OWNERSHIP TO BE VESTED IN
Name Social Security No.
________________________________________________________________
________________________________________________________________
________________________________________________________________
2. OWNERS ADDRESS
________________________________________________________________
________________________________________________________________
3. CONTINGENT OWNER (if any) Social Security No.
Name_____________________________________________________________
Address__________________________________________________________
II. BENEFICIARY as to proceeds at death of the Insured:
Survivors within a class (Primary or Secondary) entitled to the
proceeds shall share equally unless otherwise specified.
NAME RELATIONSHIP
1. Primary_______________________________________________________
2. Secondary, if primary beneficiary is not living:
NAME RELATIONSHIP
______________________________________________________________
/ / Children born to or adopted by the Proposed Insured and
________________________________(including any named above).
The Beneficiary as to proceeds at death of any person other
than the Insured or Joint Insured shall be as stated in the
applicable benefit provision.
3. / / Directions for settlement attached.
- --------------------------------------------------------------------------------------------------------------
SECTION F SPECIAL REQUESTS, REMARKS AND CORRECTIONS OR ENDORSEMENTS
(Policy date, certificates for additional insurance, etc.)
I request the adjustable policy loan interest rate.
I request the Cost of Living Increase Rider if available.
I request the Automatic Premium Loan privilege if available.
ADDITIONAL COMMENTS
<PAGE>
SECTION G MEDICAL HISTORY - HAS ANY PERSON PROPOSED FOR COVERAGE EVER HAD OR BEEN TOLD THEY HAD:
1. Epilepsy, fainting spells, convulsions, nervous YES NO
or mental condition, stroke, paralysis or any dis-
order of the brain or nervous system? / / / /
2. Heart attack, heart murmur, high blood pressure,
shortness of breath, pain or pressure in the
chest, palpitation, or any disorder of the heart,
blood or blood vessels? / / / /
3. Tuberculosis, asthma, spitting of blood, or any
disorder of the lungs, bronchial tubes, throat or
respiratory system? / / / /
4. Ulcer, indigestion, colitis, chronic diarrhea,
hepatitis, gallstones, hernia, passing blood or
any disorder of the stomach, intestines, rectum,
appendix, gallbladder or liver? / / / /
5. Nephritis, sugar, albumin, pus or blood in the
urine, syphilis, kidney stone, or any disorder of
the kidneys, urinary system or female or male
organs including the prostate? / / / /
6. Diabetes, gout, or any disorder of the thyroid or
other glands? / / / /
7. Immune system disorder? / / / /
8. Rheumatic fever, arthritis, back trouble, or any
disorder of the joints, muscles or bones? / / / /
9. Any disorder of the eyes, ears or skin? / / / /
10. Cancer, tumor or lymph node enlargement? / / / /
11. Any physical deformity or defect? / / / /
12. Any injury, disease, recurrent infection,
condition or disorder not indicated above? / / / /
HAS ANY PERSON PROPOSED FOR COVERAGE:
13. Gained or lost weight in the past year? (If yes,
give pounds gained or lost and reason) / / / /
14. Used drugs for high blood pressure or presently
taking medication of any type? / / / /
(If yes, show drugs, dosage, and duration taken)
15. Been advised to have or now contemplate surgery? / / / /
16. Smoked cigarettes or used tobacco in any form
within the past 12 months? / / / /
DURING THE PAST FIVE YEARS
HAS ANY PERSON PROPOSED FOR COVERAGE:
17. Been examined or had a physical check-up? / / / /
18. Had an x-ray, electrocardiogram, blood studies,
or any other laboratory test or study? / / / /
19. Give details to "yes" answers to questions 17 and 18 regarding check-ups, electrocardiograms, x-rays,
blood studies, or other tests.
- --------------------------------------------------------------------------------------------------------------
QUES. WHAT TEST NAME AND ADDRESS OF
NO. NAME WAS DONE DATE REASON FOR TEST WHAT WAS FOUND DOCTORS AND HOSPITALS
- --------------------------------------------------------------------------------------------------------------
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INDICATE QUESTION # -- IDENTIFY PERSON
Circle specific condition, give date and severity of symptoms, type of surgery,
remaining effects, names & addresses of physicians & hospitals.
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CONDITIONAL RECEIPT -- CONTINUED
The DATE OF INSURABILITY is defined as the later of (1) the date on which all parts of this application
and any supplements hereto are completed on all persons proposed for insurance, or (2) the date on which all
medical examinations and procedures which may be required in connection with this application, including, when
required by the company, a second physical examination, electrocardiogram, urine specimen or chest x-ray, have
been completed, or (3) if the person proposed for insurance is a child, the date he or she attains the age of
7 days.
The total of all proceeds payable by the Company in connection with the interim insurance provided by
this receipt, if any, shall be equal to the face amount of the insurance applied for subject to the following
limitations and exceptions:
(1) If any person proposed for insurance is insurable on the DATE OF INSURABILITY, but only at a rate
which is higher than the rate applied for, the total proceeds which may be payable shall not exceed $50,000.
(2) In no event shall the total proceeds which may be payable exceed $250,000.
The payment for which this receipt is given will be applied to the premium due on any policy issued as a
result of or in connection with the application. If no such policy is issued, the amount of the payment will
be returned to the person from whom it was received.
No Agent or employee of the Farm Bureau Life Insurance Company has any power or authority to change or
modify any of the provisions of this Conditional Receipt.
DATED AT____________________________________ _________________ _______________________________
CITY STATE DATE SOLICITING AGENT
NOTICE TO APPLICANT
INFORMATION REGARDING YOUR INSURABILITY WILL BE TREATED AS CONFIDENTIAL. FARM BUREAU LIFE INSURANCE COMPANY
OR ITS REINSURERS MAY, HOWEVER, MAKE A BRIEF REPORT THEREON TO THE MEDICAL INFORMATION BUREAU, A NON-PROFIT
MEMBERSHIP ORGANIZATION OF LIFE INSURANCE COMPANIES, WHICH OPERATES AN INFORMATION EXCHANGE ON BEHALF OF ITS
MEMBERS. IF YOU APPLY TO ANOTHER MEDICAL INFORMATION BUREAU MEMBER COMPANY FOR LIFE OR HEALTH INSURANCE
COVERAGE, OR A CLAIM FOR BENEFITS IS SUBMITTED TO SUCH A COMPANY, THE MEDICAL INFORMATION BUREAU, UPON
REQUEST, WILL SUPPLY SUCH COMPANY WITH THE INFORMATION IN ITS FILE.
UPON RECEIPT OF A REQUEST FROM YOU, THE MEDICAL INFORMATION BUREAU WILL ARRANGE DISCLOSURE OF ANY INFORMATION
IT MAY HAVE IN YOUR FILE. (MEDICAL INFORMATION WILL BE DISCLOSED ONLY TO YOUR ATTENDING PHYSICIAN.) IF YOU
QUESTION THE ACCURACY OF INFORMATION IN THE MEDICAL INFORMATION BUREAU'S FILE, YOU MAY CONTACT THE MEDICAL
INFORMATION BUREAU AND SEEK A CORRECTION IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE FEDERAL FAIR
CREDIT REPORTING ACT. THE ADDRESS OF THE MEDICAL INFORMATION BUREAU'S INFORMATION OFFICE IS POST OFFICE BOX
105, ESSEX STATION, BOSTON, MASSACHUSETTS 02112, TELEPHONE NUMBER (617) 426-3660.
FARM BUREAU LIFE INSURANCE COMPANY OR ITS REINSURERS MAY ALSO RELEASE INFORMATION IN ITS FILE TO OTHER LIFE
INSURANCE COMPANIES TO WHOM YOU MAY APPLY FOR LIFE OR HEALTH INSURANCE, OR TO WHOM A CLAIM FOR BENEFITS MAY BE
SUBMITTED. (SEE NOTICE TO APPLICANT -- ON REVERSE SIDE.)
<PAGE>
SECTION H GENERAL QUESTIONS -- HAS ANY PERSON PROPOSED FOR COVERAGE:
YES NO
1. Been treated for alcoholism or any drug habit;
used or taken narcotics, marijuana, LSD,
amphetamines or barbiturates on a regular basis? / / / /
2. Engaged in, or intend to engage in hazardous
sports or travel outside the U.S. and Canada? (If
yes for Hazardous Sports, complete Supplement
#432-87) / / / /
3. Made any aerial flights in the past two years or
contemplate such flights in the future, other
than as a civilian passenger? / / / /
(If yes, complete Supplement #432-87)
4. Volunteered for military service, been alerted,
or ordered to report for active duty? / / / /
5. Been rejected for or received a Medical Discharge
or Disability Benefits from Military Service? / / / /
6. A pending application for or reinstatement of
insurance in this or any other Company? / / / /
7. Ever had an application for insurance or
reinstatement declined, postponed, rated
up or limited? / / / /
8. Had any cases of stroke, heart attack, cancer,
diabetes, insanity, suicide, tuberculosis or
inheritable disorders in their family? / / / /
9. Applied for a pension, disability or medical
expense payments from any source? / / / /
10. Had a moving traffic violation in the past 2
years? Give the specific details of each violation. / / / /
INDICATE QUESTION # -- IDENTIFY PERSON
- ----------------------------------------------------------------------------------
GIVE DETAILS
- --------------------------------------------------------------------------------------------------------------
REPRESENTATIONS, AUTHORIZATION AND ACKNOWLEDGEMENT STATEMENT
I represent that the statements and answers in all parts of this application and supplements thereto are
true and complete to the best of my knowledge and belief. It is agreed that: (1) All such statements and
answers shall be the basis of any insurance issued; (2) Except as provided in the conditional receipt attached
hereto and unless it is delivered to the applicant and the premium payment therein described is made, no
insurance shall take effect unless a policy has been issued by the Company, physically received and accepted
by the applicant and the entire first premium paid while, to the best of his knowledge, there has been no
change, since the date of this application, in the health and insurability of all persons proposed for
coverage; (3) No agent or medical examiner is authorized to pass on acceptability for insurance or to make,
modify or discharge any contract of insurance or waive any of the Company's rights or requirements; (4) The
right to change any beneficiary is reserved unless otherwise requested; (5) All changes on the application
must be subject to written ratification by the proposed insured or owner.
STATEMENT regarding payment made with application: I have paid $____________ with this application for / /
Life / / Disability Income and I accept the terms of the conditional receipt detached from this application.
I hereby authorize any licensed physician, medical practitioner, hospital, clinic or other medical or
medically related facility, insurance company, the Medical Information Bureau, or other organization,
institution or person, that has any records or knowledge of me or my health or the health of my dependent, to
give to the Farm Bureau Life Insurance Company or its reinsurers any such information. This authorization
shall remain valid for two years.
I also acknowledge receipt of the NOTICE TO APPLICANT relating to information obtained by inspecting companies
and Medical Information Bureau. A photographic copy of this authorization and acknowledgement shall be as
valid as the original.
DATED AT_____________________________________ DATE SIGNED_________________________________________________
CITY AND STATE
___________________________________________________ _____________________________________________________
SIGNATURE OF WITNESS SIGNATURE OF PROPOSED INSURED
____________________________________________________________________ _____________________________________
SIGNATURE OF APPLICANT OWNER IF OTHER THAN PROPOSED INSURED SIGNATURE OF SPOUSE OR PAYOR (IF
PROPOSED FOR INSURANCE) OR PARENT
IF INSURED IS A CHILD UNDER AGE 15
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CONDITIONAL RECEIPT
Received from _____________________________this____________day of_______________________, 19_____,
the amount of $________________(this amount must be a minimum of one month's premium for each policy applied
for) in connection with an application for / / Life / / Disability Income insurance on which
_______________________________ is the Proposed Insured. This receipt shall be void and no further action will
be taken to process this application if any check or draft for which this receipt is given is not paid when
presented for payment.
IMPORTANT INFORMATION -- PLEASE READ CAREFULLY
Except as otherwise expressly provided below, no insurance is provided by this receipt or in connection
with or as a result of having completed this application, and no insurance will be provided by this receipt or
in connection with or as a result of having completed this application unless the person or persons proposed
for insurance in this application is insurable in accordance with the Company's rules and standards of
insurability with respect to the policy or policies applied for and the level of insurance applied for.
If the person or persons proposed for insurance in this application is insurable as described above, this
receipt provides interim insurance coverage from the DATE OF INSURABILITY, as defined below, until the
earliest of the following dates:
(1) the date the Company mails notice that the application is not accepted;
(2) the date the Company mails to the applicant or the proposed insured a policy or policies other than
the policy or policies applied for;
(3) the date the policy or policies applied for is issued and becomes effective; or
(4) the date 60 days after the DATE OF INSURABILITY.
No insurance is provided by this receipt after the earliest of the four dates listed above.
The terms and conditions of any interim insurance coverage which may be provided by this receipt shall be
the same as those contained in the policy or policies applied for, but shall not include the terms or
provisions of any Accidental Death Benefit rider or any other insurance rider or riders applied for.
(CONTINUED ON REVERSE SIDE OF THIS RECEIPT)
NOTICE TO APPLICANT -- (SEE REVERSE SIDE OF THIS NOTICE)
Federal law requires that notice of investigation be given to persons applying for insurance.
In making this application for insurance to Farm Bureau Life Insurance Company or its reinsurers, it is
understood that an investigative consumer report may be prepared whereby information is obtained through
personal interviews with your neighbors, friends, or others with whom you are acquainted. This inquiry
includes information as to your character, general reputation, personal characteristics and mode of living.
You have the right to make a written request within a reasonable period of time to receive additional,
detailed information about the nature and scope of this investigation. (See Notice to Applicant --
on reverse side.)
</TABLE>
<PAGE>
Exhibit 1.A. 6(a)
Certificate of Incorporation of the Company
STATE OF IOWA
OFFICE OF SECRETARY OF STATE
This is to Certify that the IOWA LIFE INSURANCE COMPANY of Des Moines, Iowa
has filed in this office Articles of Incorporation, and paid the fees as by law
provided.
Therefore, this Certificate is issued, thereby authorizing it to transact
business as a corporation, under and Subject to the laws of the State of Iowa,
PERPETUALLY from October 30th, 1944.
In testimony whereof, I have hereunto set my hand and caused to be affixed
the seal of the office.
Done at Des Moines, the Capital, this Thirtieth day of October, 1944.
/s/ Wayne M. Ropes
Wayne M. Ropes
Secretary of State
by [left blank] Deputy Secretary of State
Expires PERPETUAL
<PAGE>
ARTICLES OF INCORPORATION
OF
IOWA LIFE INSURANCE COMPANY
We, the undersigned, for the purpose of transacting the business
hereinafter set forth, do hereby associate ourselves together and under the
following Articles of Incorporation unite ourselves into a body corporate under
the provisions of Chapter 384 and Chapter 398 of the Code of Iowa, 1939, and all
acts amendatory thereto, and assume all powers and obligations granted bodies
corporate under said chapters, and do hereby adopt the following Articles of
Incorporation, to-wit:
ARTICLE I.
NAME
The name of this Corporation shall be IOWA LIFE INSURANCE COMPANY.
ARTICLE II.
PRINCIPAL PLACE OF BUSINESS
The principal place of business of this Corporation shall be in the city of
Des Moines, County of Polk, State of Iowa. It may establish and maintain branch
offices, depositories and agencies elsewhere.
ARTICLE III.
POWERS, OBJECTS AND PURPOSES
The purposes and objects for which this Corporation is formed, and the
powers which it shall have and exercise, are:
1. To make insurance on the lives of persons and every insurance
appertaining thereto or connected therewith, and granting, purchasing or
disposing of annuities, and to make insurance against bodily injury, disablement
or death by accident, and against disablement resulting from sickness or old age
and every insurance appertaining thereto, on a level premium plan and as a legal
reserve company with all the rights and privileges granted or permitted by
Chapter 384 and Chapter 398 of the Code of Iowa, 1939, and all acts amendatory
thereto.
2. To assume and exercise all the rights, powers and privileges that are
now or may hereafter be conferred by law upon similar corporations, and to have
the right of perpetual succession, sue and be sued, make contracts, acquire,
own, and transfer property, real and personal, and have a common seal.
<PAGE>
3. To issue all forms of insurance contracts pertaining to or connected
with the business of life insurance as it now or may hereafter be carried on in
this state or elsewhere.
4. To cede to and reinsure its excess risks wherever they may be in other
companies or associations, and to accept and reinsure the excess risks of other
companies or associations ceded to it.
5. To buy, sell, invest and reinvest its funds in any of the securities or
property in which a life insurance company may now or hereafter lawfully invest.
6. To have and exercise all of the rights and powers necessary and
incident to carrying into effect the purposes for which this Corporation is
formed.
7. The objects, powers and purposes specified above shall, except where
otherwise expressed, be in no way limited or restricted by inference to or
inference from the terms of any clause or paragraph of these Articles of
Incorporation, and the foregoing shall be construed both as powers and objects
and the enumeration thereof shall not be held to limit or restrict in any manner
the general powers conferred upon this Corporation by the laws of the State of
Iowa, or any acts amendatory thereto, all of which are hereby expressly claimed.
ARTICLE IV.
CAPITAL STOCK
The authorized capital stock of this Corporation is Five Hundred Thousand
($500,000.00) Dollars, divided into Two Hundred Six Thousand (206,000) shares,
of which amount Two Hundred Thousand (200,000) shares of the par value of One
($1.00) Dollar per share, amounting to Two Hundred Thousand ($200,000.00)
Dollars is "Common Stock," and Six Thousand (6,000) shares of the par value of
Fifty ($50.00) Dollars per share, amounting to Three Hundred Thousand
($300,000.00) Dollars, is 6% cumulative "First Preferred Stock."
The nature and definitive extent and preferences and privileges granted
each class is, as follows:
1. STOCK ISSUE CONDITIONS. No stock of this Corporation shall be issued
until this Corporation has received payment in full therefor the selling price
as fixed by the board of directors, which shall be not less than par, in cash or
property, providing, however, that when it is issued for anything other than
money it must be done in accordance with the statutes in force at the time said
stock shall be issued.
2. COMMON STOCK. The Common Stock shall be issued to and owned only by
the Iowa Farm Bureau Foundation, its assigns, or a member in good standing of
the
<PAGE>
Iowa Farm Bureau Federation as defined in the By-Laws of this Corporation, and
no one else shall be eligible to own the same.
The Common stockholders shall be entitled to receive, when and as
declared by the board of directors, subject to any limitations in these
Articles contained, dividends from the net earnings of this Corporation on
such equitable basis as the board of directors shall determine, and shall be
payable annually when and as determined by the board of directors, provided,
however, that no dividends shall be declared or paid on the Common Stock
issued to and owned by the Iowa Farm Bureau Federation or its assigns in
excess of six (6%) per cent per annum on the par value thereof. No dividends
shall be declared or paid on the Common Stock until the board of directors
has first declared dividends on the First Preferred Stock and paid or set
apart the same to or for the account of said First Preferred stockholders.
Dividends to the Common stockholders shall be non-cumulative. No person
shall be entitled to dividends unless he is a Common stockholder of record at
the time of the declaration of the same.
The holders of Common Stock shall be entitled to one vote for each and
every share of stock issued and owned at all meetings of the stockholders, and
shall not have the privilege of voting by proxy but a corporate stockholder
shall have the privilege of voting by an authorized representative or
representatives, and no one other than the Iowa Farm Bureau Federation shall be
entitled to own more than one share.
The Common Stock of any holder thereof, other than the Iowa Farm Bureau
Federation or its assigns, may be called, redeemed or retired at the election of
the board of directors at such time or times as it shall determine, and shall be
called, redeemed or retired by the board of directors whenever the holder
thereof shall cease to be eligible to own the same by ceasing to be a member in
good standing of a County Farm Bureau and the Iowa Farm Bureau Federation, as
herein provided and as defined in the By-Laws, or any amendment thereto, upon
the payment of the purchase price paid per share with accrued dividends, if any;
provided, however, that not less than thirty (30) days' prior notice of such
intention to retire or redeem such stock shall be given the holder of such stock
called for retirement or redemption by written notice postpaid to the last known
address of each stockholder as shown by the books of this Corporation.
From and after the date fixed for such redemption all dividends on the
Common Stock thereby called for redemption shall, unless the Corporation shall
default in the payment of the redemption price, cease and all rights of the
holders thereof as stockholders of the Corporation, except the right to receive
the redemption price and accrued dividends, if any, shall cease and terminate.
The eligibility of a person, other than the Iowa Farm Bureau Federation or
its assigns, to own and hold Common Stock in this Corporation shall be
determined by the records of the Iowa Farm Bureau Federation of which the owner
thereof or the one under which he is eligible to own the same is or was a member
at the time of issue of said stock, and said books and records shall be
conclusive of his or their said eligibility.
<PAGE>
In the event of the dissolution and winding up of the business of this
Corporation, whether voluntary or involuntary, or in the event of the sale of
all of the assets of the Corporation and the distribution of the proceeds
thereof, the Common stockholder shall receive nothing until the First Preferred
Stock has been paid in full the purchase price paid per share to this
Corporation, together with all unpaid accrued dividends on such shares of stock.
3. FIRST PREFERRED STOCK. The First Preferred Stock shall be issued to
and owned only by members in good standing of a County Farm Bureau of this state
and of the Iowa Farm Bureau Federation and shall have no voting privileges, and
the holder of First Preferred Stock shall be entitled to receive, when and as
declared by the board of directors, dividends from the net earnings of the
Corporation at the rate of six (6%) per cent per annum, payable annually, when
and as determined by the board of directors. Such dividends shall be payable
before any dividends shall be paid on or set apart for the Common stockholders,
and such dividends on the First Preferred Stock shall be cumulative so that if
at any time at the dividend period dividends at the rate of six (6%) per annum
should not have been paid upon or set apart for the First Preferred Stock, the
deficiency shall be fully paid or set apart without interest before any
dividends shall be paid or declared upon the Common Stock.
The First Preferred Stock may be redeemed or retired in whole or in part,
at the election of the board of directors at such time or times as it shall
determine at the purchase price paid per share with accrued dividends, if any,
provided, however, that not less than thirty (30) days' prior notice of such
intention to retire or redeem such stock shall be given the holders of such
stock so called for retirement or redemption by written notice postpaid to the
last known address of such stockholders as shown by the books of the
Corporation.
No First Preferred stockholders shall have any preferential right
respecting the retirement or redemption of the shares of First Preferred Stock
owned by him, but in the event less than all of the outstanding shares of First
Preferred Stock are to be redeemed such redemption may be made by lot or
pro-rata in such manner as may be determined by the board of directors of this
Corporation.
From and after the date fixed for such redemption all dividends on the
First Preferred Stock thereby called for redemption shall, unless the
Corporation shall default in the payment of the redemption price, cease and all
rights of the holders thereof as stockholders of the Corporation, except the
right to receive the redemption price and accrued dividends, if any, shall cease
and terminate.
In the event of the dissolution and winding up of the business of the
Corporation, whether voluntary or involuntary, or in the event of the sale of
all of the assets of the Corporation and the distribution of the proceeds
thereof, the holder of the First Preferred Stock shall be entitled to be paid in
full the purchase price paid per share, together with all unpaid dividends
accrued on such shares, before any sum whatsoever shall be paid
<PAGE>
in liquidation on account of the Common Stock, and thereafter the Common Stock
shall be entitled to the remaining assets.
4. LIMITATION ON STOCKHOLDERS' DIVIDENDS. No cash dividend on the capital
stock of the Corporation in excess of the amount required to pay dividends at
the rate of six (6%) per annum on the par value on the issued and outstanding
First Preferred Stock, shall be paid in any calendar year prior to January 1,
1946, unless the capital of the Corporation, its surplus and contingency
reserves shall aggregate ten (10%) per cent or more of all other liabilities of
the Corporation, and no cash dividend in excess of the amount required to pay
dividends at the rate of six (6%) per cent per annum on the par value of the
issued and outstanding First Preferred Stock shall be paid in any calendar year
between January 1, 1946 and January 1, 1951, unless the capital, surplus and
contingency reserves shall equal or exceed eight and one-half (8 1/2%) per cent
of all other liabilities; nor shall any cash dividends in excess of the amount
required to pay dividends at the rate of six (6%) per cent per annum on the par
value of the issued and outstanding First Preferred Stock be paid on the capital
stock in any calendar year after January 1, 1951, unless the capital, surplus
and contingency reserves shall equal or exceed seven (7%) per cent of all other
liabilities.
No cash dividend in any one calendar year in excess of the amount required
to pay dividends at the rate of six (6%) per cent per annum, on the issued and
outstanding First Preferred Stock, shall be paid on the capital stock unless the
policyholders dividend scale of the Corporation in effect for said calendar year
results in an average net cost equal to or less than the average net cost to the
ten legal reserve companies operating in the United States each having more than
$250,000,000 insurance in force and showing the lowest average net cost.
For the purpose of this comparison the average net cost shall be computed
on the Whole Life Plan for ages at issue 25, 35, and 45, and for a policy issued
in the amount of One Thousand ($1,000) Dollars. Cost for above ages shall be
determined for each year of issue since organization of the Corporation, except
that the cost on policies in force for twenty (20) years or more shall not be
used. The actual dividends payable for the year in question shall be used and
not a net cost based on dividend history. Companies doing primarily a mail
order business or operating through lodges or as fraternal organizations, as
well as United States Government Insurance, shall not be included in the
comparison.
5. REGISTERED OWNER. This Corporation shall be entitled to treat the
person or corporation in whose name any share of stock is registered as the
owner thereof for all purposes, and shall not be bound to recognize any
equitable right or claim to any interest in such share on the part of any other
person or corporation, whether or not the corporation shall have notice thereof,
save as expressly provided by the laws of the State of Iowa or as may hereafter
be provided.
6. TRANSFER OF STOCK. The shares of First Preferred Stock in this
Corporation shall be transferable only to a member in good standing of a County
Farm Bureau of
<PAGE>
this state and of the Iowa Farm Bureau Federation, and the shares of Common
Stock shall not be transferable in any manner except the shares owned by the
Iowa Farm Bureau Federation, and no transfer except as herein provided shall be
of any validity or cognizable by the Corporation, and no transfer of any stock
of this Corporation shall be of any validity until duly entered on the books of
the Corporation.
7. INCREASE OR DECREASE OF STOCK. From time to time any class of stock
may be increased or decreased as may be determined by vote of the stockholders
present at any annual or special meeting possessing voting rights to the extent
and in the manner provided by the statutes of the State of Iowa and these
Articles of Incorporation, and in the event it is determined to increase the
amount of First Preferred Stock it shall not be necessary to secure the consent
of the holders of the First Preferred Stock; provided, however, that no other
class of stock shall be created having preference over the First Preferred Stock
as now authorized or as may hereafter be authorized in respect of payment of
dividends out of the earnings or upon liquidation or dissolution unless the
amendment authorizing such change shall receive the affirmative vote of the
holders of not less than two-thirds of the outstanding First Preferred Stock
voting as a class.
8. All persons and/or corporations or associations who shall acquire stock
in this Corporation shall acquire the same subject to the provisions of these
Articles of Incorporation, and shall, by their subscription therefor and
acceptance thereof, be bound by the said Articles of Incorporation, and any
amendments thereto, and the By-Laws duly adopted thereunder.
ARTICLE V.
OFFICERS AND DIRECTORS
1. The business and affairs of this Corporation shall be managed by a
board of twelve (12) directors who shall be members in good standing of the Iowa
Farm Bureau Federation, and shall be elected by the stockholders of this
Corporation as hereinafter provided, and said directors shall hold office until
their successors are elected and qualified.
2. The term of office of the directors of this Corporation shall be two
(2) years and until their successors are elected and qualified.
3. At the first annual meeting of the stockholders of this Corporation to
be held in 1946, as provided in these Articles, seven (7) directors shall be
elected for a term which shall expire at the next annual meeting of the
stockholders and until their successors are elected and qualified; five (5)
directors for a term of two years, and then at each annual meeting thereafter
there shall be elected for a term of two years each as many directors as there
are directors whose terms expire.
4. Until the first annual meeting of the stockholders of this Corporation
to be held in 1946, the following persons shall constitute the directors of this
Corporation.
<PAGE>
Name Address
---- -------
Allan E. Kline Vinton, Iowa
E. Howard Hill Minburn, Iowa
Mrs. Raymond Sayre Ackworth, Iowa
A. Fletcher Aitchison Cascade, Iowa
J. S. Van Wort Hampton, Iowa
H. J. Shoemaker Hawarden, Iowa
J. Otto Gidel Lake City, Iowa
Russell Hayes Prairie City, Iowa
W. C. Molison Grinnell, Iowa
Lee Stephenson Eldon, Iowa
W. G. Lodwick Sedan, Iowa
F. A. Klopping Underwood, Iowa
5. Until the first annual meeting of the stockholders of this Corporation
and until their successors are elected and qualified the officers of this
Corporation shall be:
Office Name Address
------ ---- -------
President: Allan B. Kline Vinton, Iowa
Vice-President: E. Howard Hill Minburn, Iowa
Secretary: Donald B. Groves Des Moines, Iowa
Treasurer: Donald B. Groves Des Moines, Iowa
6. The officers of this Corporation shall be elected by the board of
directors immediately following the first annual meeting of the stockholders,
and thereafter immediately following each annual meeting, and shall hold office
for the term of one year or until their successors are elected and qualified.
7. The officers of this Corporation shall be a president, vice-president,
secretary, treasurer, and such other officers as the board of directors may from
time to time create, and the offices of secretary and treasurer may be held by
the same person.
8. The board of directors may fill all vacancies occurring in its
membership, and a director elected to fill a vacancy shall serve for the
unexpired term of the director whose vacancy he was elected to fill and/ or
until his successor is elected and qualified.
9. A majority of the board of directors shall constitute a quorum for the
transaction of all business of the Corporation.
10. The board of directors shall have full authority to adopt and enact
regulations and rules and by-laws for the proper government of the Corporation,
classify risks, promulgate rates therefor, adopt policy forms and riders,
appoint agents, officers,
<PAGE>
employees or others, require bonds for such officers and employees as they may
determine, issue such information as the welfare of the Corporation may require,
designate depositories, hold meetings at such times and places as the business
may require, and shall make a full and complete report of its doings at each
annual meeting of the Corporation.
11. The board of directors may appoint an executive committee, consisting
of five (5) members, and designate a chairman thereof; the members thereof shall
hold office for the term of one year or until their successors are appointed and
qualified; said term, however, being subject to the will and pleasure of the
board of directors. The executive committee shall have such powers and possess
such authority as the board of directors shall, from time to time, by by-law or
resolution vest in it.
12. The board of directors shall have power to appoint such other
committees as it may deem necessary for the efficient conduct of the business,
and every such committee so created by the board shall report its doings to the
meeting of the board of directors next ensuing.
13. All conveyances of real property, releases of mortgages, liens and
judgments, and all other instruments affecting real property, made by the
Corporation or required by law to be made a matter of record, shall be executed
by the president or vice-president and the secretary or assistant secretary and
attested to by the corporate seal.
ARTICLE VI.
MEETINGS OF STOCKHOLDERS
1. REGULAR ANNUAL MEETING. The first regular annual meeting of the
stockholders of this Corporation shall be held in the year 1946 and all
subsequent annual meetings of the stockholders of this Corporation shall be held
annually, at such time and place and upon such notice as the board of directors
shall, from time to time, fix and determine, provided such notice is not less
than ten days and such meeting shall be held at Des Moines, Iowa.
2. SPECIAL MEETINGS. Special Meetings of the stockholders may be called
at any time by the president upon the giving of five (5) days' notice in writing
by mail to the stockholders as shown by the records of this Corporation, and
such meetings shall be called at any time upon the request of stockholders
representing twenty-five (25%) per cent of the stock issued.
In case the president neglects or refuses to call a meeting at the request
of the stockholders, as herein provided, the stockholders may join in a call of
the stockholders at a special meeting upon giving to each stockholder of record
having voting privileges the same notice and in the same manner as hereinbefore
provided in this section.
<PAGE>
3. VOTING PRIVILEGE. At all meetings of the stockholders each Common
stockholder shall be entitled to one vote for each share of stock owned and held
by him or it.
ARTICLE VII.
CORPORATE PERIOD
This Corporation shall commence business under these Articles of
Incorporation as soon as it secures certificate of incorporation from the
Secretary of State of the State of Iowa, and certificate authorizing it to
transact an insurance business from the Commissioner of Insurance of the State
of Iowa, as by law provided, and shall have perpetual existence unless changed
as by law and these Articles of Incorporation required.
ARTICLE VIII.
PRIVATE PROPERTY EXEMPT
The private property of the stockholders of this Corporation shall be
exempt from the debts of the Corporation and from all liability therefor.
ARTICLE IX.
This Corporation shall have a corporate seal and shall have inscribed
thereon "Iowa Life Insurance Company, Des Moines, Iowa, Corporate Seal, " which
words may be changed at any time by resolution of the board of directors.
ARTICLE X.
BY-LAWS
The Board of Directors may at its pleasure make and adopt By-Laws which do
not conflict with the law or these Articles of Incorporation or By-Laws adopted
or ratified by the stockholders and alter or amend the same.
ARTICLE XI.
AMENDMENTS
These Articles of Incorporation may be amended at any annual meeting of the
stockholders or at any special meeting called for that purpose by a two-thirds
vote of the stockholders having voting privileges present at such meeting,
provided that no amendment shall be made or enacted unless the proposed
amendment or alteration has been filed in writing with the president and with
the secretary of this Corporation not less than sixty (60) days before the
meeting at which the same is offered. Notice of
<PAGE>
special meeting and the proposed amendment or alteration to these Articles of
Incorporation coming before such special meeting shall be given the stockholders
in the same manner and for the same period of time as is required for special
meetings of stockholders.
<PAGE>
STATE OF IOWA
[GRAPHIC]
OFFICE OF
THE SECRETARY OF STATE
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
I, MELVIN D. LYNHORST, SECRETARY OF STATE OF THE STATE OF IOWA, DO HEREBY
CERTIFY THAT THE FOLLOWING AND HERETO ATTACHED IS A TRUE PHOTOSTATIC COPY OF
Amendment to Articles of Incorporation for IOWA LIFE INSURANCE COMPANY, of
- -------------------------------------------------------------------------------
Des Moines, Iowa, changing the corporate title to FARM BUREAU LIFE INSURANCE
- -------------------------------------------------------------------------------
COMPANY.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AS THE SAME APPEAR OF RECORD IN THIS OFFICE.
-----------------------------------
IN TESTIMONY WHEREOF, I HAVE HEREUNTO
SET MY HAND AND AFFIXED THE OFFICIAL SEAL
OF THE SECRETARY OF STATE AT THE CAPITOL, IN
DES MOINES, THIS 4th DAY OF August,
A.D. NINETEEN HUNDRED AND FIFTY-EIGHT.
/s/ Melvin D. Lynhorst
--------------------------------------------
SECRETARY OF STATE
--------------------------------------------
DEPUTY
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION,
AS AMENDED, OF
IOWA LIFE INSURANCE COMPANY
KNOW ALL MEN BY THESE PRESENTS:
That at the annual meeting of the stockholders of the Iowa Life Insurance
Company, held at the Fort Des Moines Hotel, Des Moines, Iowa, on the 1st day
of August, 1958, pursuant to notice in writing, stating the time, place and
purpose of said meeting mailed in accordance with the provisions of the Articles
of Incorporation and the laws of the State of Iowa, the following Amendment to
the Articles of Incorporation, a copy of which amendment was duly filed with the
president and secretary of this corporation more than sixty (60) days prior to
August 1, 1958, was adopted by a UNANIMOUS vote of all of the stockholders
present in person or represented by an authorized representative at said
meeting:
Amend Article I, entitled "Name," by striking all of said article, and
substituting in lieu thereof the following:
"The name of this corporation shall be 'FARM BUREAU LIFE INSURANCE
COMPANY'."
Amend Article IV, entitled "Capital Stock," by striking all of said
article, and substituting in lieu thereof the following:
"The authorized capital stock of this corporation is Five Hundred Thousand
($500,000.00) Dollars, divided into ten thousand (10,000) shares, of which
amount four thousand (4,000) shares of the par value of Fifty ($50.00)
Dollars per share, amounting to Two Hundred Thousand ($200,000.00) Dollars,
is Common Stock, and six thousand (6,000) shares of the par value of Fifty
($50.00) Dollars per share, amounting to Three Hundred Thousand
($300,000.00) Dollars, is six (6%) per cent cumulative First Preferred
Stock.
The nature and definite extent and preferences and privileges granted each
class is, as follows:
Section 1. STOCK ISSUE CONDITIONS. No stock of this corporation shall be
issued until this corporation has received payment in full therefor the
selling price as fixed by the board of directors, which shall be not less
than par, in cash or property, providing, however, that when it is issued
for anything other than money it must be done in accordance with the
statutes in force at the time said stock shall be issued.
Sec. 2. COMMON STOCK. The Common Stock shall have a par value of Fifty
($50.00) Dollars per share, and the holders of record thereof shall be
entitled to one vote per share at all
<PAGE>
-2-
meetings of the stockholders. The Common Stock shall be issued to and
owned only by the Iowa Farm Bureau Federation and shall be issued from time
to time upon application by it and upon tender and payment of the purchase
price as fixed by the board of directors, which shall be not less than par.
The holders of record of the Common Stock shall be entitled to vote at all
meetings of the stockholders by a duly authorized representative or
representatives.
If, after providing for the payment of full dividends for any fiscal year
on the First Preferred Stock and for any balance that remains due on the
cumulative dividends of such First Preferred Stock, there shall remain any
surplus net earnings or profits not in the opinion of the board of
directors required for the operation of the business of this corporation or
for the payment of its liabilities, it shall be applicable to dividends
upon the Common Stock for such fiscal year when and as from time to time
the same shall be declared by the board of directors, which dividend shall
not be cumulative but shall only be paid as surplus net earnings or profits
are available and dividends are declared. Such dividends shall be ratable
in proportion to the number of shares of Common Stock issued and
outstanding until dividends have been declared and set apart for the Common
Stock to the extent of, but not in excess of, six (6%) per cent for any one
fiscal year.
No common stockholder shall be entitled to dividends unless it is a
stockholder of record at the time of the declaration of the same.
The Common Stock or any part thereof may be called, redeemed or retired at
the option and election of the board of directors at such time or times and
in such manner as it shall determine upon the payment of the purchase price
paid this corporation for each share, with accrued dividends, if any,
provided, however, that not less than thirty (30) days' prior notice of
such intention to retire or redeem such stock shall be given the holder of
such stock called for retirement or redemption in writing, post-paid, to
the last known address of such stockholder as shown by the books of this
corporation.
From and after the date fixed for such retirement or redemption all
dividends on the Common Stock thereby called for retirement or redemption
shall, unless this corporation shall default in the payment of the
redemption price, cease, and all rights of the holders thereof as Common
stockholders of this corporation, except the right to receive the
redemption price and accrued dividends, if any, shall cease and terminate.
In the event of the dissolution or winding up of the business and affairs
of this corporation, whether voluntary or involuntary, or in the event of
the sale of all of the assets of this corporation and the distribution of
the proceeds thereof, the Common stockholders of record shall, after the
First Preferred stockholders have received distribution and payment of the
full purchase price paid per share to this corporation, together with all
unpaid accrued dividends, for their shares,
<PAGE>
-3-
as provided in Section 4 of this Article, be entitled to receive
distribution of all of the remaining assets of this corporation in
proportion to the purchase price paid per share to this corporation by said
Common stockholder.
Sec. 3. EXCHANGE OF ISSUED AND OUTSTANDING COMMON STOCK. Within a
reasonable time after the adoption of this amended and substituted Article
IV of the Articles of Incorporation of this corporation, the board of
directors shall call the present issued and outstanding Common Stock of
this corporation as permitted in the Articles of Incorporation, as amended,
and give the thirty (30) days' notice to the holders of record of the
Common Stock owned by the Iowa Farm Bureau Federation as provided in
Section 3 of Article IV of this corporation's Articles of Incorporation, as
amended, and all of the shares of the Class A Common Stock issued and of
record in the name of the Iowa Farm Bureau Federation, as of the date of
the adoption of this amendment, shall be surrendered up to this corporation
and exchanged for such number of shares or fractional part thereof of the
Common Stock authorized by this amendment as the total amount paid by the
Iowa Farm Bureau Federation, at the purchase price of One and 50/100
($1.50) Dollars per share will pay for, at the rate of Seventy-five
($75.00) Dollars per share for said Common Stock.
Sec. 4. FIRST PREFERRED STOCK. The First Preferred Stock shall have a par
value of Fifty ($50.00) Dollars per share and shall have no voting
privileges, and the holders of record of the First Preferred Stock shall be
entitled to receive, when and as declared by the board of directors,
dividends from the net earnings of this corporation at the rate of six (6%)
per cent per annum, payable annually, when and as determined by the board
of directors. Such dividends shall be payable before any dividends shall
be paid on or set apart for the Common stockholders, and such dividends on
the First Preferred Stock shall be cumulative so that if at any dividend
period dividends at the rate of six (6%) per cent per annum should not have
been paid upon or set apart for the First Preferred Stock the deficiency
shall be fully paid on or set apart without interest before any dividends
shall be paid or declared upon the Common Stock. No first preferred
stockholder shall be entitled to dividends unless he is a stockholder of
record at the time of the declaration of the same.
The First Preferred Stock may be redeemed or retired in whole or in part,
at the election and option of the board of directors, at such time or times
as it shall determine at the purchase price paid per share with accrued
dividends, if any, provided, however, that not less than thirty (30) days'
prior notice of such intention to retire or redeem such stock shall be
given the holders of such stock so called for retirement or redemption by a
written notice post-paid to the last known address of such stockholders as
shown by the books of the corporation.
Except as provided in the preceding paragraph, no First Preferred
stockholders shall have any preferential right respecting the
<PAGE>
-4-
retirement or redemption of the shares of First Preferred Stock owned by
him, but in the event less than all of the outstanding shares of First
Preferred Stock are to be redeemed, such redemption may be made by lot or
pro rata or by designation of stockholder or holders in such manner and
basis as may be determined by the board of directors of this corporation.
From and after the date fixed for such redemption all dividends on the
First Preferred Stock thereby called for redemption shall, unless the
corporation shall default in the payment of the redemption price, cease,
and all rights of the holders thereof as stockholders of the corporation,
except the right to receive the redemption price and accrued dividends, if
any, shall cease and terminate.
In the event of the dissolution and winding up of the business of the
corporation, whether voluntary or involuntary, or in the event of the sale
of all of the assets of the corporation and the distribution of the
proceeds thereof, the holder of the First Preferred Stock shall be entitled
to be paid in full the purchase price paid per share to this corporation,
together with all unpaid dividends accrued on such shares, before any sum
whatsoever shall be paid in liquidation on account of the Common Stock, and
thereafter the holders of the Common Stock shall be entitled to the entire
remaining assets ratably in proportion to the shares issued and
outstanding.
Sec. 5. LIMITATION ON STOCKHOLDER DIVIDENDS. No cash dividend on the
capital stock of this corporation in excess of the amount required to
pay dividends at the rate of six (6%) per cent per annum on the par
value of the issued and outstanding First Preferred Stock shall be paid
in any calendar year prior to January 1, 1946, unless the capital of the
corporation, its surplus and contingency reserves shall aggregate ten
(10%) per cent or more of all other liabilities of the corporation, and
no cash dividend in excess of the amount required to pay dividends at
the rate of six (6%) per cent per annum on the par value of the issued
and outstanding First Preferred Stock shall be paid in any calendar year
between January 1, 1946 and January 1, 1951, unless the capital, surplus
and contingency reserves shall equal or exceed eight and one-half (8
1/2%) per cent of all other liabilities; nor shall any cash dividends in
excess of the amount required to pay dividends at the rate of six (6%)
per cent per annum on the par value of the issued and outstanding First
Preferred Stock to be paid on the capital stock in any calendar year
after January 1, 1951, unless the capital, surplus and contingency
reserves shall equal or exceed seven (7%) per cent of all other
liabilities.
No cash dividend in any one calendar year in excess of the amount required
to pay dividends at the rate of six (6%) per cent per annum, on the issued
and outstanding First Preferred Stock, shall be paid on the capital stock
unless the policyholders dividend scale of the corporation in effect for
said calendar year results in an average net cost equal to or less than the
average net cost to the ten legal reserve companies, other than
<PAGE>
-5-
the Farm Bureau Life Insurance Company, having the most insurance in force
in the State of Iowa as of the preceding December 31st.
For the purpose of this comparison the average net cost shall be
computed on the Whole Life Plan for ages at issue at 25, 35 and 45, and
for a policy issued in the amount of One Thousand ($1,000.00) Dollars, cost
for above ages shall be determined from the information provided annually
by recognized life insurance publications. Companies doing primarily a
mail order business or operating through lodges or as fraternal
organizations, as well as United States Government insurance, shall not be
included in the comparison.
Sec. 6. REGISTERED OWNER. This corporation shall be entitled to treat the
person or corporation in whose name any share of stock is registered as the
owner thereof for all purposes, and shall not be bound to recognize any
equitable right or claim to any interest in such share on the part of any
other person or corporation, whether or not the corporation shall have
notice thereof, save as expressly provided by the laws of the State of Iowa
or as may hereafter be provided.
Sec. 7. TRANSFER OF STOCK. The shares of First Preferred Stock and Common
Stock shall not be transferable.
Sec. 8. INCREASE OR DECREASE OF STOCK. From time to time any class of
stock may be increased or decreased as may be determined by vote of the
stockholders present at any annual or special meeting possessing voting
rights to the extent and in the manner provided by the statutes of the
State of Iowa and these Articles of Incorporation, and in event it is
determined to increase the amount of First Preferred Stock it shall not be
necessary to secure the consent of the holders of the First Preferred
Stock; provided, however, that no other class of stock shall be created
having preference over the First Preferred Stock as now authorized or as
may hereafter be authorized in respect to payment of dividends out of the
earnings or upon liquidation or dissolution unless the amendment
authorizing such change shall receive the affirmative vote of the holders
of not less than two-thirds (2/3) of the outstanding First Preferred Stock
voting as a class.
Sec. 9. All persons and/or corporations or associations who shall acquire
stock in this corporation shall acquire the same subject to the provisions
of these Articles of Incorporation, and shall, by their subscription
therefor and acceptance thereof, be bound by the said Articles of
Incorporation and any amendments thereto, and the By-Laws duly adopted
thereunder."
Amend Article V, by striking all of Section 1 thereof, and substituting
in lieu thereof the following:
"Section 1. The business and affairs of this corporation shall be managed
by a board of directors of not less than twelve (12)
<PAGE>
-6-
nor more than twenty-one (21), the exact number to be fixed and defined by
a by-law adopted by a two-thirds (2/3) vote of the stockholders entitled to
vote and present in person or represented by an authorized representative
at any regular or special meeting of the stockholders of this corporation,
and said by-law shall only be amended in the same manner as is provided
herein for its adoption."
Amend Article V, by striking all of Section 2 thereof, and substituting in
lieu thereof the following:
"Sec. 2. The board of directors shall be divided into two classes,
district directors and directors at large, and the district directors shall
be elected to serve for terms of three (3) years and until their successors
are elected and have qualified, and the directors at large shall be elected
to serve for terms of two (2) years and until their successors are elected
and have qualified. The terms of the directors shall be on a staggered
basis so that approximately one-half of the directors at large shall be
elected each year and approximately one-third of the district directors
shall be elected each year. The manner, method and procedure for the
nomination and election of directors shall be as defined and provided in a
by-law duly adopted by a two-thirds (2/3) vote of the stockholders entitled
to vote and present in person or represented by an authorized
representative at any regular or special meeting of the stockholders of
this corporation, and said by-law shall only be amended in the same manner
as is provided herein for its adoption."
Amend Article V, by striking all of Section 3 thereof, and substituting in
lieu thereof the following:
"Sec. 3. The following named persons shall, from and after the date of the
adoption of this Amendment to the Articles of Incorporation, as amended,
constitute the board of directors of this corporation, and shall serve for
a term expiring as of the date set opposite their names and until their
successors are elected and qualified, in accordance with the terms and
provisions of the By-Laws. At the annual meeting of the stockholders of
this corporation held in the year of 1959, and at each annual meeting
thereafter, there shall be elected such number of directors as terms expire
as of the date of such annual meeting, and such additional directors, if
any, as provided for in the By-Laws, to serve for the terms fixed in the
By-Laws of this corporation and until their successors are elected and
qualified.
Expiration Date
Name Address of Term
---- ------- ---------------
K. Howard Hill Minburn, Iowa November, 1959
Howard Waters Danville, Iowa November 21, 1958
Mrs. H. L. Witmer Tipton, Iowa November 21, 1958
Clarence Myers Blue Earth, Minn. November, 1959
Charles Marshall Avoca, Nebraska November, 1959
John Ingels Maynard, Iowa November 21, 1958
<PAGE>
-7-
Expiration Date
Name Address of Term
---- ------- ---------------
Wayne Keith Burt, Iowa November, 1960
LeRoy Getting Sanborn, Iowa November 21, 1958
Wesley Seymour Lakeview, Iowa November, 1959
Harvey Moeckly Polk City, Iowa November 21, 1958
Wayne J. Farmer Van Horne, Iowa November, 1959
James B. Helmick Rte. #2, Columbus
Junction, Iowa November, 1960
R. Edwin Allen Lucas, Iowa November, 1959
John Kenagy Rte. #3, Clarinda,
Iowa November, 1960
Amend Article V, by striking all of Section 4 thereof.
Amend Article V, by striking all of Section 5 thereof, and substituting in
lieu thereof as Section 4 the following:
"Sec. 4. Until the first annual meeting of the stockholders of this
corporation held after the adoption of this Amendment, and until their
successors are elected and qualified, the officers of this corporation
shall be:
Office Name Address
------ ---- -------
President: E. Howard Hill Minburn, Iowa
Vice-President: Howard Waters Danville, Iowa
Secretary: Kenneth Thatcher Des Moines, Iowa
Treasurer: D. B. Groves Des Moines, Iowa."
Amend Article V, by striking all of Section 6 thereof, and substituting in
lieu thereof as Section 5 the following:
"Sec. 5. The officers of this corporation shall be elected by the board of
directors immediately following each annual meeting and shall hold office
for such term or until their successors are elected and qualified, as shall
be provided for in the By-Laws."
Amend Article V, by striking the numbers of Sections 7, 8, 9, 10, 11, 12
and 13, and re-numbering as "Sections 6, 7, 8, 9, 10, 11 and 12,"
respectively.
Amend Article V, by striking all of Section 14 thereof, and substituting in
lieu thereof as Section 13 the following:
"Sec. 13. PROPORTIONATE REPRESENTATION. The holder or holders jointly or
severally, of not less than one-fifth (1/5) of the aggregate vote of the
Common Stock, but less than a majority of the vote represented by the
shares of such stock, shall be entitled to nominate to be elected directors
in accordance with these Articles of Incorporation. In the event such
nomination shall be made, there shall be elected, to the extent that the
total number to be elected is divisible, such proportionate
<PAGE>
-8-
number from the persons so nominated as the aggregate vote of the shares of
stock held by persons making such nominations bear to the whole of Common
shares issued; provided the holders of the minority shares of such stock
shall only be entitled to one-fifth (1/5) of the total number of directors
to be elected for each one-fifth of the entire voting capital stock of such
corporation so held by them. This section shall not be construed to
prevent the holders of a majority of the votes represented by said Common
Stock from electing a majority of the directors. Vacancies occurring from
time to time shall be filled so as to preserve and secure to such minority
and majority stockholders proportionate representation as herein provided."
Amend Article VI, by striking all of said Article and substituting in lieu
thereof as Article VI the following:
"Section 1. REGULAR ANNUAL MEETING. The first regular annual meeting of
the stockholders of this corporation shall be held in the year 1946 and all
subsequent annual meetings of the stockholders of this corporation shall be
held annually at such time and place and upon such notice as the board of
directors shall from time to time, fix and determine, provided such notice
is not less than ten days and such meeting shall be held at Des Moines,
Iowa.
Sec. 2. SPECIAL MEETINGS. Special meetings of the stockholders, except for
the election of directors, may be called at any time by the president, and
shall be called by the president or secretary of this corporation upon the
call of the board of directors by a resolution duly adopted so providing
and directing and notice thereof shall be given the stockholders by written
or printed notice stating the object, time and place of such meeting, and
shall be mailed to the last known address of each stockholder as shown by
the books and records of this corporation at least fifteen (15) days prior
to such meeting."
Sec. 3. VOTING PRIVILEGE. At all meetings of the stockholders each Common
stockholder shall be entitled to one vote for each share of stock owned and
held by him or it."
Amend Article IX, by striking all of said Article and substituting in lieu
thereof as Article IX the following:
"This corporation shall have a corporate seal and shall have inscribed
thereon 'Farm Bureau Life Insurance Company, Des Moines, Iowa, Corporate
Seal.'"
Amend Article X, by striking all of said Article and substituting in lieu
thereof as Article X the following:
"The board of directors may, at its pleasure, make and adopt By-Laws and
amend the same which do not conflict with the law of the Articles of
Incorporation, as amended from time to time,
<PAGE>
-9-
or the By-Laws adopted by the stockholders. No amendment shall be made to
any By-Law which has been adopted by the stockholders unless the proposed
amendment or alteration has been filed in writing with the president and
with the secretary of the corporation not less than sixty (60) days prior
to the meeting at which the amendment is to be offered and voted upon."
CERTIFICATE
The President and Secretary of this corporation were duly authorized and
directed to sign, acknowledge, record, and do all things which are by law
required to execute, complete and carry into effect the within and foregoing
amendment to the Articles of Incorporation. We, E. Howard Hill and Kenneth
Thatcher, Chairman and Secretary, respectively, of said meeting, do hereby
certify the above to be a true and correct statement of the proceedings of the
stockholders at the above named meeting.
/s/ E. Howard Hill
---------------------------------
Chairman
/s/ Kenneth Thatcher
---------------------------------
Secretary
In conformity with the above resolution we, the President and Secretary,
respectively, of said corporation, have executed this instrument, and do hereby
sign and acknowledge the same for and on behalf of the said corporation this 1st
day of August, A. D., 1958.
/s/ E. Howard Hill
---------------------------------
President
/s/ Kenneth Thatcher
---------------------------------
Secretary
[STAMP]
[STAMP]
<PAGE>
-10-
STATE OF IOWA
SS.
COUNTY OF POLK
BE IT REMEMBERED, that on this 1st day of August, A. D., 1958, before me, a
Notary Public in and for said county and state, personally appeared E. Howard
Hill and Kenneth Thatcher, each being to me personally known, who being by me
duly sworn did say, that they are the President and Secretary, respectively, of
the Iowa Life Insurance Company, and that the foregoing instrument was signed
and sealed on behalf of said corporation by authority of its stockholders, and
that they acknowledge said instrument to be the voluntary act and deed of said
corporation, by them voluntarily executed.
/s/
---------------------------------
Notary Public in and for
POLK COUNTY, IOWA
[SEAL]
[STAMP]
<PAGE>
Exhibit 1.A. 6 (b)
By-Laws of the Company
Adopted ANNUAL MEETING
May 28, 1969
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
ARTICLE I
CORPORATE NAME, LOCATION AND PURPOSE
Section 1. NAME. The name of this corporation shall be FARM BUREAU LIFE
INSURANCE COMPANY.
Section 2. LOCATION. The location of its principal or home office shall
be in Des Moines, Iowa.
Section 3. POWERS, OBJECTS AND PURPOSES. The corporate powers, objects
and purposes of this corporation are such as are provided in Article III of the
Articles of Incorporation of this corporation.
ARTICLE II
CORPORATE PERIOD
Section 1. CORPORATE PERIOD. The corporate period of this corporation
commenced on the 30th day of October, 1944, and shall have perpetual existence
thereafter unless changed as by law and the Articles of Incorporation required.
ARTICLE III
STOCK AND STOCKHOLDERS
(Authorized Capital- Eligibility to own stock- Conditions, etc.)
Section 1. AUTHORIZED CAPITAL. The authorized capital stock of this
corporation is Five Hundred Thousand Dollars ($500,000), divided into ten
thousand (10,000) shares, of which amount four thousand (4,000) shares of the
par value of Fifty Dollars ($50) per share, amounting to Two Hundred Thousand
Dollars ($200,000), is Common Stock, and six thousand (6,000) shares of the par
value of Fifty Dollars ($50) per share, amounting
<PAGE>
to Three Hundred Thousand Dollars ($300,000), is seven and one-half per cent (7
1/2%) cumulative First Preferred Stock.
Section 2. COMMON STOCK. The Common Stock shall have a par value of Fifty
Dollars ($50) per share, and the holders of record shall be entitled to one vote
per share at all meetings of the stockholders. The Common Stock shall be issued
to and owned only by the Iowa Farm Bureau Federation and shall be issued from
time to time upon application by it and upon tender of the purchase price as
fixed by the Board of Directors, which shall be not less than par. The holders
of record of the Common Stock shall be entitled to vote at all meetings of the
stockholders by a duly authorized representative or representatives.
If, after providing for the payment of full dividends for any fiscal year
on the First Preferred Stock and for any balance that remains due on the
cumulative dividends of such First Preferred Stock, there shall remain any
surplus net earnings or profits not in the opinion of the Board of Directors
required for the operation of the business of this corporation or for the
payment of its liabilities, it shall be applicable to dividends upon the Common
Stock for such fiscal year when and as from time to time the same shall be
declared by the Board of Directors, which dividends shall not be cumulative but
shall only be paid as surplus net earnings or profits are available and
dividends are declared. Such dividends shall be ratable in proportion to the
number of shares of Common Stock issued and outstanding until dividends have
been declared and set apart for the Common Stock to the extent of, but not in
excess of, seven and one-half (7 1/2 %) for any one fiscal year.
No Common stockholder shall be entitled to dividends unless it is a
stockholder of record at the time of the declaration of the same.
It is callable at the option of the Board of Directors at the selling
price, together with accrued dividends, if any, on thirty (30) days' prior
notice as provided in the Articles of Incorporation.
(b) FIRST PREFERRED STOCK. The holders of the First Preferred Stock shall
be entitled to receive when and as declared by the Board of Directors, dividends
from the net earnings of this corporation at the rate of seven and one-half per
cent (7 1/2 %) per annum on the par value, payable annually when and as
determined by the Board of Directors. Such dividends shall be payable before
any dividends shall be paid on or set apart for the common stockholders, and
shall be fully paid or set apart before any dividends shall be paid or declared
upon the Common Stock. It is to be sold at par and one-half per share,
one-third of which selling price shall be contributed surplus. It is callable
at the option of the Board of Directors at the selling price, together with any
accrued dividends, if any, on a thirty (30) day's prior notice, as provided in
the Articles of Incorporation. No first preferred stockholder shall be entitled
to dividends unless he or it is a stockholder of record at the time of the
declaration of the same.
<PAGE>
Section 3. LIMITATION ON DIVIDENDS. No cash dividends on the capital
stock of the corporation in excess of the amount required to pay dividends at
the rate of six per cent (6%) per annum on the par value of the issued and
outstanding First Preferred Stock shall be paid in any calendar year prior to
January 1, 1946, unless the capital of the corporation, its surplus and
contingency reserves, shall aggregate ten per cent (10%) or more of all other
liabilities of the corporation, and no cash dividend in excess of the amount
required to pay dividends at the rate of six per cent (6%) per annum on the par
value of the issued and outstanding First Preferred Stock, shall be paid in any
calendar year between January 1, 1946 and January 1, 1951, unless the capital
surplus and contingency reserves shall equal or exceed eight and one-half (8
1/2%) of all other liabilities, nor shall any cash dividends in excess of the
amount required to pay dividends at the rate of seven and one-half per cent (7
1/2%) per annum on the par value of the issued and outstanding First Preferred
Stock be paid on the capital stock in any calendar year after January 1, 1951,
unless the capital surplus and contingency reserves shall equal or exceed seven
per cent (7%) of all other liabilities.
No cash dividend in any one calendar year in excess of the amount required
to pay dividends at the rate of seven and one-half per cent ( 7 1/2%) per annum,
on the issued and outstanding First Preferred Stock, shall be paid on the
capital stock unless the policyholders' dividend scale of the corporation in
effect for said calendar year results in an average net cost equal to or less
than the average net cost to the ten legal reserve companies other than the Farm
Bureau Life Insurance Company, having the most insurance in force in the State
of Iowa as of the preceding December 31st.
For the purpose of this comparison the average net cost shall be computed
on the Whole Life Plan for ages at issued 25, 35, and 45, and for a policy
issued in the amount of One Thousand Dollars ($1,000). Cost for the above ages
shall be determined from the information provided annually by recognized life
insurance publications. Companies doing primarily a mail order business or
operating through lodges or as fraternal organizations, as well as United States
Government Insurance, shall not be included in the comparison.
Section 4. REGISTERED OWNER. This corporation shall be entitled to treat
the person or corporation in whose name any share of stock is registered as the
owner thereof for all purposes, and shall not be bound to recognize any
equitable right or claim to any interest in such share on the part of any other
person or corporation, whether or not the corporation shall have notice thereof,
save as expressly provided by the laws of the State of Iowa or as may hereafter
be provided.
Section 5. TRANSFER OF STOCK. The shares of First Preferred Stock and
Common Stock shall be transferable.
Section 6. STOCKHOLDERS' CONTRACTS. All persons who shall acquire stock
in this corporation shall acquire the same subject to the provisions of the
Articles of Incorporation and these By-Laws, and by the acceptance of a
certificate or certificates
<PAGE>
of stock in said corporation, agree to be bound by the Articles of Incorporation
and By-Laws and all amendments thereto.
Section 7. ISSUANCE OF STOCK. So long as Chapter 492, Code of Iowa, 1966,
is the law of the State of Iowa, no stock of this corporation shall be issued
until this corporation has first received payment in full therefor at par, in
cash or property, provided, however, that when stock is issued for anything
other than money, it must be in accordance with the statutes of the State of
Iowa in force at the time said stock is issued.
ARTICLE IV
MEETINGS OF STOCKHOLDERS
Section 1. ANNUAL MEETING. The first regular annual meeting of the
stockholders of this corporation shall be held in the year of 1946 and all
subsequent annual meetings of the stockholders of this corporation shall be held
annually at Des Moines, Iowa, at such time and place as the Board of Directors
shall fix and determine, provided not less than ten (10 ) days' notice in
writing is given each stockholder entitled to vote, by mailing the same to his
last known address.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders, except
for the election of directors, may be called at any time by the president, and
shall be called by the president or secretary of this corporation upon the call
of the Board of Directors by a resolution duly adopted so providing and
directing and notice thereof shall be given the stockholders by written or
printed notice stating the object, time and place of such meeting, and shall be
mailed to the last known address of each stockholder, as shown by the books and
records of this corporation at least fifteen (15) days prior to such meeting.
Section 3. VOTING PRIVILEGE. At all meetings of the stockholders each
Common stockholder shall be entitled to one vote for each share of stock owned
and held by him or it.
Section 4. QUORUM. At annual and special meetings of the stockholders,
the stockholders of this corporation represented in person or by duly authorized
representative shall constitute a quorum at all meetings of the stockholders.
Section 5. ORDER OF BUSINESS. The order of business at all stockholders'
meetings insofar as possible and appropriate shall be as follows:
a. Call of Roll.
b. Reading and disposing of any unapproved minutes.
c. Reports of officers and committees.
d. Unfinished business.
e. New business.
<PAGE>
f. Election of directors.
g. Adjournment.
ARTICLE V
(Stockholders' By-Law)
BOARD OF DIRECTORS
(Classification - Qualification - Nomination - Terms and Election)
Section 1. MANAGEMENT. The business and affairs of this corporation shall
be managed by a Board of Directors of not less than twelve (12) nor more than
twenty-one (21), divided into two classes, district directors and directors at
large, and the district directors shall be elected to serve for terms of three
(3) years and until their successors are elected and qualified, and the
directors at large shall be elected to serve for terms of two (2) years and
until their successors are elected and qualified.
Section 2. NUMBER, QUALIFICATION AND ELECTION OF DIRECTORS. The board of
directors shall be constituted, as follows: There shall be twelve (12)
directors who shall be residents of the State of Iowa and active members of the
board of directors of the Iowa Farm Bureau Federation, nine (9) of whom shall be
district directors, and three (3) of whom shall be directors at large elected to
serve for a term of two (2) years and until their successors are elected and
qualified; plus one (1) director at large elected to serve for a term of two (2)
years and until his successor is elected and qualified from each state, other
than the state of the domicile of the corporation, in which this corporation is
licensed and authorized to transact and conduct its insurance business, other
than for the purpose of investments or reinsurance, who shall be an active
member of the board of directors of the Farm Bureau corporation of each such
state; at such time as the premium volume in any state other than the state of
domicile equals or exceeds one-sixth (1/6) of the premium volume in Iowa, such
other state shall be entitled to one (1) district director and shall be further
entitled to an additional district director each time such state attains an
additional premium volume equal to one-twelfth (1/12) of the premium volume in
Iowa. The number of district directors in each such state, if any, shall be
reduced whenever the premium volume in such state is less than the premium
volume required above to attain such director and the difference is greater than
one twenty-fourth (1/24) of the premium volume in Iowa. Adjustments in the
number of district directors shall be made at the time of the regular annual
meeting of this corporation based upon premium volume defined as the
direct-business premiums and annuity considerations received less dividends
allowed in the preceding fiscal year. In the event there is to be a downward
adjustment in board representation, as provided for above, then and in that
event the board of directors' nominating committee for such state, as
hereinafter provided for, shall determine and designate which district director
or directors are to be continued in office and the board of directors upon
receiving such determination and designation shall forthwith accept the
resignation of the board member who is not continuing, said resignation to be
effective as of the date of the
<PAGE>
board meeting held in connection with the annual meeting of the company, and in
the event said board of directors' nominating committee for said state fails to
act and so designate then and in that event the board of directors shall accept
the resignation of the district director from said state whose term has the
least number of years to run, and if there be more than one such district
director, then said terminating director shall be chosen by lot among them. All
district directors shall be elected to serve for a term of three (3) years and
until their successors are elected and qualified from districts and in the
manner hereinafter in these ByLaws provided, except that a district director
newly qualified from a state, other than the state of domicile of this
corporation, may at the discretion of the nominating committee of his state, be
elected for a term of one (1) or two (2) years in order to provide for staggered
terms of district directors from said state.
Each district director must be an active member of the board of directors
of the Farm Bureau corporation of his state of residence and whenever he ceases
to be a director of the board of directors of such state Farm Bureau
corporation, there shall be a vacancy in the office of director of this
corporation.
Section 3. DISTRICTS DEFINED.
(a) The State of Iowa shall be divided into nine (9) districts numbered
from one (1) to nine (9), which districts shall be defined, as follows:
DISTRICT 1- Alameda, Black Hawk, Bremer, Buchanan, Chickasaw, Clayton,
Delaware, Dubuque, Fayette, Howard, Winneshiek;
DISTRICT 2- Butler, Cerro Gordo, Floyd, Franklin, Hancock, Humboldt,
Kossuth, Mitchell, Winnebago, Worth, Wright;
DISTRICT 3- Cherokee, Clay, Buena Vista, Dickinson, Emmet, Lyon, O'Brien,
Osceola, Palo Alto, Plymouth, Pocahontas, Sioux;
DISTRICT 4- Audubon, Calhoun, Carroll, Crawford, Guthrie, Harrison, Ida,
Monona, Sac, Woodbury, Shelby;
DISTRICT 5- Boone, Dallas, Greene, Grundy, Hamilton, Hardin, Jasper,
Marshall, Polk, Story, Webster;
DISTRICT 6- Benton, Cedar, Clinton, Iowa, Jackson, Johnson, Jones, Linn,
Poweshiek, Scott, Tama;
DISTRICT 7- Davis, Des Moines, Henry, Jefferson, Lee, Louisa, Keokuk,
Muscatine, Van Buren, Wapello, Washington;
DISTRICT 8- Appanoose, Clarke, Decatur, Lucas, Mahaska, Marion, Monroe,
Madison, Warren, Wayne;
<PAGE>
DISTRICT 9- Adams, Adair, Cass, Fremont, Mills, Montgomery, Pottawattamie,
Page, Ringgold, Taylor, Union.
(b) DISTRICTS DEFINED IN STATES OTHER THAN THE STATE OF THE DOMICILE OF
THIS CORPORATION. On and after the date any state, other than the
state of the domicile of this corporation, is entitled to one (1)
district director, said state shall constitute one (1) district, and
when such state is entitled to more than one district director as
herein provided said state may, if its nominating committee so
determines, divide itself into such number of districts as there are
district directors, or, in the alternative, said state may elect its
district directors on a state-wide basis and said directors shall
serve for the same terms as all other district directors. When a
state, other than the state of domicile of this corporation, is
entitled to an additional director, as hereinbefore provided, the
secretary of this corporation shall in writing so advise the
nominating committee of said state (the board of directors of the
state Farm Bureau corporation) and said committee shall then nominate
an eligible person, as defined in this Article, and file in writing
with the secretary of this corporation the name of such nominee
properly certified in the manner and in accordance with the terms of
Section 4 of this Article. The Board of Directors of this corporation
shall at its next meeting elect said nominee as a district director of
this corporation to serve until the next regular annual meeting of
this corporation and until his successor is elected and qualified.
SECTION 4. NOMINATION OF DIRECTORS- NOMINATING COMMITTEES. The Board of
Directors of the state Farm Bureau corporation of the state of the domicile of
this corporation and of any other state in which this corporation is licensed
and is authorized to transact its insurance business shall each, respectively,
constitute and be a stockholders' nominating committee for each state. Each
such state's nominating committee shall nominate the person or persons who are
eligible and qualified to be elected as directors of this corporation from such
state, as hereinbefore provided, and shall submit and file in writing with the
secretary of this corporation the names of such nominees, including the name of
the nominee, if any, who has been nominated and elected by the Board of
Directors as a district director since the date of the last annual meeting of
the stockholders of this corporation, not less than thirty (30) days prior to
the date of the meeting of the stockholders of this corporation at which they
are to be elected, and the secretary of this corporation shall submit the names
of such nominees to a nominating committee appointed by the president of this
corporation which said committee shall report and submit to the stockholders for
election only the names of those so nominated, if eligible, and no one else
shall be eligible for election to the Board of Directors of this corporation.
Section 5. MEMBERS OF BOARD OF DIRECTORS. The following named persons
shall constitute the Board of Directors of this corporation and shall serve for
the terms set opposite their names and until their successors are elected and
qualified. At the annual meeting of the stockholders of this corporation to be
held in the year 1970, and at each annual meeting thereafter, there shall be
elected such number of district directors as
<PAGE>
terms expire as of the date of such annual meeting for a term of three (3) years
and until their successors are elected and qualified, and such number of
directors at large as terms expire as of the date of such annual meeting for a
term of two (2) years and until their successors are elected and qualified.
(Directors at Large)
Name Address Expiration Date of Term
---- ------- -----------------------
J. Merrill Anderson RFD #1, Newton, Iowa 1970
Dean Kleckner Rudd, Iowa 1971
Mrs. Herbert Johnson RFD #1, Charles City, Iowa 1971
P. Dillon Hempstead Houston, Minnesota 1970
Roland G. Nelson Mead, Nebraska 1970
Kenneth McIntyre Harwood, North Dakota 1971
(District Directors)
District Name Address Expiration Date of Term
- -------- ---- ------- -----------------------
1 K. H. Hoppenworth RFD #1, Tripoli, Iowa 1971
2 Edward Engstrom RFD #1, Kanawha, Iowa 1970
3 Lyle R. Stephens LeMars, Iowa 1971
4 T. Selmer Hodne Box 103, Manilla, Iowa 1972
5 R. N. Burt RFD #1, Marshalltown, Iowa 1971
6 Robert Joslin RFD #2, Clarence, Iowa 1972
7 Fred Holsteen RFD #1, West Point, Iowa 1970
8 Lawrence W. Everett RFD, New Sharon, Iowa 1972
9 William E. McGrew Emerson, Iowa 1970
Section 6. ELIGIBILITY OF OFFICERS. No person shall be eligible to be
elected by the Board of Directors of this corporation to the offices of
president and vice-president of this corporation unless he is a resident of the
State of Iowa, an active member of the board of directors of the Iowa Farm
Bureau Federation. No person shall be eligible to be elected by the Board of
Directors of this corporation to the offices of secretary and treasurer of this
corporation unless he is a resident of the State of Iowa and the active
secretary and active treasurer of the Iowa Farm Bureau Federation.
Section 7. MEETINGS. The regular organization meeting of the Board of
Directors shall be held immediately after each annual meeting of the
stockholders, or as soon thereafter as a quorum of the Board of Directors can
be obtained for the election of officers and the transaction of any other
business which may properly be brought before the meeting and no notice of said
organization meeting shall be required.
Regular meetings of the Board of Directors shall be held quarterly at such
time and place and upon such notice as the directors may fix by resolution.
Special
<PAGE>
meetings may be called upon the order of the president. Notice of the time,
place and purpose of special meetings shall be given at least two (2) days
previous thereto by oral or written notice delivered personally or mailed to the
several directors at their last known address. Any director may waive notice of
any meeting of the Board of Directors. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting.
Section 8. QUORUM. A majority of the entire number of the Board of
Directors shall constitute a quorum of the board for the transaction of business
at any meeting of the Board of Directors. A majority vote of the members
present in quorum shall determine any matters not herein or in the Articles and
ByLaws requiring a different vote. If less than a majority of the directors may
be present at any meeting, a majority of the members present may adjourn the
meeting from time to time without further notice.
Section 9. VACANCIES. The Board of Directors shall fill all vacancies
occurring in its membership and that of the officers of this corporation by the
election of a person eligible to serve as such, as in these ByLaws authorized
and provided, and a director or officer so elected to fill a vacancy shall serve
for the unexpired term of the director or officer whose vacancy he was elected
to fill and/ or until his successor is elected and qualified. Whenever a member
of the Board of Directors of this corporation ceases to be eligible by reason of
the termination of his membership as an active member of the Board of Directors
of the Iowa Farm Bureau Federation , or of a state Farm Bureau corporation of a
state in which this corporation is licensed and authorized to transact its
insurance business, there shall be a vacancy in the office of said director as a
member of the Board of Directors of this corporation, and the Board of Directors
of this corporation shall fill such vacancy by electing the person nominated and
eligible to be elected as a director of this corporation, as in these ByLaws
provided, to serve until the next regular annual meeting of the stockholders of
this corporation and until his successor is elected and qualified, and his name
shall be placed in nomination for election as a director of this corporation by
the nominating committee and elected to serve for the remainder of a two-year
term if a director at large, and a three-year term if a district director, and
until his successor is elected and qualified.
Section 10. This Article V of the ByLaws of this corporation is a bylaw
adopted by the stockholders of this corporation in accordance with the laws of
this state and the Articles of Incorporation, as amended, of this corporation,
and may be amended only as authorized and provided in Article XI of these
ByLaws.
ARTICLE V-A
BOARD OF DIRECTORS- GENERAL PROVISIONS
Section 1. RULES AND REGULATIONS. The Board of Directors may from time
to time adopt rules and regulations and such rules and regulations shall
constitute by
<PAGE>
reference a part of these ByLaws, and shall be binding upon the stockholders of
this corporation and upon anyone doing business with this corporation.
Section 2. COMMITTEES.
(a) AUDIT AND BUDGET. The audit and budget committee shall consist of
three (3) members who shall be members of the Board of Directors and shall be
appointed by the president and approved by the Board of Directors. The chairman
thereof shall be designated by the president. This committee shall review at
periodic intervals, all receipts received and all disbursements made from the
funds of the corporation and perform such other duties as may be delegated to it
by the Board of Directors.
(b) INVESTMENT. The investment policy of the corporation shall be
determined by the Board of Directors, which shall have the power to determine
the classes of investments and the percentage of investment to be made within
each of said classifications, subject to and in accordance with the provisions
of Section 515.35, Code of Iowa, 1966. The investment committee shall consist
of the president, secretary, treasurer, general counsel and the general manager
of the corporation, all of whom shall serve by virtue of their office. The
president shall serve as chairman of said committee and in the absence of the
president, those present shall designate an acting chairman. The committee
shall elect its secretary. The secretary of the committee shall keep a complete
record of the proceedings thereof. The investment committee shall make a report
to the Board of Directors each month, which report shall show the investments
purchased, sold or retired during the month immediately preceding, and in
addition, said committee shall, annually, make a full report to the Board of
Directors, covering all investment activities with particular reference to
purchases and sales during the preceding fiscal year. The Board of Directors
may call for special reports on investments at any time they so desire.
The investment committee shall have the duty and the power to authorize and
direct the mode, manner and time of making and calling in investments, and the
sale or transfer of investments and the reinvestment of the proceeds thereof,
and to examine all funds and securities as often as they deem necessary or when
required to do so by the Board of Directors. The investment committee shall
have the duty and authority from time to time and whenever necessary to
authorize the execution of all contracts, deeds, conveyances and any other
instruments of the corporation necessary for the assignment, transfer and sale
of investments of the corporation requiring corporate signature. A majority of
the members of the committee shall constitute a quorum. There shall also be a
purchasing committee, which said committee shall consist of this corporation,
all of whom shall serve by virtue of their office. The treasurer shall serve as
chairman of said committee and in the absence of the treasurer, those present
shall designate an acting chairman. The purchasing committee shall select its
secretary who shall keep a complete record of the proceedings thereof. The
purchasing committee shall have the same power and authority, relative to the
handling, acquisition and disposition of investments of every kind and nature,
coextensive with the investment committee. A majority of the members of the
committee shall constitute a quorum. The
<PAGE>
purchasing committee shall make a detailed report to the investment committee
quarterly, covering the activities of the purchasing committee for the preceding
three months' period.
The investment of the funds of the corporation and the deposit of the
reserve on all policies and contracts issued by the corporation shall comply
with the laws of the State of Iowa.
Section 3. FIDELITY BONDS. The Board of Directors shall require the
officers, agents and employees having custody of any of its funds or property to
give the corporation a bond conditioned for the faithful discharge of the duties
of such person and in such amount and with such company as surety as the Board
of Directors shall require or approve. The cost of such bond shall be borne by
the corporation.
Section 4. AUDITS. The Board of Directors shall have an annual audit made
of the records of the corporation for submission to the members at the annual
meeting. The Board of Directors may have other audits made from time to time
whenever they shall deem such additional audits necessary.
ARTICLE VI
OFFICERS
(Officers - Election - Term - Duties)
Section 1. OFFICERS. The officers of this corporation shall be a
president, vice president, secretary and treasurer, and the office of secretary
and treasurer may be held by the same person. The Board of Directors may also
elect or appoint a general manager, an assistant general manager, assistant
secretaries, an assistant treasurer, a general counsel, an assistant general
counsel, an underwriting secretary, a medical director, an actuary and such
other officers as the interests of the company may require. The Board of
Directors shall have power to prescribe additional powers and duties for the
officers and employees herein provided for, and to change such powers and duties
whenever the board may deem best.
Section 2. ELECTION AND TERM OF OFFICE. The president, vice president,
treasurer, and secretary shall be elected at the organization meeting of the
Board of Directors and all other officers shall be appointed or elected at such
time as the Board of Directors in its discretion shall determine. The term of
office of the president, vice president, treasurer and secretary shall be for
one (1) year, or until their successors are elected and qualified. The term of
office of all other elected or appointed officers shall be at the will and
pleasure of the Board of Directors.
Section 3. DUTIES OF OFFICERS.
<PAGE>
(a) PRESIDENT. The president shall preside over all meetings of the Board
of Directors and meetings of the stockholders; shall execute personally or
through an agent duly authorized by the Board of Directors, in behalf of the
corporation, all contracts, deeds or other instruments which have been approved
by the Board of Directors; shall be a member ex-officio of all committees of the
Board of Directors; and shall have general supervision and administrative
control over all of the affairs of the corporation.
(b) VICE PRESIDENT. In the absence or the inability or disability of the
president, or his refusal to act, his duties shall devolve upon and be
discharged by the vice president.
(c) SECRETARY. The secretary shall be the custodian of all books, papers,
records, documents, official seal and property of the corporation, except as
otherwise authorized by the Board of Directors. He shall conduct by himself or
through such assistant secretaries and other subordinates such business as shall
be authorized by the Board of Directors; he shall serve or cause to be served,
printed and published, such notice as shall be required by law, by these ByLaws
and by resolutions of the Board of Directors; he shall keep the corporate
records, carry on all proper correspondence and shall act as secretary in the
meetings of the stockholders and the Board of Directors, and shall perform such
other administrative duties as shall be assigned to him from time to time by the
Board of Directors.
(d) TREASURER. The treasurer shall have charge of the funds of the
corporation and shall pay them out as ordered by the Board of Directors. He
shall keep an accurate account of receipts and disbursements and submit a
monthly report thereof to the Board of Directors at their regular meeting and
oftener as required; he shall also give a full and complete report at the annual
meeting of the stockholders.
(e) GENERAL MANAGER. Subject to the business and administrative policies
adopted by the Board of Directors from time to time and under the supervision
and direction of the Iowa Farm Administrative Board, the corporate manager, the
general manager shall be responsible for the supervision and direction of the
business and affairs of this corporation and its employees and agents.
(f) ASSISTANT GENERAL MANAGER. The assistant general manager shall, in
the absence of the general manager, perform the duties of the general manager;
he shall at other times have such duties and authority as shall be delegated to
him and shall assist the general manager and be subject to the supervision and
direction of the general manager.
(g) ASSISTANT SECRETARY. The assistant secretary or secretaries shall
perform the duties of the secretary in the absence of the secretary and shall
perform such other duties as may from time to time be required by the Board of
Directors.
(h) ASSISTANT TREASURER. Such of the powers and duties vested in the
treasurer may be delegated by the Board of Directors to an assistant treasurer
or assistant
<PAGE>
treasurers as the Board of Directors in its discretion may deem necessary or
desirable. The assistant treasurer or assistant treasurers shall be vested only
such powers and duties as are so delegated. Assistant treasurers shall, in the
performance of their duties as delegated, be subject to the direction,
supervision and control of the treasurer.
(i) GENERAL COUNSEL. The general counsel, subject to the supervision of
the Board of Directors, shall be responsible for all matters of legal import
concerning the company.
(j) ASSISTANT GENERAL COUNSEL. The assistant general counsel shall, in
the absence of the general counsel, perform the duties of the general counsel;
he shall at other times have such duties and authority as shall be delegated to
him and shall assist the general counsel and be subject to the supervision and
direction of the general counsel.
(k) UNDERWRITING SECRETARY. It shall be the duty of the underwriting
secretary to have general supervision of the underwriting and acceptance of
risks and applications for insurance. No policy shall be issued unless the
application shall have first been approved by either the Underwriting Secretary
or an underwriter designated by him.
(l) MEDICAL DIRECTOR. It shall be the duty of the medical director to
have general supervision of medical underwriting and he shall be under the
general supervision of the underwriting secretary. He shall have supervision
over all medical examiners and cause to be kept such records as may be required
by the business of the company, and perform such other duties relating to the
underwriting of the company as shall from time to time be delegated to him.
(m) ACTUARY. The actuary shall be directly responsible to the general
manager and through him to the Iowa Farm Administrative Board, and through it to
the Board of Directors of this corporation for the performance and carrying out
of his responsibilities. It shall be the duty of the actuary to supervise the
compilation of all statistics and calculation of premium rates and the
allocation and distribution of surplus, and the performance of such other duties
as shall be assigned to him from time to time by the general manager.
ARTICLE VII
Section 1. KINDS OF INSURANCE. The Board of Directors shall determine the
kinds of insurance and the nature of the risks to be covered, subject and
pursuant to the provisions of the Articles of Incorporation, as amended, and the
applicable laws of the State of Iowa.
Section 2. FORM OF POLICIES. The policies of insurance issued by the
company shall be in such form and upon such terms and conditions as may be
determined and authorized by the Board of Directors.
<PAGE>
Section 3. PREMIUM. The Board of Directors shall fix the amount of the
premium and valuations for each policy and contract of insurance, with said
premiums to be paid monthly, quarterly, semi-annually or annually.
Section 4. REINSURANCE. The company may contract for reinsurance on its
own risks and may make and issue reinsurance contracts on the risks of others.
Such contracts may be on a participating or on a non-participating basis and may
be with or without contingent liability.
ARTICLE VIII
FISCAL YEAR
Section 1. FISCAL YEAR. The fiscal year of the company shall commence
with the first day of January of each year and terminate with the 31st day of
December each year.
ARTICLE IX
CORPORATE SEAL
Section 1. CORPORATE SEAL. The corporate seal of the corporation shall be
in the form of a circle and shall have inscribed therein the name of the
corporation and the words "Corporate Seal, Iowa."
ARTICLE X
EMPLOYEES
Section 1. EMPLOYEES. No person who is a member of the Board of
Directors, other than the president, and no person who is a relative of any
member of the Board of Directors or any officer of this corporation shall be
eligible for employment by the corporation.
ARTICLE XI
(Stockholders' By-Law)
AMENDMENTS TO BY-LAWS
Section 1. AMENDMENTS TO BYLAWS. The Board of Directors may, at its
pleasure, make and adopt ByLaws and amend the same which do not conflict with
the law or the Articles of Incorporation, as amended from time to time, or the
ByLaws adopted by the stockholders. No amendment shall be made to any ByLaw
which has been adopted by the stockholders unless the proposed amendment or
alteration has been filed in writing
<PAGE>
with the president and with the secretary of the corporation not less than sixty
(60) days prior to the meeting at which the amendment is to be offered and voted
upon.
<PAGE>
AMENDMENTS TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
Adopted August 26, 1975
AMEND ARTICLE I of the By-Laws, entitled CORPORATE NAME, LOCATION AND
PURPOSES, by striking Section 2 thereof in its entirety and by substituting in
lieu thereof the following:
"Section 2. LOCATION. The location of its principal or home office shall
be in West Des Moines, Polk County, Iowa."
AMEND ARTICLE IV, entitled MEETINGS OF STOCKHOLDERS, by striking Section 1
in its entirety and by substituting in lieu thereof the following:
"Section 1. REGULAR ANNUAL MEETING. The regular annual meeting of the
stockholders and of this corporation held in the year 1975, and all subsequent
annual meetings of the stockholders of this corporation shall be held annually
at such time and place and upon such notice as the Board of Directors shall from
time to time fix and determine. Such notice shall be given in writing and
mailed to the stockholders' last known address as shown by the books and records
of the corporation not less than ten (10) days prior to such meeting, informing
the stockholders of the place, date and hour of said stockholders' meeting, and
said meeting shall be held in West Des Moines, Iowa, or at such other place in
Polk County, Iowa, as the Board of Directors may fix and determine, providing
notice of any such meeting at a place other than West Des Moines, Iowa, shall be
given to the stockholders in writing and mailed to the stockholders' last known
address as shown by the books and records of the corporation at least twenty
(20) days prior to such meeting, informing the stockholders of the place, date
and hour of said stockholders' meeting."
AMEND ARTICLE V-A, entitled BOARD OF DIRECTORS - GENERAL PROVISIONS, by
striking Section 2(a) in its entirety and by substituting in lieu thereof the
following:
"(a) BUDGET AND FINANCE. The budget and finance committee shall consist
of three (3) members who shall be members of the Board of Directors and shall be
appointed by the president and approved by the Board of Directors. The chairman
thereof shall be designated by the president. This committee shall review at
periodic intervals, all receipts and all disbursements made from the funds of
the corporation and perform such other duties as may be delegated to it by the
Board of Directors."
FURTHER AMEND ARTICLE V-A, by striking from Section 2(b), entitled
INVESTMENT, the figures and words "515.35, Code of Iowa, 1966" appearing in line
five thereof and by substituting in lieu thereof the figures and words "511.8,
Code of Iowa, 1975."
<PAGE>
AMEND ARTICLE IX, entitled CORPORATE SEAL, by striking said Article in its
entirety and by substituting in lieu thereof the following:
"ARTICLE IX
CORPORATE SEAL
Section 1. CORPORATE SEAL. The corporation shall have a corporate seal
and shall have inscribed thereon, 'Farm Bureau Life Insurance Company, Corporate
Seal, Iowa.'"
<PAGE>
AMENDMENT TO
AMENDED AND SUBSTITUTED BY-LAWS
FARM BUREAU LIFE INSURANCE COMPANY
26 November, 1975
ARTICLE XII
INDEMNIFICATION - OFFICERS, DIRECTORS AND EMPLOYEES
This corporation shall make indemnification to the following extent and
under the following circumstances:
a. To indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right or the corporation) by reason of the fact that
he is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
enterprise, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
b. To indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue, or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of this duty to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
<PAGE>
c. To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in paragraphs "a" and "b," or in
defense of any claim, issue, or matter herein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred
by him in connection therewith.
d. Any indemnification under paragraphs "a" and "b" (unless ordered by a
court") shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer,
employee, or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs "a" and "b." Such
determination shall be made (1) by the board of directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit, or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the shareholders.
e. Expenses, including attorney fees, incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
the manner provided in paragraph "d" upon receipt of an undertaking by or on
behalf of the director, officer, employee, or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
f. The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such person.
g. The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
<PAGE>
Section 9. VACANCIES. The Board of Directors shall fill all vacancies
occurring in its membership and that of the officers of this corporation by the
election of a person eligible to serve as such, as in these ByLaws authorized
and provided, and a director or officer so elected to fill a vacancy shall serve
for the unexpired term of the director or officer whose vacancy he was elected
to fill and/ or until his successor is elected and qualified.
Whenever a member of the Board of Directors of this corporation ceases to
be eligible by reason of the termination of his membership as an active member
of the Board of Directors of the Iowa Farm Bureau Federation, or of a state Farm
Bureau corporation of a state in which this corporation is licensed and
authorized to transact its insurance business, there shall be a vacancy in the
office of said director as a member of the Board of Directors of this
corporation, and the Board of Directors of this corporation shall fill such
vacancy by electing the person nominated and eligible to be elected as a
director of this corporation, as in these ByLaws provided, to serve for the
unexpired term of the director whose vacancy he was elected to fill and/ or
until his successor is elected and qualified.
<PAGE>
Adopted: September 30, 1980
AMENDMENTS TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
AMEND ARTICLE V-A, Section 2(b), entitled "Investment," by striking it in
its entirety and substituting in lieu thereof the following:
"(b) INVESTMENT AND PURCHASE COMMITTEE. The investment policy of the
Corporation shall be determined by the Board of Directors, which shall have
the power to determine the classes of investments and the percentage of
investment to be made within each of said classifications, subject to and in
accordance with the provisions of Section 511.8 of the 1979 Code of Iowa.
The Investment and Purchase Committee shall consist of the secretary,
treasurer and general counsel and the general manager of the Corporation and
the head of the Investment Department shall be an ex officio member of this
Committee without portfolio, all of whom shall serve by virtue of their
office. The treasurer shall serve as chairman of said Committee and in his
absence the general counsel shall act as chairman; the Committee shall elect
its secretary. The secretary of the Committee shall keep a complete record
of the proceedings thereof. The Investment and Purchase Committee shall make
a report to the Board of Directors each month, which report shall show the
investments purchased, sold, or retired during the month immediately
preceding, and in addition, said Committee shall, annually, make a full
report to the Board of Directors, covering all investment activities with
particular reference to purchases and sales during the preceding fiscal year.
The Board of Directors may call for special reports on investments at any
time they so desire.
The Investment and Purchase Committee shall have the duty and the power to
authorize and direct the mode, manner and time of making and calling in
investments, and the sale or transfer of investments and the reinvestment of the
proceeds thereof, and to examine all funds and securities as often as they deem
necessary or when required to do so by the Board of Directors. The Investment
and Purchase Committee shall have the duty and authority from time to time and
whenever necessary to authorize the execution of all contracts, deeds,
conveyances and any other instruments of the Corporation necessary for the
assignment, transfer and sale of investments of the Corporation requiring
corporate signature. A majority of the members of the Committee shall
constitute a quorum.
The investment of the funds of the Corporation and the deposit of the
reserve on all policies and contracts issued by the Corporation shall comply
with the laws of the State of Iowa."
<PAGE>
AMENDMENTS
TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
West Des Moines, Iowa
AMEND ARTICLE III, Section 1, entitled "AUTHORIZED CAPITAL", by striking
the first paragraph in its entirety and by substituting in lieu thereof the
following:
"Section 1. AUTHORIZED CAPITAL. The authorized capital stock of this
corporation is One Million Five Hundred Fifty Thousand Dollars ($1,550,000.00),
divided into thirty one thousand (31,000) shares, of which amount twenty-five
thousand (25,000) shares of the par value of Fifty Dollars ($50.00) per share,
amounting to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) is
Common Stock, and six thousand (6,000) shares of the par value of Fifty Dollars
($50.00) per share, amounting to Three Hundred Thousand Dollars ($300,000) is
seven and one-half per cent (7 1/2%) cumulative First Preferred Stock."
AMEND ARTICLE III, Section 2 (a)., entitled "COMMON STOCK", by striking the
second paragraph in its entirety and substituting in lieu thereof the following:
"If, after providing for the payment of full dividends for any fiscal year
on the First Preferred Stock and for any balance that remains due on the
cumulative dividends of such First Preferred Stock, there shall remain any
surplus net earnings or profits not in the opinion of the board of directors
required for the operation of the business of this corporation or for the
payment of its liabilities, it shall be applicable to dividends upon the Common
Stock for such fiscal year when and as from time to time the same shall be
declared by the board of directors, which dividend shall not be cumulative but
shall only be paid as surplus net earnings or profits are available and
dividends are declared. Such dividends shall be ratable in proportion to the
number of shares of Common stock issued and outstanding."
AMEND ARTICLE III, Section 3, entitled "LIMITATION ON DIVIDENDS" by
striking the Section in its entirety.
<PAGE>
Adopted March 1, 1984
AMENDMENTS TO THE
AMENDED AND SUBSTITUTED BY-LAWS
OF
FARM BUREAU LIFE INSURANCE COMPANY
AMEND ARTICLE V-A, Section 2(b), entitled "Investment," by striking it in
its entirety and substituting in lieu thereof the following:
(b) INVESTMENT COMMITTEE. The investment policy of the Corporation shall
be determined by the Board of Directors, which shall have the power to determine
the classes of investments and the percentage of investment to be made within
each of said classifications, subject to and in accordance with the provisions
of Section 511.8 of the Code of Iowa, as amended. The Investment Committee
shall consist of the Secretary, Treasurer, General Counsel, General Manager,
Assistant General Manager, Controller and Financial Planning Officer, Vice
President Life and Health Insurance, and Vice President Investments of the
Corporation, all of whom shall serve by virtue of their office. The Treasurer
shall serve as chairman of said Committee and in his absence the General Counsel
shall act as chairman; the Committee shall elect its Secretary. The secretary
of the Committee shall keep a complete record of the proceedings thereof. The
Investment Committee shall make a report to the Board of Directors each month,
which report shall show the investments purchase, sold or retired during the
month immediately preceding, and in addition, said Committee shall, annually,
make a full report to the Board of Directors, covering all investment activities
with particular reference to purchases and sales during the preceding fiscal
year. The Board of Directors may call for special reports on investments at any
time they so desire.
The Investment Committee shall have the duty and the power to authorize
and direct the mode, manner and time of making and calling in investments, and
the sale or transfer of investments and the reinvestment of the proceeds
thereof, and to examine all funds and securities as often as they deem necessary
or when required to do so by the Board of Directors. The Investment Committee
shall have the duty and authority from time to time and whenever necessary to
authorize the execution of all contracts, deeds, conveyances and any other
instruments of the Corporation necessary for the assignment, transfer and sale
of investments of the Corporation requiring corporate signature. A majority of
the members of the Committee shall constitute a quorum.
The investment of the funds of the Corporation and the deposit of the
reserve on all policies and contracts issued by the Corporation shall comply
with the laws of the State of Iowa.
AMEND ARTICLE III, Section 4., entitled "REGISTERED OWNER" by renumbering
as Section 3.
<PAGE>
AMEND ARTICLE III, Section 5., entitled "TRANSFER OF STOCK" by renumbering
as Section 4.
AMEND ARTICLE III, Section 6., entitled "STOCKHOLDERS' CONTRACTS" by
renumbering as Section 5.
AMEND ARTICLE III, Section 7., entitled "ISSUANCE OF STOCK" by renumbering
as Section 6.
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
AMONG
EQUITRUST VARIABLE INSURANCE SERIES FUND,
EQUITRUST INVESTMENT MANAGEMENT SERVICES, INC.,
AND
FARM BUREAU LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 5th day of June, 1998
by and among Farm Bureau Life Insurance Company (hereinafter, the "Company"),
an Iowa insurance company, on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each account hereinafter referred to as the "Account"),
and the undersigned fund, a business trust organized under the laws of the
Commonwealth of Massachusetts (hereinafter referred to as the "Fund") and
EquiTrust Investment Management Services, Inc. (hereinafter the
"Underwriter"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933,
<PAGE>
as amended (hereinafter the "1933 Act"); and
WHEREAS, EquiTrust Investment Management Services, Inc. (hereinafter
referred to as the "Adviser") is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the SEC, and the Fund shall use its best efforts to calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Board") may refuse to sell shares of any Designated Portfolio
to any person, or
<PAGE>
suspend or terminate the offering of shares of any Designated Portfolio if such
action is required by law or by regulatory authorities having jurisdiction, or
is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Designated Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Designated Portfolios will be sold to the general public. The Fund and
the Underwriter will not sell Fund shares to any insurance company or separate
account unless an agreement containing provisions substantially the same as
Articles I, III and VII of this Agreement is in effect to govern such sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the designee
of the Fund for receipt of purchase and redemption orders from the Account, and
receipt by such designee shall constitute receipt by the Fund; provided that the
Company receives the order by 3:00 p.m. central time and the Fund receives
notice of such order by 9:30 a.m. central time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each Designated
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares one Business Day after receipt of
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
3:00 p.m. central time. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 3:00 p.m. central time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. For purposes
of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock
<PAGE>
certificates will not be issued to the Company or any Account. Shares ordered
from the Fund will be recorded in an appropriate title for each Account or the
appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated Portfolio shares in additional shares of that
Portfolio. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10 The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated
(normally by 5:30 p.m. central time) and shall use its best efforts to make
such net asset value per share available by 6:00 p.m. central time. If the
net asset value is materially incorrect through no fault of the Company, the
Company on behalf of each Account, shall be entitled to an adjustment to the
number of shares purchased or redeemed to reflect the correct net asset value
in accordance with Fund procedures. Any material error in the net asset value
shall be reported to the Company promptly upon discovery. Any administrative
or other costs or losses incurred for correcting underlying Contract owner
accounts shall be at Company's expense.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws,
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Iowa insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws of the state of Iowa and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend the Registration
<PAGE>
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have
the Board, a majority of whom are not interested persons of the Fund, formulate
and approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Iowa to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with the laws of the State of Iowa and any applicable
state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $2.5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any
<PAGE>
amounts received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund if, and when, applicable. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies. The Company
agrees to exercise its best efforts to ensure that other individuals/entities
not employed or controlled by the Company and dealing with the money and/or
securities of the Fund maintain a similar bond or coverage in a reasonable
amount.
ARTICLE III. PROSPECTUSES. STATEMENTS OF ADDITIONAL INFORMATION. AND PROXY
STATEMENTS: VOTING
3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus as set in type
or on a diskette, at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company (at the Company's expense) once each year (or
more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners in the Fund. The Underwriter (at the Company's
expense) shall provide the Company with copies of the Fund's annual and semi-
annual reports to shareholders in such quantity as the Company shall reasonably
request for use in connection with offering the Variable Contracts issued by the
Company. If requested by the Company in lieu thereof, the Underwriter shall
provide such documentation (which may include a final copy of the Fund's annual
and semi-annual reports as set in type or on diskette) and other assistance as
is reasonably necessary in order for the Company (at the Company's expense) to
print such shareholder communications for distribution to Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from
<PAGE>
Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Designated
Portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
that the Company develops or uses and in which the Fund (or a Portfolio thereof)
or the Adviser or the Underwriter is named, at least ten calendar days prior to
its use. No such material shall be used if the Fund or its designee reasonably
object to such use within ten calendar days after receipt of such material. The
Fund or its designee reserves the right to reasonably object to the continued
use of such material, and no such material shall be used if the Fund or its
designee so object.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause to
be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use. No such material shall be
<PAGE>
used if the Company reasonably objects to such use within ten calendar days
after receipt of such material. The Company reserves the right to reasonably
object to the continued use of such material and no such material shall be used
if the Company so objects.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, within a reasonable time after the filing of
such document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, within a reasonable time
after the filing of such document(s) with the SEC or other regulatory
authorities.
4.7 For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following
that refer to the Fund or any affiliate of the Fund: advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(I.E., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and the Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise
<PAGE>
payable to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, except as otherwise provided herein. The Fund shall
see to it that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Fund, in accordance with applicable state laws prior to their
sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The Company shall bear the expenses of printing the Fund's prospectus
(in accordance with 3.1) and of distributing the Fund's prospectus, proxy
materials, and reports to Contract owners and prospective Contract owners.
ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1 The Fund will invest the assets of each Designated Portfolio in such a
manner as to ensure that the Contracts will be treated as annuity, endowment, or
life insurance contracts, whichever is appropriate, under the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations issued thereunder (or
any successor provisions). Without limiting the scope of the foregoing, each
Designated Portfolio of the Fund will comply with Section 817(h) of the Code and
Treasury Regulation Section 1.817-5, and any Treasury interpretations thereof,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts, and any amendments or other modifications or successor
provisions to such Section or Regulations. In the event of a breach of this
Article VI by the Fund, it will take all reasonable steps (a) to notify the
Company of such breach and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Regulation 817.5.
6.2 The Fund represents that each Designated Portfolio is or will be
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance, endowment contracts, or
annuity insurance contracts, under applicable provisions of the Code, and that
it will make every effort to maintain such treatment, and that it will notify
the Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future. The Company agrees that any prospectus offering a
contract that is a "modified
<PAGE>
endowment contract" as that term is defined in Section 7702A of the Code (or any
successor or similar provision), shall identify such contract as a modified
endowment contract.
ARTICLE VII. POTENTIAL CONFLICTS.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be
<PAGE>
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by the company for the purchase (and redemption) of shares of
the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund and the
Underwriter and each of their officers and directors and each person, if any,
who controls the Fund or the Underwriter within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement, prospectus, or statement of
additional information ("SAI") for the Contracts or contained
in the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Fund for use in the Registration Statement, prospectus or SAI
for the Contracts or in the Contracts or sales literature or
other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts
or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature or
other promotional material of the Fund not supplied by the
Company or persons under its control) or wrongful conduct of
the Company or persons under its authorization or control,
with respect to the sale or distribution of the Contracts or
Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, SAI, or sales literature or other promotional
material of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement
or omission was made in reliance upon information furnished to
the Fund by or on behalf
<PAGE>
of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
qualification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
<PAGE>
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of it directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts;
and
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or SAI or sales
literature or other promotional material of the Fund (or any
amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or
Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature or other promotional material (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature or
other promotional material for the Contracts not supplied by
the Underwriter or persons under its control) or wrongful
conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, SAI, or sales literature or other promotional
material of the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission
<PAGE>
was made in reliance upon information furnished to the Company
by or on behalf of the Fund; or
(iv) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms
of this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
<PAGE>
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of the Fund) or litigation (including legal and other expenses)
to which the Indemnified Parties may be required to pay or may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, expenses, damages, liabilities or expenses (or actions in
respect thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms
of this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified
in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
<PAGE>
expense, in the defense thereof. The Fund also shall be entitled to assume the
expense thereof, with counsel satisfactory to the party named in the action and
to settle the claim at its own expense; provided, however, that no such
settlement shall, without the Indemnified Parties' written consent, include any
factual stipulation referring to the Indemnified Parties or their conduct. After
notice from the Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceeding against it or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Iowa.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to some
or all Designated Portfolios, by six (6) months' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio based
upon the Company's determination that shares of the Fund are
not reasonably available to meet the requirements of the
Contracts; provided that such termination shall apply only to
the Designated Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the
use of such shares as the underlying
<PAGE>
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance Commissioner or
like official of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of any Account, or
the purchase of the Fund shares; provided, however, that the
Fund or Underwriter determines in its sole judgment exercised
in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Company
to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of the Fund or Underwriter to perform its obligations
under this Agreement; or
(f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in
the event that such Designated Portfolio ceases to qualify as
a Regulated Investment Company under Subchapter M or fails to
comply with the Section 817(h) diversification requirements
specified in Article VI hereof, or if the Company reasonably
believes that such Designated Portfolio may fail to so qualify
or comply; or
(g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the
qualifications specified in Section 6.3 hereof; or if the Fund
or Underwriter reasonably believes that such Contracts may
fail to so qualify; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations, financial condition, or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or
(i) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund or the
Underwriter has suffered a
<PAGE>
material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is
the subject of material adverse publicity.
10.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be permitted
to reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.2 shall not apply to
any termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement. The parties further agree
that this Section 10.2 shall not apply to any termination under Section 10.1(g)
of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act. Upon request, the Company will promptly furnish to the Fund and
the Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
EquiTrust Variable Insurance Series Fund
Attn: Sue Cornick
5400 University Avenue
West Des Moines, IA 50266
<PAGE>
If to the Company:
Farm Bureau Life Insurance Company
Attn: Sue Cornick
5400 University Avenue
West Des Moines, IA 50266
If to Underwriter:
EquiTrust Investment Management Services, Inc.
Attn: Sue Cornick
5400 University Avenue
West Des Moines, IA 50266
ARTICLE XII. MISCELLANEOUS
12.1 All references herein to the Adviser relate solely to the Adviser of
such individual Fund, as appropriate. All persons dealing with a Fund must look
solely to the property of such Fund, and in the case of a series company, the
respective Designated Portfolio listed on Schedule A hereto as though such
Designated Portfolio had separately contracted with the Company and the
Underwriter for the enforcement of any claims against the Fund. The parties
agree that neither the Board, officers, agents or shareholders assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
<PAGE>
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Iowa Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with Iowa
variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
12.9 The Company shall furnish or cause to be furnished, to the Fund or
its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon as practical and in
any event within 90 days after the end of each fiscal year.
(b) the Company's quarterly statements (statutory) (and GAAP, if any), as
soon as practical and in any event within 45 days after the end of
each quarterly period.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
COMPANY: Farm Bureau Life Insurance Company
By its authorized officer
By: /s/ William J. Oddy
---------------------------------------------
Title: Executive Vice President & General
Manager
------------------------------------------
Date: June 5, 1998
-------------------------------------------
FUND: EquiTrust Variable Insurance Series Fund
By its authorized officer
By: /s/ Richard D. Harris
---------------------------------------------
Title: Senior Vice President,
Secretary-Treasurer & Trustee
------------------------------------------
Date: June 5, 1998
-------------------------------------------
UNDERWRITER: EquiTrust Investment Management Services, Inc.
By its authorized officer
By: /s/ William J. Oddy
---------------------------------------------
Title: President
------------------------------------------
Date: June 5, 1998
-------------------------------------------
<PAGE>
SCHEDULE A
NAME OF SEPARATE ACCOUNT AND DATE ESTABLISHED BY BOARD OF DIRECTORS
Farm Bureau Life Variable Account II 1/6/98
Farm Bureau Life Annuity Account II 1/6/98
Farm Bureau Life Variable Account III 1/6/98
Farm Bureau Life Annuity Account III 1/6/98
CONTRACTS FUNDED BY SEPARATE ACCOUNT
Flexible Premium Variable Life Insurance Policies
Flexible Premium Deferred Variable Annuity Contracts
DESIGNATED PORTFOLIOS
Value Growth Portfolio
High Grade Bond Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Blue Chip Portfolio
<PAGE>
PARTICIPATION AGREEMENT
Among
T. ROWE PRICE EQUITY SERIES, INC.,
T. ROWE PRICE INTERNATIONAL SERIES, INC.,
T. ROWE PRICE INVESTMENT SERVICES, INC.,
and
FARM BUREAU LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 8th day of June, 1998
by and among Farm Bureau Life Insurance Company (hereinafter, the "Company"), a
Iowa insurance company, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each account hereinafter referred to as the "Account"), and the
undersigned funds, each, a corporation organized under the laws of Maryland
(each hereinafter referred to as the "Fund") and T. Rowe Price Investment
Services, Inc. (hereinafter the "Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
<PAGE>
WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc. (each hereinafter referred to as the "Adviser") are each
duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and
WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by the
Company and the Account on those days on which the Fund calculates its net asset
value pursuant to rules of the SEC, and the Fund shall use its best efforts to
calculate such net asset value on each day which the New York Stock Exchange is
open for trading. Notwithstanding the foregoing, the Board of Directors of the
Fund (hereinafter the "Board") may refuse to sell shares of any Designated
Portfolio to any person, or suspend or terminate the offering of shares of any
Designated Portfolio if such action is required by law or by regulatory
authorities having jurisdiction, or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Designated Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
<PAGE>
shares of any Designated Portfolios will be sold to the general public. The
Fund and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III and VII of this Agreement is in effect to govern such
sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares one Business Day after receipt
of an order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
3:00 p.m. Baltimore time. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 3:00 p.m. Baltimore time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. For
purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares. The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional shares
of that Portfolio. The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash.
The Fund shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.
<PAGE>
1.10 The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. Baltimore time) and shall use its best efforts to make such net
asset value per share available by 7 p.m. Baltimore time. If the net asset
value is materially incorrect through no fault of the Company, the Company on
behalf of each Account, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct net asset value in
accordance with Fund procedures. Any material error in the net asset value
shall be reported to the Company promptly upon discovery. Any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at Company's expense.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws,
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Iowa insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the state of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have
the Board, a majority of whom are not interested persons of the Fund, formulate
and approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
<PAGE>
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Iowa to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of Iowa and any
applicable state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $2.5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund if, and when, applicable. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies. The Company
agrees to exercise its best efforts to ensure that other individuals/entities
not employed or controlled by the Company and dealing with the money and/or
securities of the Fund maintain a similar bond or coverage in a reasonable
amount.
ARTICLE III. Prospectuses, Statements of Additional Information, and Proxy
Statements; Voting
3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus as set in type
or on a diskette, at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company (at the Company's expense) once each year (or
more frequently if the prospectus for the Fund is amended) to have the
<PAGE>
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners in the Fund. The Underwriter (at the Company's
expense) shall provide the Company with copies of the Fund's annual and semi-
annual reports to shareholders in such quantity as the Company shall reasonably
request for use in connection with offering the Variable Contracts issued by the
Company. If requested by the Company in lieu thereof, the Underwriter shall
provide such documentation (which may include a final copy of the Fund's annual
and semi-annual reports as set in type or on diskette) and other assistance as
is reasonably necessary in order for the Company (at the Company's expense) to
print such shareholder communications for distribution to Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Designated Portfolio for which
instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
<PAGE>
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or uses and in which the Fund (or a Portfolio
thereof) or the Adviser or the Underwriter is named, at least ten calendar days
prior to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within ten calendar days after receipt of such
material. The Fund or its designee reserves the right to reasonably object to
the continued use of such material, and no such material shall be used if the
Fund or its designee so object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature or other promotional material approved by the
Fund or its designee or by the Underwriter, except with the permission of the
Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use. No such material shall be used if the
Company reasonably objects to such use within ten calendar days after receipt of
such material. The Company reserves the right to reasonably object to the
continued use of such material and no such material shall be used if the Company
so objects.
4.4 The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, within a reasonable time after the filing of
such document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, SAIs, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Contracts or the Account, within a
reasonable time after the filing of such document(s) with the SEC or other
regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
<PAGE>
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
5.1 The Fund and the Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, except as otherwise provided herein. The
Fund shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws prior to
their sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The Company shall bear the expenses of printing the Fund's
prospectus (in accordance with 3.1) and of distributing the Fund's prospectus,
proxy materials, and reports to Contract owners and prospective Contract owners.
ARTICLE VI. Diversification and Qualification
6.1 The Fund will invest the assets of each Designated Portfolio in such
a manner as to ensure that the Contracts will be treated as annuity, endowment,
or life insurance contracts, whichever is appropriate, under the Internal
Revenue Code of 1986, as amended (the Code ) and the regulations issued
thereunder (or any successor provisions). Without limiting the scope of the
foregoing, each Designated Portfolio of the Fund will comply with Section 817(h)
of the Code and Treasury Regulation 1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
<PAGE>
the Fund so as to achieve compliance within the grace period afforded by
Regulation 817.5.
6.2 The Fund represents that each Designated Portfolio is or will be
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance, endowment contracts, or
annuity insurance contracts, under applicable provisions of the Code, and that
it will make every effort to maintain such treatment, and that it will notify
the Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future. The Company agrees that any prospectus offering a
contract that is a "modified endowment contract" as that term is defined in
Section 7702A of the Code (or any successor or similar provision), shall
identify such contract as a modified endowment contract.
ARTICLE VII. Potential Conflicts.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
<PAGE>
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice that this provision is being implemented, and until the end of
that six month period the Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the company for the purchase (and redemption) of
shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
<PAGE>
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and the Underwriter and each of their officers and directors and each person, if
any, who controls the Fund or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Registration
Statement, prospectus, or statement of additional information ( SAI ) for the
Contracts or contained in the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the Registration Statement, prospectus or SAI for the
Contracts or in the Contracts or sales literature or other promotional material
(or any amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature or other promotional material of the
Fund not supplied by the Company or persons under its control) or wrongful
conduct of the Company or persons under its authorization or control, with
respect to the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus, SAI, or
sales literature or other promotional material of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the Company;
or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the qualification requirements specified in Article VI of this
Agreement); or
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
<PAGE>
8.2 Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or prospectus or SAI or sales literature or other promotional material
of the Fund (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus for the Fund or in sales
literature or other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature or other promotional
material for the Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, prospectus,
SAI, or sales literature or other promotional material of the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Underwriter;
<PAGE>
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Party, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
8.3 Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:
(i) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
<PAGE>
comply with the diversification and other qualification requirements specified
in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceeding against it or any
of its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
<PAGE>
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to
some or all Designated Portfolios, by six (6) months' advance written notice
delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio based upon the
Company's determination that shares of the Fund are not reasonably available to
meet the requirements of the Contracts; provided that such termination shall
apply only to the Designated Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the Company by the
NASD, the SEC, the Insurance Commissioner or like official of any state or any
other regulatory body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of any Account, or the
purchase of the Fund shares; provided, however, that the Fund or Underwriter
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Company to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or Underwriter by the
NASD, the SEC, or any state securities or insurance department or any other
regulatory body; provided, however, that the Company determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Fund or Underwriter to
perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in the event that such
Designated Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M or fails to comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if the Company reasonably
believes that such Designated Portfolio may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the qualifications
specified in Section 6.3 hereof; or if the Fund or Underwriter reasonably
believes that such Contracts may fail to so qualify; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
<PAGE>
(i) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole judgment exercised
in good faith, that the Fund or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity.
10.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any termination under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company s assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a Legally Required Redemption ), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act. Upon request, the Company will promptly furnish to the Fund
and the Underwriter the opinion of counsel for the Company (which counsel shall
be reasonably satisfactory to the Fund and the Underwriter) to the effect that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
If to the Company:
Farm Bureau Life Insurance Company
5400 University Avenue
<PAGE>
West Des Moines, Iowa 50266
Attention: Sue Cornick
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
ARTICLE XII. Miscellaneous
12.1 All references herein to the Fund are to each of the undersigned
Funds as if this agreement were between such individual Fund and the Underwriter
and the Company. All references herein to the Adviser relate solely to the
Adviser of such individual Fund, as appropriate. All persons dealing with a
Fund must look solely to the property of such Fund, and in the case of a series
company, the respective Designated Portfolio listed on Schedule A hereto as
though such Designated Portfolio had separately contracted with the Company and
the Underwriter for the enforcement of any claims against the Fund. The parties
agree that neither the Board, officers, agents or shareholders assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all
<PAGE>
information reasonably identified as confidential in writing by any other party
hereto and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the affected party until such
time as such information may come into the public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Iowa Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with Iowa
variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
12.9 The Company shall furnish or cause to be furnished, to the Fund or
its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted accounting
principles ( GAAP ), if any), as soon as practical and in any event within 90
days after the end of each fiscal year.
(b) the Company s quarterly statements (statutory) (and GAAP, if any),
as soon as practical and in any event within 45 days after the end of each
quarterly period.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
<PAGE>
COMPANY: FARM BUREAU LIFE INSURANCE COMPANY
By its authorized officer
By: /s/ William J. Oddy
Title: Executive Vice President & General Manager
Date: June 8, 1998
FUND: T. ROWE PRICE EQUITY SERIES, INC.
By its authorized officer
By: /s/ Henry H. Hopkins
Title: Vice President
Date: June 8, 1998
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By: /s/ Henry H. Hopkins
Title: Vice President
Date: June 8, 1998
<PAGE>
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By: /s/ Darrell N. Braman
Title: Vice President
Date: June 8, 1998
<PAGE>
SCHEDULE A
Name of Separate Account and Date Established by Board of Directors:
Farm Bureau Life Variable Account II
1/6/98
Farm Bureau Life Variable Account III
1/6/98
Contracts Funded by Separate Account:
Flexible Premium Variable Life Insurance Policy
Designated Portfolios:
T. Rowe Price Equity Series, Inc.
- Equity Income Portfolio
- Mid-Cap Growth Portfolio
- New America Growth Portfolio
- Personal Strategy Balanced Portfolio
T. Rowe Price International Series, Inc.
- International Stock Portfolio
Name of Separate Account and Date Established by Board of Directors:
Farm Bureau Life Annuity Account II
1/6/98
Farm Bureau Life Annuity Account III
1/6/98
Contracts Funded by Separate Account:
Flexible Premium Deferred Variable Annuity Contract
Designated Portfolios:
T. Rowe Price Equity Series, Inc.
- Equity Income Portfolio
- Mid-Cap Growth Portfolio
- New America Growth Portfolio
- Personal Strategy Balanced Portfolio
T. Rowe Price International Series, Inc.
- International Stock Portfolio
<PAGE>
August 10, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen,
With reference to the Registration Statement on Form S-6 filed by Farm Bureau
Life Insurance Company ("Company") and its Farm Bureau Life Variable Account
III with the Securities and Exchange Commission covering certain variable
universal life insurance policies, I have examined such documents and such
law as I considered necessary and appropriate, and on the basis of such
examinations, it is my opinion that:
(1) Company is duly organized and validly existing under the laws of the State
of Iowa.
(2) The variable universal life policies, when issued as contemplated by the
said Form S-6 Registration Statement will constitute legal, validly issued
and binding obligations of Farm Bureau Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the said Form
S-6 Registration Statement and to the reference to my name under the caption
"Legal Matters" in the Prospectus contained in the said Registration Statement.
In giving this consent, I am not admitting that I am in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Stephen M. Morain
Stephen M. Morain
Senior Vice President
& General Counsel
<PAGE>
August 10, 1998
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
This opinion is furnished in connection with the registration by Farm Bureau
Life Insurance Company of a flexible premium variable life insurance policy
("Policy") under the Securities Act of 1933, as amended. The prospectus
included in the Initial Filing to the Registration Statement on Form S-6
describes the Policy. I have provided actuarial advice concerning the
preparation of the policy form described in the Registration Statement, and I
am familiar with the Registration Statement and exhibits thereto.
It is my professional opinion that:
(1) The illustrations of death benefits and cash values included in Appendix A
of the Prospectus, based on the assumptions stated in the illustrations,
are consistent with the provisions of the Policy. The rate structure of the
Policy has not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear more favorable
for policyowners at the ages illustrated than for policyowners at other
ages.
(2) The information contained in the examples set forth in Appendix B of the
Prospectus, based on the assumptions stated in the examples, is consistent
with the provisions of the Policy.
(3) The fees and charges deducted under the Policy, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to
be incurred and the risks assumed by the insurance company.
I hereby consent to the use of this opinion as an exhibit to the Initial
Filing to the Registration Statement and to the reference to my name
under the heading "Experts" in the Prospectus.
Sincerely,
/s/ Christopher G. Daniels
Christopher G. Daniels, FSA, MSAA
Life Product Development and Pricing Vice President
Farm Bureau Life Insurance Company
<PAGE>
Ernst & Young LLP letterhead
The Board of Directors
Farm Bureau Life Insurance Company
We consent to the reference to our firm under the captions "Financial
Statements" and "Experts" and to the use of our report dated February 16,
1998 with respect to Farm Bureau Life Insurance Company, in the Registration
Statement (Form S-6) and related Prospectus of Farm Bureau Life Variable
Account III for the registration of flexible premium variable life insurance
policies.
Sincerely,
/s/ Ernst & Young LLP
Des Moines, Iowa
August 14, 1998
<PAGE>
[Sutherland, Asbill & Brennan LLP letterhead]
August 24, 1998
Farm Bureau Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of the registration statement on Form
S-6 for Farm Bureau Life Variable Account III. In giving this consent, we do
not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Sincerely,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ Stephen E. Roth
Stephen E. Roth, Esq.
<PAGE>
DESCRIPTION OF FARM BUREAU LIFE
INSURANCE COMPANY'S ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR ITS FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
This document sets forth the administrative procedures that will be
followed by Farm Bureau Life Insurance Company (the "Company") in connection
with the issuance of its individual flexible premium variable life insurance
policy (the "Policy") and acceptance of payments thereunder, the transfer of
assets held thereunder and the redemption by policyowners of their interests in
the Policies. Capitalized terms used herein have the same definition as in the
prospectus for the Policy that is included in the current registration statement
on Form S-6 for the Policy as filed with the Securities and Exchange
Commission ("Commission" or "SEC").
1. PURCHASE AND RELATED TRANSACTIONS.
Set forth below is a summary of the principal Policy provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, a "purchase" transaction.
(a) PREMIUM PAYMENTS. The Policies will be offered and sold pursuant to
established underwriting standards in accordance with state insurance laws.
State insurance laws prohibit unfair discrimination, but recognize that premiums
and charges must be based upon factors such as age, sex, health and occupation.
Premiums for the Policies will not be the same for all policyowners selecting
the same Specified Amount. An initial premium, together with a completed
application, must be received by the Company before a Policy will be issued.
The minimum amount of an initial premium is equal to an amount that, when
reduced by the premium expense charge, will be sufficient to pay the monthly
deduction for the first Policy Months. Other than the initial premium, the
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<PAGE>
Company does not require the payment of an additional premium, and failure to
pay an additional premium will not of itself cause a Policy to lapse. The
Company expects that most Policyowners will choose to pay planned periodic
premiums -- that is, level premiums at regular (quarterly, semi-annual or
annual) intervals. The Policy provides, however, that a policyowner may pay
premiums in addition to planned periodic premiums (i.e., unscheduled premiums)
if (i) the insured is then living; (ii) the additional premium is at least $100;
and (iii) the premium does not cause total premiums paid to exceed the maximum
premium limitation for the Policy established by federal tax law. The Company
reserves the right to limit the number and amount of unscheduled premium
payments. In the event that a tendered premium causes total premiums paid to
exceed the maximum premium limitation for the Policies established by federal
tax law, the Company will return the portion of such premium which causes total
premiums to exceed such limitation.
The Policy will remain in force so long as the Net Accumulated Value is
sufficient to pay the monthly deduction which consists of charges for the cost
of insurance, additional insurance benefits and administrative expenses. Thus,
the amount of the premium, if any, that must be paid to keep the Policy in force
depends upon the amount of the monthly deduction and the Net Accumulated Value
of the Policy, which in turn depends upon the investment experience of the
Subaccounts of the Variable Account.
The cost of insurance rate utilized in computing the cost of insurance
charge will not be the same for each Policyowner. The chief reason is that the
principle of pooling and distribution of mortality risks is based upon the
assumption that the cost of insuring each insured is commensurate with his or
her mortality risk, which is actuarially determined based upon factors such as
attained
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<PAGE>
age, sex and premium class. Accordingly, while not all insureds will be subject
to the same cost of insurance rate, there will be a single rate for all insureds
in a given actuarial category.
(b) INITIAL PREMIUM PROCESSING. Upon receipt of a completed application
for a Policy, the Company will follow certain insurance underwriting (i.e.,
evaluation of risk) procedures designed to determine whether the proposed
insured is insurable. This process may involve medical examinations or other
verification procedures and may require that certain further information be
provided by the applicant before a determination can be made. A Policy will not
be issued until this underwriting procedure has been completed. 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. 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
such 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 policy date would fall on the 29th, 30th or 31st of any
month, the policy date will instead be the 28th of such month. Applicants who
pay the initial premium at the time of submission of the application will be
issued a conditional receipt which provides that if the applicant dies during
the underwriting period, he or she will receive the death benefit provided for
in such conditional receipt if he or she would have been found to be insurable
under the Company's normal underwriting procedures. Net Premiums will be
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<PAGE>
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. No charge is
imposed in connection with this initial allocation.
(c) PREMIUM ALLOCATION. The policyowner may allocate net premiums among
the Subaccounts or the Declared Interest Option. The Variable Account currently
has 15 Subaccounts, each of which invests exclusively in shares of one of the
corresponding portfolios of the EquiTrust Variable Insurance Series Fund, T.
Rowe Price Equity Series, Inc., T. Rowe Price International Series, Inc., and
(each a "Fund"). Each Fund is a series-type mutual fund and is registered
with the Securities and Exchange Commission as an open-end diversified
management investment company.
The policyowner must indicate the initial allocation of premiums in the
application for the Policy. Net premiums will continue to be allocated in
accordance with the policyowner's allocation instructions in the application
unless contrary written instructions are received by the Company. The change
will take effect on the date the written notice is received at the Home Office.
Once a change in allocation is made, all future net premiums will be allocated
in accordance with the new allocation instructions, unless contrary written
instructions are provided by the policyowner. The minimum percentage of each
premium that may be allocated to any Subaccount or the Declared Interest Option
-4-
<PAGE>
is 10%; fractional percentages are not permitted. No charge is imposed for any
change in net premium allocation.
(d) EXCHANGE PRIVILEGE. The Company will permit the owner of a flexible
premium fixed-benefit life insurance policy issued by the Company or an
affiliated ("fixed-benefit policy"), within 12 months of the policy date shown
in such policy, to exchange his or her policy for a Policy on the life of the
insured.
The policy date will be the date the application for the Policy is signed.
The Policy will have a specified amount equal to the specified amount of the
fixed-benefit policy. No evidence of insurability is required to exercise this
privilege. The insured will be placed in the premium class applicable to the
initial specified amount under the fixed-benefit policy, unless there has been
an underwritten increase in specified amount, in which event the insured will be
placed, with respect to the entire specified amount under the Policy, in the
premium class applicable to such increase in specified amount.
The net cash value of the fixed-benefit policy will initially be allocated
to the Declared Interest Option. When the Company receives, at its Home Office,
a notice signed by the policyowner that the Policy has been received and
accepted, the amount initially allocated to the Declared Interest Option
automatically will be transferred among the Subaccounts and the Declared
Interest Option pursuant to the allocation instructions set forth in the
application for the Policy.
The Company will waive the premium expense charge and premium taxes on the
net cash value of the fixed-benefit policy applied to the Policy pursuant to the
exchange. In addition, the Company will assess the first year monthly
administrative charge only to the extent that 12 monthly
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<PAGE>
per $1,000 charges under the fixed-benefit policy have not been assessed.
Otherwise, charges and deductions will be made in the usual manner.
An exchanging owner will not be permitted to carry over any outstanding
loans under his fixed-benefit policy. Any outstanding loan and loan interest
must be repaid prior to the date of exchange. If not repaid prior to the date
of exchange, the amount of the outstanding loan and interest thereon will be
reflected in the net cash value of the fixed-benefit policy.
(e) REINSTATEMENT. Prior to the maturity date, a lapsed policy (other
than a surrendered 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. In order to reinstate a Policy, a
policyowner must submit: (i) a written application for reinstatement signed by
the insured and the policyowner; (ii) evidence of insurability satisfactory to
the Company; (iii) payment of a premium that, after 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 charge for the
two policy months prior to lapse. The effective date of reinstatement will be
the monthly deduction day coinciding with or next following the date of approval
by the Company of the application for reinstatement.
(f) REPAYMENT OF POLICY DEBT. A loan made under the Policy will be
subject to interest charges at the loan interest rate stated in the Policy from
the date that the loan is made. Outstanding policy debt may be repaid in whole
or in part prior to the maturity date at any time during the insured's life so
long as the Policy is in force. Any payments made by the policyowner while
there is outstanding policy debt are treated first as repayment of policy debt,
unless the owner indicates
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<PAGE>
otherwise. When a repayment of the debt is made, the portion of 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 policy debt, but will remain in the Declared Interest Option unless
and until transferred to the Variable Account by the Policyowner.
(g) CORRECTION OF MISSTATEMENT OF AGE OR SEX. If the insured's age or sex
was misstated in an application, the Company will recalculate the accumulated
value to be the amount it would have been had the cost of insurance been based
on the correct age and sex of the insured. If the insured has died, the Company
will pay the death proceeds that would have been payable at the insured's
correct age and sex.
2. TRANSFERS.
Amounts may be transferred among the Subaccounts an unlimited number of
times per year. Only one transfer per policy year may be made between the
Declared Interest Option and the Variable Account. The amount of this transfer
must be at least $100 or the total accumulated value in the Subaccount, or the
total accumulated value in the Declared Interest Option reduced 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 will be assessed. Transfers resulting from the making of policy
loans will not be considered transfers for the purposes of these limitations and
charges. All transfers effected on the same day will be considered a single
transfer for purposes of these limitations and charges. Transfers are made
-7-
<PAGE>
by written request to the Home Office or by telephone if the policyowner has
elected the Telephone Transfer Authorization.
3. REDEMPTION PROCEDURES - SURRENDER AND RELATED TRANSACTIONS
This section outlines those procedures which might be deemed to constitute
redemptions under the Policy. These procedures differ in certain significant
respects from the redemption procedures for mutual funds and annuity plans.
(a) SURRENDER. At any time prior to the maturity date while the Policy is
in force, a policyowner may surrender the Policy in whole or in part by sending
a written request to the Company at its Home Office. A surrender charge equal
to the lesser of $25 or 2.0% of the amount requested will be payable upon
complete surrender and upon each partial surrender.
The amount payable on complete surrender of the Policy is the net surrender
value at the end of the valuation period during which the surrender request is
received. If the entire net accumulated value is surrendered, all insurance in
force will terminate. A partial surrender 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. The policyowner may request that the proceeds of a
complete or partial surrender be paid in a lump sum or under one of the payment
options specified in the Policy.
A partial surrender will be allocated among the Subaccounts and Declared
Interest Option in accordance with the written instructions of the policyowner.
If no such instructions are received with the request for partial surrender, the
partial surrender will be allocated among the Subaccounts and 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
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<PAGE>
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.
Surrender proceeds ordinarily will be mailed to the policyowner within
seven days after the Company receives a signed request for a surrender at its
Home Office, although payments may be postponed whenever: (i) the New York
Stock Exchange is closed other than customary weekend and holiday closing, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange 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. 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.
(b) PAYMENT OF DEATH PROCEEDS. So long as the Policy remains in force,
the Company will, upon due proof of the insured's death, pay the death proceeds
to the primary or a contingent beneficiary (or if no beneficiary survives the
insured, to the policyowner or his estate). In determining the amount of 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. The amount of the death benefit payable under a Policy will depend
upon the death benefit 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. Under Option B, the death
benefit will
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<PAGE>
be equal to the greater of (i) the current specified amount, 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 factors referred
to above are determined by the "cash value corridor" mandated by Section 7702 of
the Internal Revenue Code. The factor is 2.50 for those under 40 years of age
and declines as the insured's attained age increases until it becomes 1.0 at age
115.
The death proceeds will be paid to the beneficiary in one lump sum or under
any of the payment options set forth in the Policy, which include payments of
interest only, payments for a fixed period, payments for life with a term
certain, payments of a fixed amount, and a joint and two-thirds survivor monthly
life income. The Company may also provide other payment options in the future.
If the insured is still alive and the Policy is in force on the maturity
date (i.e., the insured's 115th birthday), the Company will pay the policyowner
the accumulated value of the Policy reduced by an outstanding policy debt.
All payments of death benefits and maturity proceeds are ordinarily mailed
within seven days after the Company receives due proof of the insured's death or
within seven days of the maturity date, unless a payment option is chosen.
However, payment may be delayed for more than seven days under the same
circumstances described above with respect to surrender payments.
(c) POLICY LOANS. 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
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<PAGE>
net surrender value as of the end of the valuation period during which the
request for the policy loan is received at the Home Office, less any previously
outstanding policy debt. Policy debt equals the sum of all unpaid policy loans
and any due and unpaid policy loan interest. 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.
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 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. No charge will be
made for those transfers. 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 normally will be mailed to the policyowner within
seven days after receipt of a written request. Postponement of a policy loan may
take place under the same circumstances described above with respect to
surrender payments.
Amounts segregated within the Declared Interest Option as security for
policy debt will bear interest at an annual rate determined and declared by the
Company. 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.
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The interest rate charged on policy loans is not fixed. Initially, it will
be the rate shown in the Policy on the policy data page. The Company may at any
time elect to change the interest rate, subject to certain conditions specified
in the Policy and prospectus. 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 policy loans. An
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.
(d) POLICY TERMINATION. The Policy will terminate and lapse only when net
accumulated value is insufficient on a monthly deduction day to cover the
monthly deduction and a grace period expires without payment of a sufficient
premium. A grace period of 61 days begins on the date on which the Company
sends written notice of any insufficiency to the policyowner. The notice will
be sent to the policyowner's last known address on file with the Company. The
notice will specify
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the premium payment that, if received during the grace period, will be
sufficient to keep the Policy in force. If the Company does not receive the
premium payment on or before the last day of the grace period, the Policy will
terminate and insurance coverage and all rights thereunder will cease.
Insurance coverage will continue during the grace period. The amount of the
premium sufficient to keep the Policy in force beyond the grace period is an
amount equal to three times the monthly deduction due on the monthly deduction
day immediately preceding the grace period. A terminated Policy (other than a
surrendered Policy) may be reinstated prior to the maturity date at any time
within five years of the monthly deduction day immediately preceding the grace
period which expired without payment of the required premium.
(e) CANCELLATION PRIVILEGE. The policyowner may cancel the Policy by
delivering or mailing written notice or sending a telegram 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 receipt of the Policy. With respect to all
Policies, the Company will refund, within seven days after receipt of the notice
of cancellation and the returned Policy at its Home Office, an amount equal to
the greater of premiums paid or the accumulated value plus an amount equal to
any charges that have been deducted from premiums, accumulated value and the
Variable Account.
(f) SPECIAL TRANSFER PRIVILEGE. 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 policyowner may exercise this special transfer privilege
once each policy year. Once a policyowner exercises the special transfer
privilege, all future premium
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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 this special transfer
privilege.
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POWER OF ATTORNEY
The undersigned directors of Farm Bureau Life Insurance Company, an Iowa
corporation (the "Company"), hereby constitute and appoint Edward M.
Wiederstein, and Stephen M. Morain, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance policies or annuity
contracts: registration statements on any form or forms under the Securities Act
of 1933 and under the Investment Company Act of 1940, and any and all amendments
and supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and him or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto set his or her hand on the date
set forth below.
NAME DATE
- ---- ----
- ----------------------------------- ---------------
Kenneth R. Ashby
/s/ Al Christopherson January 6, 1998
- ----------------------------------- ---------------
Al Christopherson
/s/ Ernest A. Glienke January 6, 1998
- ----------------------------------- ---------------
Ernest A. Glienke
/s/ Philip A. Hemesath January 6, 1998
- ----------------------------------- ---------------
Philip A. Hemesath
/s/ Craig D. Hill January 6, 1998
- ----------------------------------- ---------------
Craig D. Hill
/s/ Daniel L. Johnson January 6, 1998
- ----------------------------------- ---------------
Daniel L. Johnson
- ----------------------------------- ---------------
Richard G. Kjerstad
<PAGE>
/s/ Craig A. Lang January 6, 1998
- ----------------------------------- ---------------
Craig A. Lang
/s/ Lindsey D. Larson January 6, 1998
- ----------------------------------- ---------------
Lindsey D. Larson
/s/ David R. Machacek January 6, 1998
- ----------------------------------- ---------------
David R. Machacek
/s/ Donald O. Narigon January 6, 1998
- ----------------------------------- ---------------
Donald O. Narigon
- ----------------------------------- ---------------
Bryce P. Neidig
/s/ Charles E. Norris January 6, 1998
- ----------------------------------- ---------------
Charles E. Norris
- ----------------------------------- ---------------
Keith R. Olsen
- ----------------------------------- ---------------
Bennett M. Osmonson
- ----------------------------------- ---------------
Howard D. Poulson
/s/ Sally A. Puttmann January 6, 1998
- ----------------------------------- ---------------
Sally A. Puttmann
/s/ Beverly L. Schnepel January 6, 1998
- ----------------------------------- ---------------
Beverly L. Schnepel
<PAGE>
- ----------------------------------- ---------------
F. Gary Steiner
/s/ Edward M. Wiederstein January 6, 1998
- ----------------------------------- ---------------
Edward M. Wiederstein
